An Annuity Alternative That Simplifies Retiree Payouts
August 6, 2019 by Melanie Waddell
Welcome back to Human Capital! This week, we’re checking in with David John, senior strategic policy advisor at AARP Public Policy Institute and a nonresident senior fellow in economic studies at the Brookings Institution, to drill down on two papers he recently co-wrote on ways to deliver retirement income.
Should all retirees use annuities? That’s one question John and the other retirement experts tackled in their first paper, When income is the outcome: Reducing regulatory obstacles to annuities in 401(k) plans. The second paper, From saving to spending: A proposal to convert retirement account balances into automatic and flexible income, continues that theme and posits that a “default decumulation solution” via managed payout funds may be a more suitable option for some folks. The sticking point: making them widely available in retirement plans.
“The conventional wisdom is that everyone should be in an annuity, but in the managed payout out paper we address the question: Is that the right vehicle for everyone?” John told Human Capital.
What’s a managed payout fund? John and his colleagues describe it as “a major alternative to an annuity,” stating the diversified pool of investments is designed to produce a relatively consistent level of annual income but, unlike an annuity, doesn’t provide a guaranteed outcome.
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