One of the themes that emerged from the many academic papers I have reviewed over the years is that economists think highly of immediate annuities. Clients, however, are not buying these products.

Why can one group love a product the other apparently hates? To answer that in just one word, I would choose "perspective." Economists and clients come at the issue from entirely different viewpoints. Academics typically examine macroeconomic and social issues, while clients are more interested in the micro economics of their household.

Economists see a number of trends that can make lifetime income annuities attractive. The most obvious of these is the trend toward longer life expectancies. A 2006 Congressional Research Service (CRS) report to Congress indicated that the life expectancy of a newborn in the United States in 1900 was 49.2 years. The 2003 newborn, by contrast, was expected to live to be 77.5 years old on average. This significant increase is attributable to advances in nutrition, medical, environmental sciences, workplace safety regulations and other factors.

There is great debate within the academic community about whether we will see such dramatic life-expectancy increases in the 21st century. The rate of increase in life expectancy slowed significantly in the latter half of the 20st century. According to Stephen Goss, chief actuary of the Social Security Administration referenced in the CRS report, the emergence of AIDS and SARS are examples of how quickly new diseases and antibiotic-resistant microbes can rise. Goss also asserts that medical advances may not be affordable for the masses and that the population in the U.S. has a tremendous problem with obesity and inadequate exercise. Nonetheless, the vast majority of the research points to longer life expectancies, and lifetime income annuities provide a high degree of certainty that some income will be available regardless of lifespan.

Economists also cite the trend of fewer defined benefit pension plans and more defined contribution plans. My grandfather worked for the Chicago Transit Authority his entire adult life. He collected a steady pension check after he retired for nearly 30 years before he died. These days, it is harder to find either a lifetime employee or a defined benefit plan.

The trend away from defined benefit to defined contribution plans has been under way for 30 years, but the pace of the shift appears to have accelerated substantially in recent years. A Towers Watson study "Prevalence of Retirement Plan Types in the Fortune 100 in 2011," showed a mere 13 companies in the 2011 Fortune 100 offered new hires a traditional defined benefit plan in 2011, compared to 58 in 2000. Further, in 2000, 72 of the Fortune 100 that year maintained a defined benefit plan, while only 30 of the firms on the 2011 list maintain one. These plans are even rarer among the small businesses for which the majority of Americans work.

With the increasing amount of responsibility placed upon the individual worker comes great concern about the lack of financial literacy among the populace. Most of our personal finance education comes piecemeal from friends, family and the school of hard knocks. Personal finance topics are typically sprinkled in the more traditional academic topics. For instance, schools in my community teach compounding interest as just a math problem and ignore the implications on one's personal finances.

In addition, the financial world has become and will probably continue to become more and more complex. I recently received notice that my homeowners insurance premiums were increasing 27%. As I reviewed information from my agent about alternative policies, I was reminded of just how difficult it can be to sort through one's financial matters. I am a highly trained professional with more than 20 years' experience who is familiar with financial terminology, yet it took almost no time for the whole matter to induce a raging headache.

Study after study about the utilization of 401(k) plans show unequivocably that most Americans are not saving enough and not taking full advantage of matching funds offered by their employers. The probable effect of this over time will be a population of workers with relatively small nest eggs.

The studies also show that a significant proportion of workers make poor initial investment choices and if they revisit those choices, they make poor subsequent decisions. The probable effect of this over time will be poor results on top of the inadequate level of savings just mentioned.

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