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Researchers : Retirement Income: Ensuring Income throughout Retirement Requires Difficult Choices
Complete Description:GAO was asked to review (1) strategies that experts recommend retirees employ to ensure income throughout retirement, (2) choices retirees have made for managing their pension and financial assets for generating income, and (3) policy options available to ensure income throughout retirement and their advantages and disadvantages. GAO interviewed experts about strategies retirees should take, including strategies for five households from different quintiles of net wealth (assets less debt); analyzed nationally representative data and studies about retirees’ decisions; and interviewed experts and reviewed documents about related policy options. Financial experts GAO interviewed typically recommended that retirees systematically draw down their savings and convert a portion of their savings into an income annuity to cover necessary expenses, or opt for the annuity provided by an employer-sponsored DB pension instead of a lump sum withdrawal. Experts also recommended that individuals delay receipt of Social Security benefits until reaching at least full retirement age and, in some cases, continue to work and save, if possible. They noted strategies depend on an individual’s circumstances, such as anticipated expenses, income level, health, and each household’s tolerance for risks, such as investment and longevity risk. GAO also found that most retirees rely primarily on Social Security and pass up opportunities for additional lifetime retirement income. An estimated 3.4 million people (9 percent) aged 65 or older in 2009 had incomes (excluding any noncash assistance) below the poverty level. Among people of all ages the poverty rate was 14.3 percent. Policy options proposed by various groups include encouraging the availability of annuities in DC plans and promoting financial literacy.
Date Published:Wednesday, June 1, 2011
Funding Agency: US General Accountability Office
Type: Report;
Source: Focus groups and/or interviews; Literature review;
Language: English
Audience: Researcher