The Regressive Ethics of Default Lifetime Income

Authors

• Derek Tharp, University of Southern MaineFollow

Document Type

Article

Publication Date

5-2026

Abstract

Recent retirement-policy reforms have made it easier for employers and plan sponsors to include private lifetime-income products in defined-contribution retirement plans, including as defaults. Yet the ethical case is much weaker than its advocates assume. The objection is not to annuities as such. Issues arise when employers convert workers' liquid retirement savings into a private lifetime-income product the worker cannot easily reverse, on terms whose regressive distributional consequences the sponsor can foresee. Two features make this ethically problematic. Irreversibility removes workers' ability to adapt as health, family, liquidity, and bequest circumstances change. Employer authority compounds this concern by leveraging institutional trust and inertia. The two together create a heightened burden of justification, made hardest to meet by predictable and regressive distributional consequences. When mortality credits flow from lower-paid, shorter-lived workers to higher-paid, longer-lived workers along social and demographic lines the sponsor can foresee, appeals to average expected welfare cannot satisfy the burden. The first question for any default should be why Social Security — a public lifetime-income alternative already available to nearly every worker and superior to private income annuities — is not being fully used by workers first. Insurers derive revenue from each dollar defaulted into a private annuity, creating a direct commercial interest, and the research environment that supports default expansion has been shaped accordingly. The sharpest harms fall on workers in poor health, with liquidity constraints, or with family obligations, for whom irreversible private annuitization is inferior to the Social Security delay they may have rationally rejected.

Recommended Citation

Tharp, Derek, "The Regressive Ethics of Default Lifetime Income" (2026). Faculty Publications. 104.
https://digitalcommons.usm.maine.edu/business-faculty/104