Individual Capability and Effort in Retirement Benefit Choice

Hazel Bateman; Christine Eckert; Fedor Iskhakov; Jordan Louviere; Stephen Satchell; Susan Thorp

doi:10.1111/jori.12162

Individual Capability and Effort in Retirement Benefit Choice

Hazel Bateman, Christine Eckert, Fedor Iskhakov, Jordan Louviere, Stephen Satchell, Susan Thorp

Research output: Contribution to journal › Article › peer-review

16 Citations (Scopus)

Abstract

We investigate the role of individual capability and effort in the management of retirement ruin. In an experimental setting, we analyze how 854 defined contribution (DC) plan members reallocated wealth between a lifetime annuity and a phased withdrawal account when we increased the risk of exhausting the phased withdrawal account before the end of life. We find that more numerate individuals who put effort into understanding product features chose more longevity insurance at higher ruin risks. Financially literate members were more likely to show understanding of the product features, but general financial literacy did not directly improve ruin risk management. Initiatives aiming to help DC members understand income stream products at the time of the decision are warranted.

Original language	English
Pages (from-to)	483-512
Number of pages	30
Journal	Journal of Risk and Insurance
Volume	85
Issue number	2
DOIs	https://doi.org/10.1111/jori.12162
Publication status	Published - Jun 2018

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10.1111/jori.12162

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AU - Eckert, Christine

AU - Iskhakov, Fedor

AU - Louviere, Jordan

AU - Satchell, Stephen

AU - Thorp, Susan

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Individual Capability and Effort in Retirement Benefit Choice

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