Brief note on some reasons for the Annuity Paradox

I was doing a little catch-up reading on the plane.  I'd been meaning to enumerate to myself some of the reasons I see in the literature for why people do not allocate to annuities despite the manifest benefits seen when only using theory to think it through. My reading gave me a starter list. Many of these reasons are my own.  Without more granular attribution, the source material are these:

- How best to Annuitize Defined Contribution Assets. CRRB Munnell, Wettstein, Hou 2019
- Annuitization and Asset Allocation with HARA Utility, Kingston & Thorp 2005
- Annuitization and Asset Allocation, Milevsky, M.A. and V.R. Young (2003)
- Optimal asset allocation and the real option to delay annuitization: It’s not now or never, Milevsky, M.A. and V.R. Young (2002) 

- Some others not listed here

The list of issues with annuities that they enumerate, if I've gotten them all, looks like this. There may be some overlap in the items. I'll add to this if I run into more:

- Adverse selection price effect (fairness); healthier people buy, prices reflect the cohort
- Marketing and admin price effects (fairness)
- Capital reserve price effects (fairness)
- Diminishing utility of the product class due to levels of pre-existing wealth
- Self insurance alternatives via family
- Availability of other life income streams eg Soc Sec
- Bequest motives
- The loss of flexibility re large unexpected events especially health
- Preference to retain and control wealth (endowment effect)
- Unawareness of annuity product benefits over full lifecycle, inadequate education
- Bias for lump sums over flows (illusion of control)
- Incomplete markets: unavailability of negotiable contracts, irreversibility
- Personal evaluation of life expectancy is lower than average (related to adverse selection)
- Personal evaluation of life expectancy is higher than average
     o expectations for better returns via risk premia over time
     o expectations for falling annuity prices at later ages
- Price effects (fairness) from incompleteness maturity/contingency structure of bonds on issue
- Price effect (i.e., high) from the general rate environment (low)
- Complexity and opacity of complex instantiations of the product
- Counter-party risk; insurer bankruptcy
- Misalignment of incentives...your advisor may not be paid to sell or may resent loss of AUM
- Mortality Credits are low at early ages