Having a steady source of income during retirement is a universal goal. According to a new research paper from Wharton, investors should consider a deferred income annuity product in their retirement accounts as this has shown to improve welfare for all groups when accounting for sex and education level.

Optimally, Americans would wait until they turn 70 before starting to receive Social Security payments, as it would lead to the biggest monthly check. Yet, most don’t for various reasons including a need for additional income, not wanting to work till this advanced age, and failure to plan properly. 

One potential solution is a deferred income annuity which would allow prospective retirees to bridge the gap and create extra income in their 60s. This would increase the chances that they would be able to not claim benefits till age 70 and maximize income from Social Security. 

These findings are especially relevant following the passage of the SECURE 2.0 Act in December 2022 which was created so employers would offer some sort of lifetime income payment option in 401(k) plans. The paper adds that options should also include a variable deferred income annuity with equity exposure in addition to fixed annuities. 

Finsum: Ideally, retirees would be able to put off receiving Social Security payments until they are 70. One way to increase the odds of this are to include annuities in retirement plans to create income during interim years.