Private Pensions: Participants Need Information on Risks They Face in Managing Pension Assets at and during Retirement

Question: Individuals face increasing responsibility for ensuring the sufficiency of their retirement savings, a result of the continuing trend toward pension plans with individual accounts and longer life expectancies. Finding: Using the NIA-funded Health and Retirement Study, GAO found that while plan sponsors provide timely information about payout options (e.g., lump-sum versus annuity) and that many plans offer both lump-sum and annuity options, there is little discussion regarding the relative risks of the available options, as well as the risk of outliving one s savings. While many retirees received annuities (60 percent), a large proportion that had the option of annuitizing chose instead to receive a lump-sum distribution. Recommendation: More effort is needed to increase public awareness of the risks associated with various options for pension distributions and the implications of choosing one option versus another for the likelihood of outliving one s retirement savings.