Whether to purchase an annuity with a lump sum of money available to a retiree is a difficult decision and can be influenced by factors not directly related to the financial considerations involved, according to the Center for Retirement Research.

A study noted that proposals have been raised to encourage investors in retirement savings programs such as the TSP to consider turning the assets into such accounts into annuities when they retire. In part, that’s because such defined contribution retirement programs require the individual to manage the account throughout retirement, which can be a daunting and risky task; turning the money into an annuity shifts responsibility for managing it to the annuity provider, which then must provide a guaranteed income to the annuitant no matter how poorly its investments perform.

Many economic models “suggest that consumers facing the risk of outliving their resources should find an¬nuities of substantial value, but few people buy them.” In the TSP, the annuity option is chosen by only low single digit percentages of investors; much more common is leaving the account in place and taking regular withdrawals or rolling it over into an IRA.

“Behavioral experiments show that individuals can be steered toward or away from annuities depending on how the product is described,” it said. “In one experiment, choosing an annuity was much more popular when it was presented in a ‘consumption’ frame, which stressed the ability to consume for life, compared to an ‘investment’ frame, which emphasized guaran¬teed returns for life.”

Other studies have shown that potential purchasers are inconsistent in their views of how much an annuity is worth, in comparison with a lump sum of money. The common result is that they stay with what they have–the lump-sum account value–rather than convert it into something they don’t know well. “Many individuals have difficulty valuing annuities and, as a result, may only actively buy an annuity when offered a very good deal,” it said.

That’s especially true for those with relatively low cash reserves who more highly value the ability to access the lump-sum rather than see the money spread out as lifetime payments, the study added.