Contrary to the optimal decision is to invest most of the retirement savings in annuity withdrawals, studies show that in practice, most retirees prefer a lump-sum withdrawal. This discrepancy is dubbed the “annuity puzzle”.

The current study examines the withdrawals preferences of the population of Israel and the psychological and demographic factors that affect them. Unlike findings from other countries, most of the subjects preferred annuity withdrawals over the lump sum withdrawal.

The level of confidence in the system was found to significantly affect the withdrawals method decision, with lower confidence associated with lump sum withdrawals preferences. In addition, it is apparent that high self-confidence is associated with a preference of the lump sum withdrawal, and that age is positively correlated with preference for annuity withdrawals.

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