Annuities have value beyond that recognized by workers who must depend on 401(k)s, not pensions, to get them through retirement.

But because they don’t recognize that value, workers aren’t turning to annuities as a source of guaranteed lifetime income.

Those are some of the findings in a brief from the Center for Retirement Research at Boston College, which examined the value that annuities offer, and how that value is affected by the risk of medical expenses and workers’ desire to leave a bequest to heirs.

Researchers also explored the behavioral reasons for why workers don’t consider annuitization when looking for lifetime income, and how those behaviors could be changed.

One handicap workers face in seeking to save enough money to get through retirement is the fact that retirement plans have been moving away from defined benefit plans to defined contribution plans — and another is the decline in Social Security replacement rates “for any given retirement age,” the brief said. As a result, workers might end up with more savings at the end of their careers, but less annuitized income.

Annuities provide a valuable option in that they take advantage of mortality predictions to allow insurers to set monthly annuity payments at a level they can count on to continue as long as all people in the pool are alive — since the resources of those who die help to provide benefits to the survivors.

In addition, these “mortality credits,” the study said, mean that recipients get monthly payments that are higher than they could take from their savings without an annuity to guarantee them.

And because of the costs inherent in commercial annuities, savers would need about a third more in savings to be able to draw what the paper termed “annuity equivalent wealth” — the income they would have with an “actuarially fair” annuity (not subject to those costs in commercial annuities).

But despite annuities’ benefits, “very few” retirees buy them. They turn away from annuities based on behavioral factors that include how they react to the complexity of the decision; how the options are framed; and whether they might die before the “break-even” age — which they perceive as a loss to be avoided.

Researchers concluded that getting 401(k) participants to focus on retirement income rather than accumulations and developing an effective default distribution for 401(k) assets are options that should be considered in the quest to provide workers with annuitized income.

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