More retirement plan sponsors are open to offering participants lifetime income options. Now they just have to make it happen.
A new report by Greenwald Research shows that a growing number of defined-contribution retirement plan participants are seeking guaranteed lifetime income products like annuities in their employer-sponsored plans. The study also shows that a majority of plan sponsors agree that their plan participants are better off with additional income options.
According to the survey, 88% of plan participants want retirement income that can keep up with inflation, while 86% want guaranteed lifetime income to cover basic expenses or more. Furthermore, a healthy 72% said they need in-plan income to have a financially secure retirement.
Participants' interest in in-plan income has grown since 2021, with four in five respondents citing GLI options as the most appealing.
“The already strong desire for plan options that allow participants to ‘pensionize’ DC retirement savings has only grown because of recent economic confusion and uncertainty," Lisa Greenwald, CEO of Greenwald Research, said in a statement.
“Roughly nine out of 10 plan sponsors told us their employees ‘need’ those options, so they’re at least somewhat likely to consider adding them to their retirement plans,” Greenwald added.
As to the commitment of sponsors, nearly nine in 10 feel a high degree of responsibility for the overall retirement preparedness of employees as well as for the financial security of retired employees, the survey said.
Regarding the obstacles sponsors cite that prevent them from offering lifetime income options at this time, they included concerns about selecting product providers, confusion over changes in providers and record keepers, and the ability of the participants to understand the products. Other concerns included higher fees and the ability to offer participants the right number of retirement income options.
More than three in four plan participants (77%) find auto-enrollment into income options appealing, according to the study, while nine in 10 find automatic reminders about enrollment appealing. That said, half of the respondents suggest this automatic enrollment should occur as retirement approaches, at age 50 or older.
Finally, 70% of respondents said they are worried about running out of money in retirement. And the study showed confidence in having a financially secure retirement dropped to 63% of respondents in 2022, down from 72% the year before.
“In-plan guarantee investments offer more control over retirement savings and can be chosen based on participant needs: principal protection or guaranteed lifetime income,” said Richard Siminou, senior financial advisor at Siminou Wealth Management at Kingswood U.S.
Siminou recommends a diversified mix of products including certificates of deposit, fixed and fixed-indexed annuities, high-yield savings and money market accounts, Treasury inflation-protected securities and Treasury bonds, as well as whole life insurance.
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