Optimal annuitization, uncertain survival probabilities, and maxmin preferences

We consider a life-cycle model with bequest motives, and assume that the individual does not know his/her survival probability and has maxmin utility preferences; we show that it is optimal not to annuitize but to purchase pure life insurance policies instead.

► We study the optimal demand for annuities in a life-cycle model. ► The individual displays uncertain survival probabilities and maxmin preferences. ► The optimal behavior is to make the welfare independent of the length of life. ► This is achieved by selling annuities short.