By Marc Gilman
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Key Takeaways
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“For most Americans, it is financially sensible to delay claiming Social Security until age 70,” says Wharton professor Olivia S. Mitchell — but most people don’t, often because they can’t afford to stop working and wait without another source of income to bridge the gap.
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Research co-authored by Mitchell finds that using retirement account assets to buy a deferred income annuity as that “bridge” tends to improve retirement outcomes for nearly everyone studied — letting you delay Social Security while still having income to live on.
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In a separate study, 52% of retirees regretted not having saved more, and about 1 in 4 specifically regretted not purchasing an annuity — and learning their actual odds of living a long life increased that regret by 42%.
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Financial literacy tends to decline with age — older men lose roughly one percentage point of financial literacy per year after 70, with women showing a similar decline — which is exactly when retirement decisions get harder to manage, not easier.
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The specific benefit varies by household: better-educated, higher-earning retirees tend to benefit most from buying deferred annuities, while lower earners often do better delaying Social Security directly, since they typically have a higher Social Security replacement rate to begin with.
The Core Idea: Using an Annuity as a Bridge
Everyone generally agrees on one basic fact about Social Security: the longer you wait to claim, the bigger your monthly check, up to age 70. As Mitchell puts it plainly: “For most Americans, it is financially sensible to delay claiming Social Security until age 70, as this maximizes the retirement payments that they receive for the rest of their lives.”
The problem is obvious — most people don’t actually do this. If you stop working before 70, you need something to live on in the meantime, and many people simply can’t or won’t wait without an income source to cover those years.
This is exactly the gap a deferred income annuity (DIA) can fill. Research Mitchell co-authored with Goethe University’s Vanya Horneff and Raimond Maurer found that “most people would be better off if they had access to deferred income annuities in their 401(k) accounts that allowed them to finance consumption while deferring claiming benefits.” In other words: use a portion of your retirement account to fund a few years of income, delay Social Security to lock in the larger lifetime benefit, and let the annuity itself begin paying later in life when you need long-term income security most.
Why This Isn’t One-Size-Fits-All
The research is clear that the benefit of this strategy isn’t uniform across every household. Better-educated, higher-earning retirees tend to benefit far more from buying deferred annuities — the study found a gap of 7 to 11 times greater benefit compared to the least-educated retirees studied. Lower earners, by contrast, often come out ahead simply by delaying Social Security directly and using their savings to bridge the gap themselves, without necessarily purchasing an annuity.
The reason comes down to two factors: lower earners already receive a higher Social Security replacement rate relative to their income, and they also tend to have higher mortality risk, both of which reduce the relative value of a longevity-focused annuity purchase for that group specifically.
What About Adding Some Stock Market Exposure?
One of the more interesting findings is around variable deferred annuities — versions that include some equity exposure rather than a purely fixed payout. Mitchell’s research found that “including 20%–50% equities in a variable annuity could improve retiree well-being by 15%–20%,” for both college-educated and high-school-educated retirees, compared to a fixed-only annuity.
There’s a catch, though: current U.S. law doesn’t permit variable annuities inside 401(k) plans — only fixed deferred income annuities qualify under existing QLAC rules. Mitchell has been direct about this: “Policymakers seeking to improve retiree well-being should consider allowing variable deferred income annuities in retirement plan portfolios.” For now, this remains a regulatory limitation rather than something available inside a typical workplace plan.
The Regret Research: What Retirees Wish They’d Done Differently
Beyond the math, Mitchell’s broader research on retirement decision-making surfaces something worth sitting with. In a survey of retirees 70 and older, 52% regretted not having saved more, and when asked directly whether they wished they’d purchased a lifetime annuity, about one-quarter said yes — they regretted not buying one.
Here’s the detail that stands out most: when researchers actually informed participants of their real statistical odds of living a very long life, regret about not having annuitized increased by 42%. People consistently underestimate their own chances of living well into their 90s — and once they understand those odds accurately, the value of guaranteed lifetime income becomes a lot more obvious to them, often too late to act on it.
Why This Gets Harder to Navigate With Age, Not Easier
There’s a compounding problem here worth understanding: financial literacy doesn’t stay flat as people age — it declines, right when retirement decisions get more consequential and more complex. Mitchell’s research finds that older men lose roughly one percentage point of financial literacy per year after age 70, with women showing a similar decline, compounded by often starting retirement with somewhat lower financial literacy to begin with.
This is part of why decisions about Social Security timing, annuity purchases, and retirement account withdrawals are genuinely better made earlier — while you still have the full capacity to evaluate the tradeoffs — rather than deferred until your 80s or 90s, when both the stakes and the difficulty of the decision are higher.
What This Means for Your Own Planning
For 2026, the mechanism for doing this inside a tax-qualified retirement account is a Qualifying Longevity Annuity Contract (QLAC) — which lets you move up to $210,000 per person (no percentage-of-balance limit, since SECURE 2.0 simplified the rule) from a traditional IRA or employer plan into a fixed deferred annuity, with income starting as late as age 85. A married couple can each fund their own QLAC, sheltering up to $420,000 combined.
The practical question worth asking isn’t just “should I buy an annuity” in the abstract — it’s whether using a portion of your specific retirement assets to bridge toward a later, larger Social Security claim (or to guarantee income later in life) actually improves your own numbers, given your health, other assets, and household situation.
What To Do Next
The research here is fairly consistent: for most people, delaying Social Security and using some retirement assets to guarantee income later in life tends to improve financial security — and a meaningful share of retirees who didn’t do this say, in hindsight, that they wish they had. The specific numbers depend entirely on your situation, which is exactly the kind of modeling worth doing before you’re the one looking back with regret. If you want to run your own numbers, reach out and we’ll work through it together.
Questions? Call (800) 927-9326 or email
Sources: Olivia S. Mitchell interview, “Olivia S. Mitchell on Reducing Longevity Risk in Retirement,” UNSW BusinessThink, April 2024; “Why Retirement Gets Better With Annuities,” Knowledge at Wharton, January 2024; Horneff, Maurer, and Mitchell, “Fixed and Variable Longevity Annuities in Defined Contribution Plans,” Pension Research Council Working Paper, The Wharton School; IRS Notice 2025-67 (2026 QLAC contribution limit).
