Practical Applications of Employee Opinions about Partial Annuitization in a Retirement Plan

Abstract

In <b><i>Employee Opinions about Partial Annuitization in a Retirement Plan</i></b>, from the Winter 2022 issue of <b><i>The Journal of Retirement</i></b>, authors Michael Finke (of <b>The American College of Financial Services</b>) and Jason J. Fichtner (of the <b>Bipartisan Policy Center</b>) report the results of a survey they conducted among defined-contribution (DC) retirement plan participants that measures interest in allocating contributions to an annuity option inside the plan. Annuities are not popular with retirement savers, but past researchers have asked savers only if they planned to put all or none of their retirement savings into annuities. Instead, the authors asked savers if they wanted the option of putting some of their retirement savings into annuities for lifetime income. The authors reported that 49.5% of respondents preferred a plan that offers stocks, bonds, and annuities; 24% preferred full annuitization; and 26.5% preferred only stocks and bonds. Respondents indicated they would allocate an average of 33.5% of savings to annuities to receive guaranteed lifetime income. The authors say that if plan administrators wish to encourage allocations to annuities, they should frame them as guaranteeing participants the ability to maintain a stable level of spending every year for life.