Over the next few decades, a substantial number of workers will retire with larger balances in their retirement accounts and have fewer sources of longevity protection than retirees today. They, therefore, must manage these resources to ensure they last throughout their retirement. Lifetime income products would be beneficial for many because payments are made for life and they mitigate the risk of running out of resources late in life. Despite the benefits of lifetime income, current retirees do not use lifetime income products very much and future retirees are unlikely to do so under current arrangements. The reasons may be that retirees already feel they have sufficient guarantees-for example, from social security benefits-against the risk of outliving their resources. However, evidence suggests also that the market for lifetime income products functions poorly and that people do not understand and are biased against the products.
Pew is no longer active in this line of work, but for more information visit the Retirement Security Project on PewHealth.org.