For most of the twentieth century a pension turned years of work into a monthly check for life. Today the responsibility has shifted to households, who now manage longevity risk, market volatility, withdrawal rates, taxes, and healthcare uncertainty on their own. Successful savers are not immune to fear. They have enough wealth to protect and enough uncertainty to make disciplined spending difficult.
The strongest evidence that income structure affects health comes from the NBER working paper “The Effect of Annuities on Longevity” by Borja Larrain, Alessandro Previtero, and Felipe Severino. It examines administrative payout data on roughly 600,000 Chilean retirees from 2004 to 2022. To reduce selection bias, the authors use the fact that annuity sales vary with recent market returns as an instrument. They find that annuitization substantially reduces mortality at five and ten year horizons, with reported reductions of about 2.55% and 3.62%.
The prudent way to state this is not “annuities make you live longer.” It is that large-scale research finds annuitization is associated with a meaningful reduction in mortality, likely through reduced stress, lower income volatility, and greater investment in health.
