How Can We Realize the Value That Annuities Offer in a 401(k) World?

Source: Steven A. Sass, Center for Retirement Research at Boston College, IB#16-12, July 2016

The brief’s key findings are:
• A growing number of people are entering retirement with more 401(k) savings and less annuity income from Social Security and traditional pensions.
• Annuities assure a lifelong income stream and – compared to other draw-down options – can provide attractive payouts, which can help cover late-life health costs.
• But few individuals buy annuities, partly due to behavioral barriers such as the complexity of valuing the product and the way that draw-down options are framed.
• Options for overcoming these barriers include:
• educating individuals to focus more on the income they can draw from their nest egg, rather than its size; and
• automatically putting a portion of 401(k) assets in an annuity, perhaps an Advanced Life Deferred Annuity that kicks in later in retirement.