At a Glance | January 3, 2019 Impact of Deferred Income Annuity (DIA) on Probability of Retirement Success 2 2 RETIREMENT READINESS Impact of Impact of Deferr Deferred Income ed Income Annuity P Annuity Pur urchases on R chases on Retir etirement R ement Re eadiness adiness By By Age and De Age and Dea ath Benefit Option th Benefit Option For each of the groups living beyond age 90, we find No death benefit Percentage of With death benefit 401(k) used to an increase in the EBRI 3 Age at Death purchase DIA Increase in retirement readiness 1 Retirement Readiness Rating 16.2% 30% 11.2% (RRR) and, as expected, the 14.6% 100+ 25% larger the percentage of 401(k) 10.8% Years Old 12.2% balance used to purchase a DIA, 20% 8.8% the larger the percentage 10.9% 15% 6.9% increase in RRR. After age 85, 7.6% 10% 5.0% the presence of a death benefit 4.0% 5% 3.1% reduced RRR. 9.6% 30% 5.2% We find an overall decrease 8.0% 95– 25% in probability of a successful 4.9% 7.1% retirement — as measured by 20% 4.5% 99 the RRR — for those dying before 6.0% 15% 3.5% Years Old benefits begin as well 4.4% 10% 2.6% as for those dying between ages 2.5% 5% 1.3% 85 and 89. This was mitigated somewhat by the presence 3.2% 30% 0.8% of a death benefit for those 3.1% 90– 25% under age 84. 0.9% 2.9% 20% 1.2% 94 2.3% 15% 0.9% Years Old 2.0% 10% 0.8% 1.3% 5% 0.5% Decrease in readiness —3.0% 30% —3.9% —2.3% 85– 25% —3.1% —1.5% 20% —2.2% 89 —0.9% 15% —1.4% Years Old —0.3% 10% —0.7% —0.1% 5% —0.4% 1. The Retirement Readiness Rating is the probability that a household will NOT run short of money in retirement. For —2.1% 30% additional detail, please see Jack VanDerhei, “What Causes EBRI —0.5% Retirement Readiness Ratings™ to Vary: Results from the 2014 —1.7% 65– 25% Retirement Security Projection Model,®” EBRI Issue Brief —0.5% (February 2014). 2. For households currently ages —1.3% 20% —0.3% 35–64 who have a 401(k) balance at retirement age (65). 84 —0.9% EBRI Retirement Security Projection Model® Version 3427. 15% —0.2% 3. Second death for couples. Years Old —0.6% Source: Jack VanDerhei. “Deferred Income Annuity Purchases: 10% —0.1% Optimal Levels for Retirement Income Adequacy.” EBRI Issue Brief, —0.3% no. 469 (Employee Benefit Research Institute, January 3, 2019). 5% 0.0% © 2019 EBRI