Who Chooses Annuities? An Experimental Investigation of the Role of Gender, Framing, and Defaults

Women nearing retirement are more likely than men to choose the annuity option, which is in part due to having less information on investment options and financial literacy.


Investment decisions at retirement are highly influenced by an individual’s tolerance to risk and financial literacy. Given that women generally tend to be more risk averse and less financially literate than men, the role of gender is central to whether an individual chooses to purchase a retirement annuity, which will pay a stream of fixed amounts over a given period of time, or to pursue an alternate investment strategy, such as receiving retirement funds in one lump sum. This study examines the role of gender on individual financial decision-making at retirement and investigates how men and women may respond differently to information biases, defaults, and framing effects in investment decision-making.


Consistent with previous research, women are more likely than men to choose an annuity option. This decision is only partly explained by differences in risk aversion and financial literacy.

  • On a ten-point financial literacy survey, women average 6.52 points while men averaged 7.56 points, demonstrating that women are, on average, less financially literate than men.
  • Without a default option, 38% of female participants chose the annuity option; in contrast, only 29% of males chose the annuity option, suggesting that women are more risk averse than men.
  • Even after controlling for differences in financial literacy, risk aversion, and information bias among men and women, female participants were significantly more likely than males to choose the annuity option.
  • When the investment option was positively framed, women were 16% less likely to choose an annuity, while men were 14% less likely to choose the annuity.

Setting a default option did not significantly impact the decision to choose the annuity or an alternative investment option; however, positively framing the investment option proved to influence the decisions of male and female participants.

When the annuity option was positively framed, men were 21% more likely to choose the annuity, while this did not change the decision of female participants.


This study was based on a controlled experiment comprised of 445 female and 400 male non-student participants between the ages of 19 and 89 from the greater Williamsburg, Virginia area. At the beginning of the experiment, participants were asked to complete a lottery choice experiment and survey in order to be able to identify their risk tolerance and level of financial literacy. Subsequently, each participant was asked to watch a five-minute slideshow on their investment options and was then invited to play a “Retirement Game,” in which they were required to make an upfront decision over whether they wished to purchase a retirement annuity or invest in a self-chosen investment portfolio.

Two treatment variables were applied to the experiment. The first treatment deliberately introduced bias into the information that was intended to facilitate a participant’s decision-making process. Participants watched one of three slideshows, two of which contained information that was heavily biased toward either the investment option or the annuity option. The third slide show presented neutral information.

The second treatment variable determined whether a particular option was selected by default. Before making their investment decision, participants were given instructions and a record sheet containing one of three default choices (investment, annuity, or none). Those participants who wished to change the default selection were required to request a new record sheet.

Related GAP Studies