How Retirees Manage Retirement Savings for Retirement Income

October 2015

Since annuitants and non-annuitants share the same top financial priorities—each of which is addressed by annuitization—why do some retirees choose to annuitize while others do not?  

Summary

How do retirees with significant assets in tax-qualified retirement accounts convert their savings into income during retirement? What factors influence their decisions? This study addresses these and related questions, and also examines the similarities and differences between retirees who annuitize at least some of their savings and those who do not.

Key Insights
Annuitants are more likely to have experienced an increased standard of living in retirement and a lifestyle that has exceeded their pre-retirement expectations.
Annuitants and non-annuitants have the same top financial priorities in retirement: protecting a spouse’s financial security, not outliving savings, and covering basic expenses with guaranteed income. These priorities are consistent with annuitization.
The same top financial priorities are also among the most important reasons retirees decide to annuitize.
Eighty percent of non-annuitants were advised to not annuitize or did not receive advice regarding annuitization; sixty percent of annuitants were advised to do so.
In-plan deferred annuities help participants become socialized to annuities and annuitization. But for 75% of retirees, either their plan(s) did not have a deferred annuity or they did not realize it, the latter likely being the case for many.
Methodology

The researchers surveyed 1,000 retirees, age 60 or older, who had at least $400,000 in defined contribution accounts and/or IRA assets and no defined benefit pension income. Half the respondents were receiving annuitized payments and half were not.