In-Plan Annuities: Solving the Puzzle
By: Matthew Drinkwater, Ph.D., FSRI, FLMI, AFSI, PCS, Corporate Vice President, Annuity and Retirement Income Research, LIMRA and LOMA
December 2023
Retirement security depends in part on having sufficient income to cover all expenses; knowing that this income is guaranteed for life can drive confidence. Investors overwhelmingly agree, across wealth segments, that lifetime-guaranteed income is important for retirees’ peace of mind. For example, during the summer, we surveyed investors, aged 40 to 85, with at least $100,000 in household investable assets; 85 percent of those surveyed “strongly” or “somewhat” agreed with the statement, “Having lifetime-guaranteed income gives people peace of mind in retirement” (2023 Retirement Investors Survey, LIMRA, 2023). And, when given a brief description of annuities, nearly half of surveyed investors claim to be willing to annuitize some of their assets in retirement.
If lifetime-guaranteed income is viewed so positively by investors, does that imply they will be amenable to annuities as a means of boosting guaranteed income? We’ve known for years that most investors may accept the need for guaranteed income in the abstract, but rarely seek it out for themselves by purchasing annuities. And while traditional pensions are often viewed favorably, generating a “personal pension” by purchasing individual annuities with retirement savings is much less popular. Solving this so-called “annuity puzzle” will require effort from all stakeholders and new solutions.
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In-Plan Guaranteed-Income Options
One approach to increasing use of lifetime-guaranteed income/annuity products involves locating them within an employer-sponsored defined contribution (DC) plan. Such in-plan income options have attracted significant industry interest and have begun appearing in more plans, with much more growth expected (see LIMRA’s Securing the In-Plan Opportunity). Placing income products within a DC plan offers several advantages, ...
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