Consumer Agenda for Retirement Security

Initiative # 3: Improve retirement savings plans 

C. Conduct a study on how to provide low-cost annuities for participants in 401(k) plans.

Participants in defined contribution plans do not generally take benefits in annuity form and then find it virtually impossible to both invest and systematically draw down their savings in retirement.  As a result, many participants outlive their retirement savings, which is a form of retirement plan leakage.

There are three reasons that participants do not take some of their benefits in annuity form:  (i) few defined contribution plans provide an annuity option; (ii) participants do not understand the advantages of annuities; and (iii) the private annuity market is expensive, especially for small annuities.  This is a problem that should be studied by the Department of Treasury and the PBGC.  Congress should also authorize the PBGC to offer participants in defined contribution plans the option to purchase annuities from it.

Learn more about the other initiatives in the Consumer Agenda for Retirement Security.

Initiative 1: Promote a more adequate and secure private retirement income system.
Initiative 2: Empower workers to promote their own retirement security.
Initiative 3: Improve retirement savings plans.
Initiative 4: Improve traditional and hybrid pension plans.
Initiative 5: Make retirement plans fairer for workers and their spouses.

Print the Consumer Agenda for Retirement Security [PDF].