The “annuity puzzle” refers to the fact that annuities are rarely purchased despite the longevity insurance they provide. Most explanations for this puzzle assume that indi-viduals have accurate expectations about their future survival. We provide evidence that individuals misperceive their mortality risk, and study the demand for annuities in a setting where annuities are priced by insurers on the basis of objectively-measured survival probabilities but in which individuals make purchasing decisions based on their own subjective survival probabilities. Subjective expectations have the capacity to explain significant rates of non-annuitization, yielding a quantitatively important explanation for the annuity puzzle.
This paper investigates individuals' expectations about their own survival to older ages and compares patterns in average responses about survival chances with actual and projected survival rates.
The falls in the proportion of young adults owning their own home have been documented in previous work. In this briefing note, we provide up-to-date analysis of these falls in homeownership, and which groups of young adults have seen the sharpest falls.
