2014 Conference

This research investigates the household decision to annuitize an occupational pension using a marital bargaining approach. The purpose of this research is to observe how each spouse’s preference for annuitization is reflected in the household decision to annuitize a pension through his/her bargaining power. Using data from the 2010 Survey of Consumer Finances, empirical models are estimated for the husband’s decision and the wife’s decision to annuitize. This research finds that own risk aversion positively affects own annuitization decision but negatively affects spouse’s annuitization decision. Also, the measure of relative bargaining power significantly affects each spouse’s annuitization decision. By employing a marital bargaining approach, this research expands the focus of the annuity decision research from the individual level to the household level and the dynamics inside of the household are able to be explored. To policy makers and financial professionals who are concerned about the limited annuity demand and interested in promoting annuities, the findings from this research provide important implications regarding survivor protection.