Americans have experienced a steady increase in longevity over the last 100 years.
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Nineteen percent of individuals who retired with significant accumulations in defined contribution (DC) plans and IRAs, but little defined benefit pension income, have annuitized at least some of their retirement savings.
Savings is necessary but not sufficient to generate a secure and adequate lifetime income for retirees. In retirement, savings must be managed and used to generate a stream of income.
Despite agreement among experts that many consumers should place a high value on life annuities and related products that insure against longevity risk, few consumers voluntarily annuitize their retirement savings.
Much of the retirement planning advice that individuals receive over the course of their lifetimes focuses on issues related to accumulating wealth, such as how much to save, how to allocate one’s portfolio across different assets, the advantages of using tax-deferred accounts, and so on.
According to standard economic models, a risk-averse consumer who faces uncertainty about length-of-life should place a high value on life annuities that provide guaranteed income for life. Yet numerous studies show that few consumers voluntarily annuitize their retirement savings.
During the accumulation years, participants in defined contribution retirement plans need to be sure that they are making adequate contributions to their plan and that these contributions are appropriately allocated among various asset classes.
Planned giving programs at colleges and universities, as well as at other charitable institutions, often provide a number of giving vehicles to their alumni and other donors. Gifts are generally categorized by their timing, either present gifts or deferred gifts.
This issue of Research Dialogue examines the retirement patterns and annuitization decisions of a large cohort of TIAA participants (more than 200,000 individuals) as they passed through retirement ages during 1987-1996.