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Why Annuities Often Make Sense

By allowing retirees to pull extra income out of a nest egg, annuities will be a key component of most people's retirement strategy, says Nobel laureate Robert Merton.

Why Annuities Often Make Sense

Christine Benz: So, one other issue I want to discuss with you is when people exit the 401(k) setting, they are in retirement, and they are trying to figure out how to draw down their assets. Do you have any thoughts on how that process might be handled better? Are there any guardrails that could be put in place to help people in that position?

Robert Merton: That's a very good question, and it's quite important. One because of course the end result of all of this is to take care of people in retirement, and if you get all the way through the accumulation phase and then don't use the funds you have accumulated in a way it's best, you have sort of lost out in the last leg of the race. And also because people are living longer in retirement, their lifestyles change.

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