Policymakers in Washington might be able to give restaurants, theaters, cruise lines and hotels a post-pandemic boosts by promoting more use of annuities.
Michael Finke, professor of wealth management at the American College of Financial Services, talked about the relationship between annuities and pleasure in a recent interview.
Finke worked with Chris Browning and other researchers on "Spending in Retirement: Determining the Consumption Gap," a widely cited paper about how retirees spend their money.
The researchers found that many retirees lack adequate retirement savings and are in danger of running out of money in retirement.
But the researchers discovered something surprising about the kinds of retirees financial professionals serve, who typically do have adequate savings: Those well-prepared retirees suffered from a consumption gap.
Retirees who had enough savings, but no retirement income annuity or defined benefit pension, spent much less than a hard-nosed financial advisor would have recommended.
For households with more wealth but no longevity protection, the consumption gap amounted to 53% of the recommended level of spending.
