Would 401(K) Participants Use a Social Security Bridge Option?

Although annuities confer the benefits of lifetime income, the market for them is minuscule. Explanations include annuities’ high cost, reluctance to part with accumulated assets, and underappreciation for insuring against outliving one’s resources. Employers could increase the availability of lifetime income by adopting a Social Security bridge strategy within their 401(k) plans. The bridge option would use 401(k) assets to pay retirees an amount equivalent to their Social Security benefits so they can postpone claiming, thereby increasing their monthly benefit when they eventually claim. We gauge workers’ potential interest in a bridge option; results indicate that up to about one-third of respondents would use the bridge. The experiment shows that framing increases the share of assets allocated to the bridge strategy and that defaulting workers into the strategy is even more effective. Further, each of the two treatments substantially increases projected Social Security benefits, increasing retirees’ access to additional lifetime income