Today’s retirees are living longer than ever before, creating the need for policy changes to help retirees stretch their savings accordingly.
Summary
To reduce longevity risk for retirees, the federal government can take several steps to encourage annuitization of retirement savings. Government policies could, for instance, require plan sponsors to include lifetime income products in their investment and/or distribution options; provide favorable tax treatment for lifetime income payments; and expand the range of lifetime income products permissible in pension plans. This report’s author weighs the implications of these and other potential policy changes.
Key Insights
- Longevity risk—the risk of outliving one’s retirement savings—is the greatest risk facing retirees in the U.S. today.
- Government policies could require plan sponsors to include lifetime income products in their investment options or provide tax incentives that encourage their use.
- To broaden the range of permissible lifetime income products, the federal government could allow low-cost products that pool risk among participants.
