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Coworker influence on annuitization decisions: Evidence from defined benefit plans

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  • Park, Youngkyun
  • Banerjee, Sudipto

Abstract

We investigate the role of coworker influence on an individual's annuitization decision. Using rich data on payout options and decisions in defined benefit plans, we find that past payout choices of coworkers significantly affect an employee's decision to annuitize at retirement and that the coworkers’ payout choices have a larger economic effect on annuitization than recent stock market returns. We also find that coworker effects are greater for employees who have a similar level of benefit amounts, those who share geographic proximity (same ZIP code), and those who retire at a norm (modal) retirement age of their workplace. Robustness tests show that estimated coworker effects are unlikely to be driven by unobserved common environments or similar preferences.

Suggested Citation

  • Park, Youngkyun & Banerjee, Sudipto, 2020. "Coworker influence on annuitization decisions: Evidence from defined benefit plans," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 582-606.
    • Handle: RePEc:eee:jeborg:v:178:y:2020:i:c:p:582-606
    DOI: 10.1016/j.jebo.2020.08.002
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    More about this item

    Keywords

    Coworker influence; Annuitization; Retirement wealth; Defined benefit plans;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • J26 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Retirement; Retirement Policies

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