-----Original Message----- 

From: ann_combs@vanguard.com [mailto:ann_combs@vanguard.com] 

Sent: Monday, August 16, 2010 11:56 AM 

To: EBSA, E-ORI - EBSA 

Cc: steve_utkus@vanguard.com; ann_combs@vanguard.com 

Subject: Lifetime Income Joint Hearing 

Vanguard would welcome the opportunity to testify at the upcoming joint 

hearing on lifetime income being held by the Departments of Labor and 

Treasury on September 14 and 15. Because of scheduling constraints, we 

are only available to present on Wednesday, September 15. Your 

accomodation of this request would be greatly appreciated. 

Our witness at the hearing will be Stephen Utkus, a Principal at 

Vanguard and head of our Center for Retirement Research. We would like 

to address the following questions posed in the hearing notice: 

1. Certain Specific Participant Concerns Affecting the Choice of 

Lifetime Income Options Relative to Other Options 2. Information to 

Help Participants Make Choices Regarding Management and Spend Down of 

Retirement Benefits 5. Alternative Designs of In-Plan and Distribution 

Lifetime Income Options 

We look forward to sharing our views on retirement income. Vanguard 

has been at the forefront of research into participant behavior and, as 

a result, we approach retirement income from a slightly different 

perspective than others in the industry. We would also like to discuss 

a new retirement income service we are planning. An outline of our 

testimony is attached. 

Thank you in advance for considering our request to testify on 

September 15. If you have any questions, please contact me at the 

numbers below. 

(See attached file: Vanguard Proposed Testimony outline.doc) 

Ann L. Combs 

Principal, Strategic Retirement Consulting The Vanguard Group 

Direct: (610) 503-6305 

Cell: (202) 365-4012 

Email: ann_combs@vanguard.com 

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Outline of Proposed Testimony 

Stephen Utkus, Principal, Vanguard Center for Retirement Research 

For September 15, 2010 

1. Certain Specific Participant Concerns Affecting the Choice of Lifetime Income Options 

Relative to Other Options

• The desire to manage a portfolio in retirement, rather than annuitizing, arises from 

legitimate participant concerns about flexibility and liquidity of savings. As a result, 

withdrawal programs (such as those based on a 4% spending rule) will likely be the 

dominant strategy for generating retirement income. Annuities are expected to play a 

secondary role because of these concerns as well as concerns about issuer credit quality. 

• At the same time, annuity purchases have been hindered by a fragmented marketplace 

and lack of use of technology. We are introducing an innovative online annuity 

marketplace to address these concerns. 

2. Information to Help Participants Make Choices Regarding Management and Spend 

Down of Retirement Benefits 

• Interpretive Bulletin 96-1 can be amended to include guidance and examples applicable 

to the retirement income or “drawdown” phase. 

• Examples of the types of information the Bulletin might incorporate include: 

descriptions of the drawdown decision and the factors participants need to consider in 

making effective choices; descriptions of the types of retirement income products, offered 

“within” and “outside” the plan, and their risks, benefits and costs; case studies of 

hypothetical participants; plus worksheets or online calculators designed to help 

participants make effective drawdown decisions. 

3. Alternative Designs of In-Plan and Distribution Lifetime Income Options 

• In plan v. out of plan. Most retirement income decisions are likely to occur in the IRA 

marketplace for several reasons—including concerns among plan sponsors regarding 

ongoing fiduciary responsibility for oversight of the product; the complexity and 

difficulty of administering current product offerings; the desire of participants for direct 

control of savings; and the weakening over time of the relationship between an employer 

and their former employee. 

• Role of defaults. Absent any strong preference by participants for a specific retirement 

income strategy, we would rely on an approach that generates some reasonable income, 

while preserving liquidity and flexibility for the participant. Thus, the most appropriate 

approach to retirement income may be a withdrawal amount set at 3% or 4% of assets—

whether those assets are in a qualified plan or IRA rollover account. 

• Role of active choice. Given the complex nature of retirement income choices, we 

anticipate that most participants will want to make active decisions. Today, the choice 

set for participants include: withdrawal plans from a portfolio; payout funds and other 

non-guaranteed income from mutual funds; and various kinds of annuity-based contracts. 

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