Undefined benefit: Projections and anchors as guides to retirement decumulation

Most defined contribution retirement income systems assume that retiring participants have the know-how and confidence to turn their lump sum savings into life-long income. Surprisingly slow withdrawals by retired defined contribution participants cast doubt on this assumption. In this study, we conduct three rounds of lab-in-the-field experiments that give near-to-retirement defined contribution plan participants updating information about withdrawal plans. We show that income projections induce slightly higher rates of withdrawal but this influence is dominated by income anchors. Supporting participants with basic information and the opportunity to engage in the decision process through interactive education tools has the potential to improve their wellbeing in retirement.