The Importance of Lifetime Income

In today’s aging society, the widespread assurance of lifetime income is the single most important step needed to improve the retirement security of older Americans.  The American Academy of Actuaries believes that retirement security can and should be significantly improved by the promotion of lifetime income, and that actuaries have an important role to play.  The Academy has identified lifetime income as a top public policy issue and strongly supports initiatives that will lead to more widespread use of lifetime income options.
 

Background

In 2011, the Academy sought input from the membership on a proposed statement advocating stronger public policy support for lifetime income solutions for Americans. The membership response was strong, encouraging, and helpful in determining Academy direction. The ultimate conclusion was that the actuarial profession has much more to say than could be captured in a single, brief position statement.  
 
The Academy then leveraged this lifetime income public interest statement to a longer-term initiative to:

• Promote meaningful discussions both within and outside the profession;
• Actively engage with the public policy community;
• Host discussion symposia on longevity, longevity risk, and lifetime income;
• Coordinate efforts of the life and pension practice councils; and
• Develop actuarial policy statements.

 

Academy Lifetime Income Public Statements

• Experience-Sharing Lifetime Income issue brief authored by the Lifetime Income Joint Risk Committee considering Experience-Sharing Lifetime Income (ESLI), a retirement income approach that shares features of both lifetime annuities and structured drawdowns. (June 28, 2023)
• Adding Annuity Options to Defined Contribution Plans issue brief providing a discussion of a variety of approaches for adding annuity options to defined contribution (DC) plans providing for insured lifetime income that begins immediately, is deferred, or is provided under an accumulation product that converts funds to lifetime income. (August 31, 2022 )
• Longevity Annuity Contracts issue brief providing a discussion of Qualifying Longevity Annuity Contracts (QLACs), which are insured annuities paid out one or more years after purchase, possibly starting at an advanced age.  (August 31, 2022 )
• Various Types of Insured Annuities issue brief providing a discussion of the various types of insured annuities available to individuals and their potential uses, as well as some relevant tax implications.  (August 31, 2022 )
• Comment Letter to Department of Labor on Pension Benefit Statements and Lifetime Income Illustrations on an interim final regulation with request for comments regarding pension benefit statements and lifetime income illustrations. (November 17, 2020 )
• Actuarial Observations on Retiree Income Approaches issue brief on application of actuarial methods to risk management in retirement income planning.(October 18, 2019 )
• The Lifetime Income Risk Joint Task Force comment letter to the Bipartisan Policy Center on its 2016 Report of the Commission on Retirement Security and Personal Savings. (February 22, 2019)
• The Lifetime Income Risk Joint Task Force comment letter to Congress suggesting improvements to the Lifetime Income Disclosure Act. (July 6, 2018)
• Income to Last a Lifetime Essential Elements examining longevity risk. (April 2018)
• The Academy’s position statement in support of policy and educational initiatives to increase retirement income options within employer-sponsored defined contribution (DC) plans. (October 31, 2017)
• Joint Academy, Institute and Faculty of Actuaries (U.K.), and Actuaries Institute of Australia white paper, Retirement Readiness: A Comparative Analysis of Australia, the United Kingdom, and the United States, showing that people in the three countries struggle with planning for retirement because they often aren’t equipped to address complex questions. Recommendations in the report include targeted financial education, greater use of default features in private retirement plans, and ensuring that public pension and social insurance systems are sustainable and capable of providing adequately for those who depend on them most. (October 12, 2017)
• Risky Business: Living Longer Without Income for Life Legislative and Regulatory Issues report that examines the importance of a secure income that lasts a lifetime (Oct. 23, 2015)
• Risky Business: Living Longer Without Income for Life Actuarial Considerations for Financial Advisers issue brief that provides actuarial insights regarding lifetime income planning (Oct. 23, 2015)
• Risky Business: Living Longer Without Income for Life Information for Current and Future Retirees issue brief explaining how risk sharing can help manage longevity risk (Oct. 23, 2015)
• The Challenge of Longevity Risk: Making Retirement Income Last a Lifetime international report that examines longevity risk under the retirement systems in the United States, Australia, and United Kingdom (Oct. 23, 2015)
• Retiree Lifetime Income: Choices & Considerations issue brief exploring key decisions and options available in the years leading up to and during retirement (Oct. 23, 2015)
• Retiree Lifetime Income: Product Comparisons issue brief that examines general insurance and investment products to create lifetime income (Oct. 23, 2015)
• Pension Committee comments on proposed lifetime income benefit statements (August 7, 2013)
• Risky Business: Living Longer Without Income for Life briefing on Capitol Hill (June 27, 2013)
• Risky Business: Living Longer Without Income for Life a discussion paper by the Lifetime Income Risk Joint Task Force (June 19, 2013)
• Lifetime Income—Risks and Solutions webinar (March 7, 2012)
• Congressional Testimony on Longevity Risk: Pension Practice Council testimony to a Senate Special Committee on Aging hearing on retirement savings (June 11, 2010)
• Pension Practice Council and Life Practice Council letter to the departments of Labor and Treasury regarding lifetime income options for participants and beneficiaries in retirement plans. (May 3, 2010)
• Pension Committee letter to Representative Pomeroy regarding the Retirement Security Needs Lifetime Pay Act of 2009. (November 18, 2009)