Annuities, The Missing Piece in Most Retirement Plans, According to New Research

While workers are increasingly worried about having enough retirement savings to last a lifetime, a new study by economists Gaobo Pang and Mark Warshawsky expands their 2024 study and offers fresh guidance on how retirees can close that gap — and what it means for retirement policy.

The study stress tests four strategies for drawing down retirement savings:

• Partial annuitization — gradual purchase of annuities over the first decade of retirement
• Pure systematic withdrawals (the 4% rule)
• Full annuitization of retirement savings
• Partial annuitization — one-time purchase of a lifetime annuity with remaining assets withdrawn systematically

Partial Annuitization Performs Best in Nearly Every Scenario

Across almost all cases tested, partial annuitization — either through a one-time or gradual annuity purchase — produced better outcomes.

Full annuitization maximizes income stability but eliminates liquidity and leaves nothing for heirs. Pure withdrawals preserve flexibility but expose retirees to significant longevity and sequence-of-returns risk. Splitting the difference captures the advantages of both.

This finding held across varying wealth levels, health statuses, risk preferences, and market conditions.

How SECURE 2.0 is Already Supporting Retirees

The study provides a clear view of how SECURE 2.0 is already providing a benefit to retirees.

Previously, the minimum distribution rules disadvantaged partial annuitization strategies because total distributions were taxed more heavily than straight withdrawal strategies. SECURE 2.0 removes that extra layer of taxation, saving money for retirees who choose lifetime income.

Delaying Social Security Generally Improves Retiree Welfare

For most retirees, using savings as a “bridge” to delay Social Security claiming until age 70 improved lifetime financial outcomes across every income strategy tested. This provides a higher inflation-indexed income floor that reduces dependence on market performance and mitigates the risk of outliving assets.

Bottom Line

For the millions of Americans navigating retirement without a pension, the combination of partial annuitization and strategic Social Security timing can help them create lifetime income that mimics a pension. The research underscores that optimal retirement income strategies vary meaningfully by wealth level, health, retirement age, and personal preferences. However, across the board, the bottom line: Americans need access to options that help them ensure they have savings to last.