It's the year 2035, and you're retiring at age 70. Unfortunately, your company closed its defined benefit (DB) pension plan to new employees years before you were hired, and Social Security hasn't been providing a cost-of- living adjustment since 2025, when the first wave of Baby Boomers became too great a strain on the government's so-called retirement safety net. Thank goodness, you were smart enough always to join your employer's 401(k) and contribute the maximum. Now, you have a substantial nest egg, but you are faced with the one question no one can answer: How long will you live?

As the retirement system braces for the graduation of a generational bulge into old age, plan sponsors are starting to worry whether they are doing enough–now that an increasing number no longer offer DB plans–to prepare employees for a potentially long retirement with fewer safety nets. Yes, they have been providing education on savings and more investment options in their defined contribution (DC) plans, but do their participants have the knowledge to make their savings stretch over an indeterminate life span?

Plan sponsors suspect not, and many are beginning to investigate vehicles that will assist their employees with the challenge. The most popular is one that has faced serious bad-mouthing in the not so distant past–annuities.