New paper: “How Can We Realize the Value That Annuities Offer in a 401(k) World?”

The Center for Retirement Research at Boston College has released a new Issue in Brief:

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

by Steven A. Sass

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.

This brief is available here.