Withdrawal Behaviors With and Without Explicit Longevity Protection
Spending less is the rational response of a risk-averse retiree to accepting the possibility of outliving their savings.
David Blanchett’s latest research, “License to Spend: Withdrawal Behaviors with and without Explicit Longevity Protection,” examines how retirees manage withdrawals from annuities with living benefits versus those without. Analyzing data from over 44,000 annuities sold between 2018 and 2021, Blanchett found that retirees with guaranteed lifetime income options, such as annuities with living benefits, are significantly more likely to withdraw funds, especially at older ages. This suggests that guaranteed income can alleviate fears of depleting savings, encouraging retirees to spend more confidently and meet their lifestyle goals in retirement.
The study highlights the behavioral impact of having explicit longevity protection, showing that the likelihood of withdrawals is notably higher among those with living benefits—twice as likely for 65-year-olds and six times as likely for 80-year-olds compared to those without such benefits. These findings underline the importance of offering guaranteed income solutions to help retirees feel more comfortable accessing their savings. For a deeper dive into how these insights could reshape retirement planning, read the full paper here.