Research and Analysis by Dale Kintzel
Retirement income in the United States has been described as a three-legged stool composed of Social Security benefits, personal savings, and employer-based retirement plans. For the latter, today's workers usually have a defined contribution plan in which the worker and employer contribute to the plan and the worker bears the risk for account performance. At retirement, the worker has the option of purchasing an annuity, which is similar to Social Security benefits and traditional defined benefit pension plans insofar as they provide a steady income stream for life. This issue paper examines the similarities and differences between Social Security retirement benefits and annuities, and the factors that determine how much lifetime retirement income an individual would receive.
When to claim Social Security retirement benefits is one of the most important financial decisions many people make. The Social Security Administration (SSA) provides a variety of online tools and publications to help individuals decide on their own when to claim benefits but maintains a neutral stance on when a person should claim. Because SSA remains neutral, other government, nonprofit, academic, and for-profit entities have developed tools to assist the public with their claiming decision. This note analyzes the advantages and limitations of six online benefit calculators. Users of these online tools should consider the source of their information and understand that the benefit estimates they produce are based on different underlying assumptions, which can result in different estimated benefit amounts.
There has been much discussion recently about life-cycle funds and their role in providing a secure retirement income for older Americans. These funds, which gradually shift account assets from broad-based stock funds to bond funds as a participant ages, are becoming an important vehicle for retirement savings. This policy brief explores the economic rationale behind the life-cycle approach and the advantages and limitations of life-cycle funds.