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the data and Enrica Croda for helpful comments. McGarry gratefully acknowledges financial support

I am grateful to Antonio Rangel and the editors of the Journal of Economic Perspectives for many helpful comments, and to Deborah K. Kerwin-Peck for excellent research assistance. I thank Charles Nelson, Gary Olin, and Jessica Vistnes for assistance with the data. Special thanks to the Robert Wood Johnson Foundation and the Andrew W. Mellon Foundation for financial support through grants to the National Bureau of Economic Research. This manuscript was prepared by Claire Gilchrist, just prior to her retirement after

Since Frank Knight (1921) introduced the distinction, economists have recognized that risk is the special case of uncertainty in which probabilities are known. Based on subjective survival probability questions in the Health and Retirement Study we use an econometric model to estimate the determinants of individual-level uncertainty about personal longevity. This model is built around the Modal Response Hypothesis—a mathematical expression of the idea that survey responses of zero, one-half or one to probability questions indicate a high level of uncertainty about the relevant probability. Our results indicate that poor cognition and poor health are associated with increases in uncertainty about survival.

Research on consumer confidence has mainly sought to evaluate the power of available data to predict economic outcomes. In contrast, this article considers how best to measure consumer confidence. We analyze the responses to eight questions that have appeared recently on the Michigan Survey of Consumers; four elicit expectations in the traditional qualitative manner and four use a newer "percent chance" format. Examination of the responses suggests three implications. It makes more sense to ask for expectations of events directly relevant to individual economic decisions than for predictions of general business conditions. Surveys should shift away from qualitative questions in favor of ones eliciting subjective probability judgments. While aggregating responses into an index of consumer confidence may provide simple summary statistics, results should also be presented on a question-by-question basis for different subgroups of the population.

Preliminary–please do not cite without permission In the US, women tend to have lower levels of financial literacy than men. This is consistent with a household division of labor in which men manage finances. However, women also tend to outlive their husbands, so they will eventually need to take over this task. Using a new survey of older couples, I find that women acquire additional financial literacy as they approach widowhood. At an estimated increase of 0.04 standard deviations per year approaching widowhood, 80 % of women in my sample would catch up with their husbands prior to the expected onset of widowhood. I also demonstrate that these findings are due to actual increases by women and are not merely an artifact of cognitive decline among older men. These results are consistent with a model in which the household division of labor breaks down when a spouse dies. The model shows that women have an incentive both to delay acquiring financial knowledge and also to begin learning before widowhood. This paper represents the first empirical examination of the financial literacy of both membersofcouplesandprovidesalife-cycleinterpretationofthegendergapinfinancial literacy. This paper employs data that is generously supported by NIA grant P01 AG026571. Many thanks to

Investment, Portfolio Management und Alterssicherung. Opinions and errors are solely those of the authors and not of the institutions with whom they are affiliated. © 2002 Mitchell and McCarthy. All Rights Reserved. Small segments of text may be used with attribution. Annuities for an Ageing World

Opinions and errors are solely those of the authors and not of the institutions with whom they are affiliated. © 2002 Mitchell and McCarthy. All Rights Reserved. Small segments of text may be used with attribution. ii Annuities for an Ageing World Substantial research attention has been devoted to the pension accumulation process, whereby employees and those advising them work to accumulate funds for retirement. Until recently, less analysis has been devoted to the pension decumulation process – the process by which retirees finance their consumption during retirement. This gap has recently begun to be filled by an active group of researchers examining key aspects of the pension payout market. One of the areas of most interesting investigation has been in the area of annuities, which are financial products intended to cover the risk of retirees outliving their assets. This paper reviews and extends recent research examining the role of annuities in helping finance retirement consumption. We also examine key market and regulatory factors.

Abstract: Asset allocation during the retirement years has not received as much attention as allocation prior to retirement. Within the context of financial planning towards the end of the life-cycle, the economics literature is puzzled over the extremely low levels of voluntary annuitization exhibited amongst the elderly. This phenomenon is inconsistent with a strict interpretation of the Modigliani life-cycle hypothesis. Although many plausible explanations have been suggested to reconcile theory and practice, none seem to contain any rigorous normative financial advice on when and if one should purchase an immediate annuity. This is particularly relevant given the increasing number of Defined Contribution pension plans in the U.S., within which the participants have to manage the risk of outliving their resources, and the corresponding trend away from Defined Benefit plans. In contrast to a classical economic approach — and motivated by the financial derivatives literature — this paper focuses attention on the Real Option embedded in the decision to annuitize. Indeed, a fixed immediate life annuity can be viewed as a project with a positive net-present value when compared to maintaining liquid wealth in nonannuitized

researchers in preliminary form, to encourage discussion and suggestions for revision before final publication. Opinions are solely those of the authors. ©2002 Pension Research Council of the Wharton School of the University of Pennsylvania. All Rights Reserved. ii Annuities for an Ageing World Substantial research attention has been devoted to the pension accumulation process, whereby employees and those advising them work to accumulate funds for retirement. Until recently, less analysis has been devoted to the pension decumulation process – the process by which retirees finance their consumption during retirement. This gap has recently begun to be filled by an active group of researchers examining key aspects of the pension payout market. One of the areas of most interesting investigation has been in the area of annuities, which are financial products intended to cover the risk of retirees outliving their assets. This paper reviews and extends recent research examining the role of annuities in helping finance retirement consumption. We also examine key market and regulatory factors. Olivia S. Mitchell (corresponding author)