Faculty Publications

Title

Deciphering the Annuity Puzzle: Practical Guidance for Advisors

Document Type

Article

Publication Date

7-24-2012

Abstract

Economists love to try to explain why people may act irrationally; such “puzzles” inspire numerous researchers to probe their possible solutions. The annuity puzzle, which ponders why retirees do not buy more annuities, is a classic example. After describing the basic theory behind why this is so puzzling, I will address a variety of potential explanations, and then turn to the practical guidance the puzzle offers for advisors and their clients.