https://www.metlife.com/assets/cao/...aycheck-or-Pot-of-Gold-Study-Final4-11-17.pdf
"1 in 5 individuals who took a lump sum
either from a DB plan or DC plan depleted
their lump sum, on average, in 5½ years."
"Nearly all of those who took an annuity (96%)
are happy they chose the guaranteed monthly
annuity payments rather than a lump sum."
Where to begin....
OK.. the quote you gave has some telling info around it...
The average lump sum amount for those who took a lump sum from their DB plans was approximately $192,357 ($232,507 for men compared to $144,793 for women). One in five DB plan participants who took a lump sum from their DB plans (22%) did so in conjunction with receiving notice of a lump sum window. The average DC plan balance at retirement was approximately $239,792 ($274,859 for men, compared to $188,178 for women
SOOO, if you take a lump sum you get lets say $200,000 in cash... which using the 4% rule means a monthly 'pension' of $667..... now, we know that they pay higher than the 4%, so lets bump it to what I get on an annuity site which is about $1,100.... the next paragraph in the study...
For those receiving monthly annuity payments from their former employer’s DB plan, the average monthly payment is about $2,661. The average monthly annuity payment among those who receive annuity payments from their DC plans is about $1,691. Many DB and DC plan participants are also collecting (or have collected) benefits from Social Security (63% and 82% for DB and DC plan participants, respectively).
So, you are comparing a cohort of people making almost $2,700 per month in one case or $1,700 per month in another with a group of people who would make $1,100 per month... so right off the bat the group who took the lump sum is starting at a disadvantage...
NOW, we know that the avg means there are people who had more and who had less... I doubt it is a perfect bell curve... it is probably skewed with more people having less $200K and many with less than $100K... which gives you about $500 per month.... So, they make a decision... do I take the lump sum since the $500 per month will not get me what I want or just live with the $500....
So now we have a cohort of people who took the lump sum... and 20% of them ran out of money... well, of course!! There are at least 20% who got less than $100K.... and maybe even less than $50K...
Now, if they did a slice of that date to show the % of people who ran out of money based on how much they got (say $10K bands or even $25K bands) that would be more telling... but it probably would show the people who got a small lump sum ran out of money and the people who got a large lump sum still has it....