Alcoa said it will phase annuitization
in over time.
But voluntary annuitization
is rare, which has been the focus of a great deal of study (for summary, see MacDonald et al.
Deferred Annuities: A type of long-term savings product that allows assets to grow tax-deferred until annuitization
The insurer may provide guarantees of death proceeds or a certain annuitization
amount (if purchased) within a variable annuity, thus providing clients with guarantees that otherwise would be unavailable to those clients who purchased the underlying investments directly.
But for nonqualified accounts, annuitization
can offer an initial tax advantage over withdrawals because each annuitized payment will include a return of the annuitant's cost basis.
process involves an irrevocable decision to accept a payment for the annuitant's life or a term of years, usually no fewer than five.
This restructuring of pension risk was achieved through a combination of a third-party annuitization
and a self-insurance solution.
John Beshears, David Laibson, and Brigitte Madrian, Harvard University and NBER; James Choi, Yale University and NBER; and Stephen Zeldes, Columbia University and NBER, "What Makes Annuitization
Numerous rational motives have been suggested to explain the puzzlingly low demand for annuities, including bequest motives, uncertain healthcare expenses, high annuity prices (due in part to adverse selection, the tendency of those with longer expected lives to purchase annuities at higher rates), the existence of means-tested government benefits such as Medicaid, and the level of mandatory annuitization
through Social Security and some DB plans.
The fixed annuitization
method (Revenue Ruling 2002-62 section 2.
Retirees who remain in the Verizon plan argue the company wrongly used plan assets to cover some of the expenses of the annuitization
38 of deferred income annuities (DIAs) (products that delay the start date of annuitization
by more than the 12-month time limitation imposed on single premium immediate annuities) provides a generally positive assessment of this recent entrant to the annuity marketplace.