We combine experimentally elicited preferences with administrative micro data to study actual financial decision-making. Firstly, we simultaneously elicit and estimate risk and time preferences in a real-life context, with horizons up to 10 years, for more than 1000 pension fund participants. We estimate a present-bias factor of 0.84, an annual discount rate of 1.1%, and a CRRA utility curvature of 0.97. Secondly, using an expected utility framework, we show that the individually estimated preferences explain actual retirement decisions up to 82% of our sample for a utility indifference of at most 2% annual certainty equivalent consumption. Freedom of choice by means of a front-loaded annuity creates annual potential welfare gains up to 2.77%, but realized welfare gains are lower or even negative.

Netspar, Network for Studies on Pensions, Aging and Retirement, is een denktank en kennisnetwerk. Netspar is gericht op een goed geïnformeerd pensioendebat.


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