Annuity puzzle solved: Don’t buy them
July 11, 2013 by Gil Weinrich
For nearly 50 years, financial economists have scratched their heads wondering why more people, at least those without significant bequest motives, didn’t buy annuities.
They provide higher income than bonds and protect against the risk of outliving one’s wealth. Why people would refuse to feast on what may be the only free lunch economics offers — higher consumption and elimination of risk at the same time — has so bothered academics that the question has its own catchy nickname: “the annuity puzzle,” which legions of aspirants have sought to solve. Click here to read…