Here’s a thoughtful article entitled “Why Retirees Aren’t Running Out of Money,” which talks about how retirees often adjust their spending in retirement to avoid running out of money.

That may be true for a large percentage of retirees, but many who incur large medical expenses simply can’t avoid these expenses.

So a good dose of pre-planning, plus some along-the-way adjustments, may be what’s needed.

A recent CBS News article called “How to fix a critical flaw in 401(k) plans” covers the results of a recent Bipartisan Policy Center (BPC) report that points out that many defined contribution plans don’t offer any guaranteed lifetime income features. The report goes on to outline nine policy recommendations that would encourage employers to offer easy-to-use retirement income generators in their 401(k) plans and help guide older workers to make informed choices to generate lifetime retirement income.

All I can say to that is, better late than never.

When 401(k) plans replaced defined benefit pension plans, that was the time when policy makers should have thought about how individuals could generate guaranteed lifetime income.

There are two simple solutions:

  1. For new retirees, make the default option a strategy that gradually shifts investments into income annuities.
  2. For active participants, mandate that plans offer deferred income annuities.

It should also be required that plans enable participants to roll out of their 401(k) plans to the rollover IRA of their choice.

Lastly, the income annuities must be priced more competitively to reflect this new market.