Is Fear of Death Hurting Your Retirement Nest Egg?

It seems another horror story about Americans’ paltry retirement savings comes out each week — 26 percent of us have saved less than $1,000, as we reported recently.

But here’s a new angle from researchers at Boston College: Our fear of death is part of the problem.

After four experimental studies, the researchers concluded that fear of our own demise leads us to avoid making decisions about how to manage our savings during retirement, according to a press release from the Society for Consumer Psychology.

The findings were published in the society’s Journal of Consumer Psychology.

The researchers primarily investigated fear of death as a factor in why so few retirees invest in annuities. They note that their findings have broader implications for our retirement savings — or lack thereof — that can help inform decisions about how to manage our savings during retirement:

Retirement savings decumulation is an increasingly important topic as 401(k)s and similar plans replace traditional defined benefit pensions, requiring older consumers to make complex financial decisions and potentially threatening their financial health and independence.

Our fear of death is particularly likely to affect how we view annuities, the researchers conclude. This type of financial product generally provides a steady income stream during retirement in exchange for handing over a lump sum of our savings. So investing in an annuity forces us to think about how long we expect to live.

In one of their studies, researchers found that “the task of choosing an annuity triggers spontaneous thoughts of dying to a greater extent than the task of choosing an Individual Retirement Account (IRA), and these death-related thoughts reduce annuity choice rates.”

In a hypothetical scenario in which participants were 65 and beginning retirement, 40 percent of participants asked about investing in an annuity had death-related thoughts. That compares with 1 percent of participants asked about investing in an IRA.

One of the study authors, Boston College associate professor of marketing Linda Salisbury, notes that the findings might also apply to other types of financial products:

“Our findings suggest that many people may be avoiding annuities because thinking about annuities inevitably involves having to think about when we will die. We also suspect that mortality salience may play a role in other financial decisions that require consumers to contemplate their own death, such as creating a will, buying life insurance, and estate planning — tasks often avoided by consumers.”

If you’re considering an annuity, be sure to first check out “Ask Stacy: Should I Put Some Money Into an Annuity?”

Do you think a fear of thinking about death has impacted your nest egg? Let us know in our Forums. It’s the place where you can speak your mind, explore topics in-depth, and post questions and get answers.