Why Don’t People Annuitize? The Role of Advice Provided by Retirement Planning Software

John A. Turner

Abstract —This study investigates whether users of 25 free retirement planning programs available on the internet are advised to annuitize, in situations where it clearly would be advisable to do so. Our main conclusion is that the programs generally do not advise it, which contributes to other reasons why people do not annuitize. Many programs ignore longevity risk. Those which do deal with longevity risk tend to handle it by simply setting a high age for the end of the planning period – 95 or older. Phased withdrawals planned to an advanced age are an inefficient way of dealing with longevity risk.

[Keywords: Retirement, annuitization, planning, annuities, software, benefit, advice, wealth, income, insurance, calculator]