How Do Retirees Go from Stock to Flow?

John Ameriks

Abstract —When participants in a defined contribution (DC) pension plan retire, they face an important decision regarding how to spend their retirement assets. The distribution decisions they make at or near retirement can significantly affect both their retirement incomes and the benefits paid to survivors or heirs. Yet very little is known about how DC plan participants actually choose to receive distributions from their retirement assets, when a wide array of annuity options is made available to them. Using unique historical data from a major DC pension provider (TIAA-CREF), we document and discuss the income elections of participants over the period 1978-2001. We show that, following the introduction of non-annuity income options in 1988, there was a significant decline in the use of life-contingent immediate annuity income among those initiating periodic withdrawals from their retirement accounts. Differences in choices by option and accumulated asset amount are described by demographic characteristic. Patterns may have relevance to policymakers, as they continue to evaluate the role of DC pension systems and life annuities in the provision of retirement income.