The Effects of Annuities on Longevity

Abstract

We investigate the annuitization choices of over 65,000 Chilean retirees. Retirees are less likely to choose an annuity following high recent stock market returns. Using the past-year returns around retirement as an instrument for selecting an annuity, we document that annuities significantly increase longevity. Using the same instrument in independent survey data from Chilean retirees, we confirm that annuitants have better post-retirement health than non-annuitants. We investigate the mechanisms leading to annuitants’ better health and longevity after retirement.