Retirees, Annuitization and Defined Contribution Plans
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. Investing in annuities during the accumulation phase of DC plan participation and the presence of a payout annuity option at retirement increase the likelihood that a retiree will annuitize savings. Retirees who have annuitized their retirement savings are more than twice as likely, compared with retirees who have not annuitized, to have saved through an annuity in a DC plan while working. In addition, 41 percent of retirees who annuitized participated in a DC plan that offered annuitization as a retirement payout option compared with 28 percent of non-annuitants. It is also apparent that the use of an advisor and the advice received matter when deciding how to manage savings during retirement. While only 3 percent of non-annuitants were advised to buy an annuity, 21 percent of annuitants reported that an advisor told them to purchase an annuity.