Navigating complex financial decisions at retirement: Evidence from annuity choices in public sector pensions

Choices regarding the disposition of wealth at retirement can have substantial implications for retirement income security. We study an annuity option allowing defined benefit pension participants to receive a level income throughout retirement by taking a larger pension benefit before Social Securi...

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Published in:Proceedings (Conference on Taxation) 2017-01, Vol.110, p.1-44
Main Authors: Clark, Robert L., Hammond, Robert G., Morrill, Melinda Sandler, Vanderweide, David
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Language:English
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Public Employee Retirement Programs
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creator Clark, Robert L.
Hammond, Robert G.
Morrill, Melinda Sandler
Vanderweide, David
description Choices regarding the disposition of wealth at retirement can have substantial implications for retirement income security. We study an annuity option allowing defined benefit pension participants to receive a level income throughout retirement by taking a larger pension benefit before Social Security eligibility. Using a combination of administrative records and survey responses from recent North Carolina public sector retirees, we find no evidence that retirees with lower financial literacy disproportionally chose the Social Security Leveling option. Rather, the evidence is consistent with individuals choosing this option to smooth consumption. Thus, retirees are generally able to navigate this complicated financial decision.
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title Navigating complex financial decisions at retirement: Evidence from annuity choices in public sector pensions
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