Using behavioral insights to increase annuitization rates: The role of framing and anchoring

Earl Gilbert, 97, plays chess at Royal Oaks retirement community in Sun City, Arizona, January 8, 2013. Sun City was built in 1959 by entrepreneur Del Webb as America?s first active retirement community for the over-55's. Del Webb predicted that retirees would flock to a community where they were given more than just a house with a rocking chair in which to sit and wait to die. Today?s residents keep their minds and bodies active by socializing at over 120 clubs with activities such as square dancing, ceramics, roller skating, computers, cheerleading, racquetball and yoga. There are 38,500 residents in the community with an average age 72.4 years. Picture taken January 8, 2013. REUTERS/Lucy Nicholson (UNITED STATES - Tags: SOCIETY)ATTENTION EDITORS - PICTURE 9 OF 30 FOR PACKAGE 'THE SPORTY SENIORS OF SUN CITY'SEARCH 'SUN CITY' FOR ALL IMAGES - GM1E91H00JE01
Editor's note:

This report was produced in concert with the event, “Retirement Policy and Annuitization: A View from the Experts,” held at Northwestern University’s Kellogg School of Management on May 9, 2019 and co-sponsored by Brookings and the Kellogg Public-Private Initiative. The other reports from the event discuss automatic enrollment in annuities and how to increase demand for annuities.


In light of past academic literature as well as empirical evidence of an “annuity puzzle,” a behavioral approach is suggested in this document in aid of increasing annuitization rates. In particular, communicating savings as a monthly or yearly income stream (as opposed to a lump sum framing) and using a uniform set of assumptions is suggested. In addition, a recommended level of annuity prior to retirement is discussed, building on anchoring bias to help individuals making retirement decisions choose higher levels of annuities. This document points out questions, concerns, and future exploration needed.

The author did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. The author is not currently an officer, director, or board member of any organization with a financial or political interest in this article.