Annuitized Wealth and Consumption at Older Ages

Brief

Annuitized Wealth and Consumption at Older Ages

Abstract

The growing popularity of Individual Retirement Accounts and defined contribution (DC) pension plans, which generally provide lump sum payments instead of annuities, will likely affect spending at older ages. Retirees with little annuitized wealth risk spending too quickly and depleting their assets before they die, or spending too slowly and not enjoying as comfortable a retirement as they could afford. This study finds that older adults with little annuitized wealth spend more, and implies that the shift from defined benefit pensions to DC pensions or privatizing Social Security without requiring annuitization may promote even further spending of retirement resources.

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Cross-Center Initiative

Cross-Center Initiative: 
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