Annuitization of defined contribution plan balances effectively reduces a variety of retirement income risks faced by retirees. This article reviews the changing role that insurance, especially life annuities, plays in solving the retirement income problem and the theoretical arguments and empirical studies showing the importance of annuities. It then reviews reasons why annuities are not more widely purchased by retirees and how policy makers can encourage annuitization in order to ensure the long-term financial security of future generations.
