Annuity Demand

The proposed research will study the importance of health insurance availability in the decision of whether to annuitize wealth at the time of retirement. Recent research has suggested that uninsured medical expenses among the elderly may contribute to the under-annuitization puzzle, but there is no direct evidence on this question. We propose to study how the annuitization decision of retirees may be affected by Medigap insurance coverage. Our first contribution is therefore to provide direct evidence on the causal effect of insurance coverage on annuitization. We will also explore the mechanisms by which insurance affects annuity demand by testing whether individuals with higher and more volatile expected medical costs are more responsive to insurance.