Near-retirees typically share the same top financial priorities for retirement—all of which are consistent with annuitization. So is there a disconnect between priorities and intentions among those likely to not annuitize?
Lifetime Income & Retirement Security
Does the expectation of employer-provided health insurance in retirement encourage faculty members to retire earlier and save less than faculty who do not expect to receive this benefit?
Variable annuities with guaranteed minimum lifetime withdrawal benefits (VA/GLWB) offer retirees longevity protection, upside exposure to equity markets, and access to savings in case of emergencies. Despite these benefits, few researchers have explored how risk-averse retirees might value VA/GLWBs.
Hybrid retirement plans that combine the best features of defined benefit and defined contribution plans can provide an efficient and equitable method of ensuring retirement security for workers. Co-operative pension structures also enhance retirement security through risk pooling and leveraging economies of scale. Yet most U.S. private sector workers are not covered by these types of plan design. The TIAA-CREF system, which began in 1918 and covers millions of workers in the non-profit sector, provides an example of a plan design with features of a hybrid co-operative pension.
States and localities – which employ about 14% of the U.S. workforce1 – continue to face the residual effects of tax revenue decreases and pension fund investment losses resulting from the 2008-2009 recession. Coupled with these relatively recent challenges are longer-term budgetary pressures, shifts in workforce demographics, and changes in typical retirement benefits across all sectors of the economy.
In 2012, the National Research Council of the National Academy of Sciences issued a comprehensive report documenting the aging of the U.S. population and analyzing the economic effects this phenomenon may trigger over the next 40 years.
On September 20, 2013, the TIAA-CREF Institute convened an expert symposium to examine Gen Y financial engagement. Generation Y is the largest generation in U.S. history. Financial decisionmaking by Gen Y and the state of their personal finances have significant implications for the individuals themselves and for the U.S. economy overall. It’s therefore important to understand Gen Y’s personal finances This can then help identify strategies to better engage Gen Y in managing their personal finances to ensure financial well-being.
Many investment companies have begun providing their defined-contribution pension participants with individualized, retirement income projections. The U.S. Congress is currently considering whether to require them all to do so. Evidence on the potential impact is scant, though a large body of economic research suggests that individuals are not currently making optimal retirement-saving decisions.