The picture of the retirement landscape isn’t a pretty one. Boston College researchers estimate that only about half of American households will be able to maintain their current standard of living in retirement.
Annuities provide guaranteed lifetime income, something that should be attractive to those who fear running out of money in retirement. So why aren’t more Americans buying annuities? Athene and the National Association for Fixed Annuities attempted to answer that question in a recent webinar.
It’s not that consumers don’t appreciate what annuities can do. Seventy percent of respondents told a TIAA survey that receiving a guaranteed monthly “paycheck” in retirement is important. But that same survey revealed only 13% of working-age individuals have purchased an annuity, and only 12% of individuals plan to buy an annuity at the time of retirement.
Over the past 15 years, researchers have attempted to solve the puzzle of why Americans like the idea of annuities but are reluctant to buy them.
The list of likely reasons ranges from price to loss aversion. But two behavioral researchers from UCLA said the list of reasons boils down to one factor: uncertainty. And there are four sources of that uncertainty.