Employer-provided retirement benefits are most commonly distributed to workers in the form of an annuity, according to a new report.
The Public Policy Institute of the American Association of Retired Persons, Washington, D.C., published this finding in a study, “Older Americans’ Ambivalence Toward Annuities.” The study examines the results of an AARP survey of older workers and retirees respecting their choices for distributing retirement income. The survey polled 1,750 older workers ages 50 to 75 and 670 retired people ages 59 to 75.
The survey reveals that nearly 5 in 10 workers (48%) plan to receive an annuity, either one purchased from a life insurer or through an employer-provided pension plan. And nearly 4 in 10 (38%) expect to receive a life annuity, the survey says.
Additionally, nearly three in four workers (74%) are receiving, or expect to receive, income from an annuity. And six in ten (63%) are receiving income from a life annuity.
Three in ten (30%) workers and four in ten (41%) retires with a choice of income distribution options intend to choose, or already have chosen, an annuity, the survey reveals.
Of workers with a 401(k)-type plan who are in a position to choose, 31% and 25% plan to elect a life annuity. Among retirees, 18% plan to elect or have elected a series of regularly scheduled payments.
When respondents were asked what features about annuities are “very” or “somewhat” convincing reasons for buying an annuity, 82.3% say that annuities “help you manage your budget because you get a predictable amount of money each month.”
Similarly high percentages of respondents cite the fact that annuities: (1) offer “peace of mind because the payments will continue as long as you live” (81.6% of respondents); (2) “ensure that your monthly income will not fall, even there is a large drop in the market” (80%); can help you remain independent because the money will never run out (76.8%); and (4) offer certainty in respect to the rate of return (75.5%).