The government's top number-crunching organization talked to planners and is now urging Americans to buy annuities and delay Social Security in order to better replicate the outcomes of now-vanishing pensions.
On the surface, the latest GAO report, "Ensuring Income Throughout Retirement Requires Difficult Choices," seems as straightforward as its name.
Yes, navigating an ever-increasing lifespan in turbulent markets has been tricky business for clients and advisors alike. A full 9% of seniors now live in poverty, despite Social Security.
But the difficult choices the GAO ultimately recommends have some interesting policy-oriented implications.
For starters, they note that taking Social Security "early" -- or at the first available date -- robs many retirees of the maximum benefits they would otherwise enjoy if they waited until the "official" retirement age.
Why not simply give people a single retirement age and then revamp the transitional period (currently the early- to mid-60s) as a disability program for those too sick to go on working?
It would end vast confusion and the temptation to quit early and "live on less," which many planners who work with middle class clients know can be a pipe dream.
The annuity approach is aimed squarely at avoiding scenarios where the retiree takes a lump sum distribution. Why not force a rollover instead of urging people to buy investment products that are notoriously confusing?
If the goal is to replicate the good points of vanished defined benefit plans, annuitization may be good, but annuities themselves are more ambiguous.
And while IRA distributions do not generate a fixed benefit every year, the distributions can be fine-tuned to at least maximize the chances that a given retiree won't spend too fast.