We investigate the consequences of holding multiple accounts for payout deci-sions at retirement. Using proprietary data of retirees’ annuitization decisions, we find thatsmall accounts are more likely to be cashed out. We use occupation information as a proxyfor wealth to disentangle income from the multiple-accounts effect. We show that indivi-duals with high expected wages are more likely to annuitize overall but less likely toannuitize their small accounts (comparing to individuals with low wages). A laboratoryexperiment and an online experimental survey (with a large representative sample) sug-gest that the composition of multiple accounts affects the annuitization rates via the deci-sions regarding small versus large accounts

To investigate financial regret among older Americans, we conduct a controlled experiment in the Health and Retirement Study. We document that many older people regret not having bought longevity protection or long-term care insurance, as well as having retired and claimed social security benefits too early. This is especially true for women, Black, and less wealthy older individuals. Additionally, we find that informing participants about objective survival probabilities boosts regret by 43% regarding not having lifetime income, and by even more for those in good health and still working.

Many people do not understand the concepts of life expectancy and longevity risk, poten- tially leading them to under-save for retirement or to not purchase longevity insurance, which in turn could reduce wellbeing at older ages. We investigate alternative ways to in- crease the salience of both concepts, allowing us to assess whether these change peoples’ perceptions and financial decision making. Using randomly-assigned vignettes providing subjects with information about either life expectancy or longevity, we show that merely prompting people to think about financial decisions changes their perceptions regarding subjective survival probabilities. Moreover, this information also boosts respondents’ inter- est in saving and demand for longevity insurance. In particular, longevity information in- f luences both subjective survival probabilities and financial decisions, while life expectancy information influences only annuity choices. We provide some evidence that many people are simply unaware of longevity risk.

Advances in technology allow researchers to track physiological activity and to offer insights regarding the cognitive and emotional processes involved in individuals' behavior. In this chapter, we suggest the potential merit of incorporating eye-tracking and other noninvasive measures of physiology in experimental finance research. To this end, we first discuss potential measures: eye-tracking, skin-conductance, heart-rate, brain activity via fMRI or EEG, and facereader software or facial EMG. Thereafter, we discuss how incorporating these measures benefited the experimental design of some existing literature in Finance. Measuring physiology has the potential to shed new light on existing theories, behavioral models, examine attentional biases and emotional responses and to learn more about individual differences that may affect financial behavior.

Past research has demonstrated that many individuals are not well equipped to make financial decisions and hence depend greatly on the flow and quality of financial information. Various governments are implementing reforms aimed at improving the quality of pension financial communication. Certain countries are requiring a move to short-form pension reporting, and some are requiring digital reporting instead of (or in some cases, in addition to) paper reporting. In a series of experiments, we show that the ability to locate information in financial reports is sensitive to the length of the report and to the communication form.

We experimentally study individuals' perceptions about and advice to others regarding retirement savings and annuitization during the pandemic. Many people recommend that others save more for retirement, but those most affected by the pandemic tell others to save and annuitize less. We investigate two possible channels for this result and show that the pandemic does not substantially alter optimism regarding survival probabilities. Hence, we conclude that economic factors are driving our results. Consequently, some financial ramifications of the COVID-19 outbreak are yet to be revealed, as the pandemic is having longer-term effects on people's willingness to save and annuitize.

We examine subjective life expectancy perceptions of Israeli smokers by investigating the results of an online survey of a representative sample of 963 Israeli residents aged 50–70 years. Our results suggest that smokers are overoptimistic regarding their subjective life expectancy, a fact that is expected to influence the decision-making process in general, and financial decisions in particular. Indeed, our results are consistent with the results obtained by Hurwitz and Sade (2019) with regard to annuitization decisions.

We exploit the fact that Israeli pension insurance policies do not take health conditions or smoking status into account in annuity pricing to investigate the potential effect of being a smoker on retirement payout choices. Contrary to the idea that smokers have higher discount rates (and thus should prefer the lump sum option), and even though the insurance pricing mechanism means that smokers would be offered the same annuity as nonsmokers (all else equal), we find that smokers do not prefer the lump sum option. We offer and test several potential explanations for our findings: illusions regarding life expectancy, self-control, and advantageous selection.

The need to ensure that people have adequate savings for retirement has prompted debate among regulators and academics. Certain countries have implemented or are considering implementing mandatory minimum annuity laws (e.g., Singapore and Israel), whereas others have repealed or are considering repealing such legislation (e.g., the U.K.). We investigate the introduction as well as the repeal of a regulatory change—specifically, a mandatory minimum annuity rule—using a laboratory experiment and two surveys. Our results indicate that imposing a mandatory minimum may create an anchoring effect to the threshold level. Furthermore, our results suggest that the mandatory requirement may have unintended consequences: Such laws may fail to provide an increase in the demand for annuities and may even reduce it for certain individuals. The outcome is sensitive to the relation between the level of the mandatory minimum and anticipated consumption (i.e., future financial need). Moreover, we provide novel evidence about the consequences of a repeal of mandatory minimum annuity laws and suggest that it may not restore the demand for annuities to the pre-law level.