A funny thing happens, however, when you dramatically increase the value of the lump sum and its equivalent monthly payout. People are now more likely to choose the monthly payout instead of the lump sum. It turns out they don't need that present value calculator chip. Their brains can easily apply a simple heuristic based on monthly expenses. It goes like this: If the monthly payout exceeds the monthly expenses, pick the monthly payout; otherwise, take the lump sum.

For those selling annuities, the message is clear: Shift the prospect's focus from the “big” lump sum equivalent number to the prospect's personal monthly expenses. If the annuity's monthly payout exceeds that expense, you've got a very good chance of making the sale.

Unfortunately, there are two caveats. The first is obvious. What happens if the annuity's monthly payout fails to offset the prospect's monthly expenses? Well, then the research implies the odds of a successful sale fall.

The second caveat might even be more of a challenge. There's an interest rate assumption that goes into calculating the monthly payout. That assumption may be significantly less than the expected market return (whether or not that expectation is reasonable). In this case, the astute prospect (i.e., the one with the net present calculator chip implanted in their brain), will opt for the lump sum. There are both mathematical and behavioral reasons for this.

And that's a brick wall almost no annuity can break through.