Many people who opt for an annuity are happy with them, but what of people who chose the lump sum over an annuity?
Do they have any regrets about choosing the lump sum?
Turns out that many lump sum recipients, if not always a majority, agree that annuities provide plenty of benefits, MetLife’s Paycheck or Pot of Gold Study has found.
More than half – 52 percent – of lump sum recipients agreed that their budget would be more predictable if they’d chosen annuity payments from an employer pension or defined contribution plan, the survey found.
Far fewer lump sum recipients — 34 percent — said it would be easier to pay for necessities if they had chosen monthly annuity payments instead of a lump sum, the survey found.
The average lump sum amount, or “pot of gold,” for those who took a lump sum from the defined benefit plan was about $192,000.
The average defined contribution plan balance at retirement was about $240,000.
“Behavioral economics has shown that the ‘lottery effect’ – the idea of an individual suddenly being offered what is perceive as a large sum of money – is tempting,” the survey concludes.
Survey results appear to confirm the lottery effect.
Only 32 percent of respondents said they would feel more financially secure if they had chosen to receive monthly payments instead of the lump sum, the survey found.
Only 27 percent said they would be better off if they had chosen to monthly annuity payments over a lump sum.
For people receiving monthly annuity payments from their former employer’s defined benefit plan, the average monthly payment is about $2,661.
The average monthly annuity payment among survey participants who receive payments from a defined contribution plan is about $1,700.
Of participants with a defined contribution lump sum, 41 percent agreed they would not be concerned about outliving their money had they chosen monthly annuity payments, the survey found.
Of participants with a defined benefit lump sum, 38 percent said they would not be afraid of running out of money if they had chosen monthly annuity payments instead of taking a lump sum from their former employer’s pension, the survey found.
Harris Poll conducted the survey last June-July on behalf of MetLife and data on lump sums were drawn from a sample size of 309 respondents.
by Cyril Tuohy | Jun 2, 2017
Author: Cyril Tuohy
Source: InsuranceNewsNet.com, Inc.
Retrieved from: www.insurancenewsnet.com