- Larger 401k accounts (in excess of $200,000) dropped 25% on average in 2008.
- 95% percent of participants in defined contribution style 401k plans would pursue a "cash out" option if offered--essentially taking the lump sum of accumulated assets rather than an option to turn that pool of assets into a guaranteed stream of income.
- Only 25% of participants in defined benefit pension programs would accept the same lump sum "cash out" offer.
Why is a pot of accumulated assets so much more psychologically appealing that a guaranteed income stream, even when that income stream is rationally superior to the pool of money?
This is one of the challenges that exists for the annuity and retirement planning industries.
A recent article (referenced below) discusses this challenge and some of the remedies--including in-plan annuities--that are surfacing to address it.
Source: On Wall Street
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