Knowing and Making

Richard Thaler has an oddly limited writeup of the " annuity puzzle " in the New York Times this week. He presents a choice between two people retiring at 65. One gets a guaranteed $4,000/month for the rest of their life (a standard annuity). The other retains a standard investment portfolio and draws down $4,000/month until it runs out (at the age of 85, if he lives that long) - or $3,000/month till he's 100. Presenting only these three options, he argues that people should really opt for the annuity as it is lower-risk and saves your family the worry of having to support you after the money runs out. The puzzle, in Thaler's view, is that most people don't buy the annuity but instead keep their money in an investment portfolio that they manage themselves. But I'm not sure this is all that puzzling. In reality, someone who keeps their money in a portfolio is not likely to draw on it at a consistent $4,000/month rate. Why would they happen to withdraw exact...

See that "Most believe retirement is over" link on the right? When you click on it, you get the article on the left . Which says that fully 8% of people expect never to retire. I know that the definitions of some words are variable, and subjective, and that reasonable people can disagree even on the meaning of "majority". The US Senate certainly does. But it's rather difficult to stretch the definition of "most" to mean 8% of people .