TIAA Study Highlights Switzerland and Chile Models for U.S. Retirement Reform

A new comprehensive study by the TIAA Institute analyzes retirement systems across 11 countries, highlighting the successful integration of annuity options in Switzerland and Chile as a model for U.S. retirement security reform. The report reveals that countries where annuity adoption is voluntary and requires individuals to independently seek products experience low uptake rates, often below 10%. Conversely, systems that embed annuities within the retirement plan structure see adoption rates surpassing 50%, demonstrating the impact of streamlined access and decision-making integration on retiree behavior. Switzerland and Chile, despite geographic and cultural differences, have implemented integrated retirement frameworks that encourage annuitization without mandates. Chile utilizes a government-run platform offering multiple payout options from which retirees can choose, while Switzerland’s plans provide annuities directly with options for income, lump sum, or hybrids. Both approaches achieve high annuitization rates through competitive pricing and reduced decision friction, which can inform U.S. policy adapting to increasing lifespans and evolving work environments. The study’s findings emphasize the viability of hybrid retirement systems combining the security of defined benefit guarantees with the flexibility of defined contribution plans. Middle-income participants benefit significantly from annuitization, especially when plan designs remove barriers to access. Key success factors for these hybrid models include universal participation, adequate contributions, risk-sharing, flexibility aligned with modern employment patterns, and strong fiduciary oversight. Regarding U.S. implications, the report notes the current limited availability of annuity options in private-sector defined contribution plans correlates with low annuity adoption among retirees. Recommendations for U.S. policymakers include expanding qualified default investment alternatives to encompass annuities with delayed liquidity, enhancing fiduciary safe harbors for sponsors offering guaranteed income products, mandating diverse qualified payout menus including annuities in DC plans, and supporting pooled employer plan infrastructures. The TIAA Institute’s research offers a data-driven blueprint for policymakers and plan sponsors seeking to improve retirement security through integrated lifetime income strategies. This approach could address the critical transition from saving to spending, ensuring retirees are better equipped for sustainable financial outcomes. The full study is accessible on the TIAA Institute website for further review and application.