People are living longer, which means they may need their retirement savings to last decades. As a result, nearly half (48%) of participants are concerned about outliving their retirement savings. Many Americans don’t know how to transform their savings into retirement income.
Guaranteed income offerings can help ease this concern by providing consistent, predictable payments for life. Research shows a majority of 401(k) participants (75%) are “very” or “somewhat” interested in putting some or all of their savings into a guaranteed income option.
Employers are on board, too — 4 in 5 believe employees want guaranteed income products in their retirement plans. However, with new retirement strategies comes opportunities, uncertainty and risks. Here are some of the benefits and risks of in-plan guaranteed income.
Think of it as a “paycheck for life.” Essentially, it is a retirement income strategy guaranteed every month once a 401(k) participant reaches retirement (generally speaking at 65 years old). These investment solutions are gaining in popularity because they are easy for employees to understand, which helps instill more confidence in their retirement outlook.
For decades, workplace plans have helped workers save, invest and accumulate as much as possible. Yet, few plans offered a decumulation strategy to provide a steady, predictable flow of retirement income.
Guaranteed income solutions aim to solve three primary participant concerns:
As with any investment solution that has various pros and cons, guaranteed lifetime income is no different.
The SECURE Act and pending SECURE Act 2.0 were designed to help Americans save for retirement; and while the law and pending update seek to improve our retirement system, it can be hard to decode.
To boil it down, selecting a guaranteed income provider is still considered a fiduciary duty, so this should be done with care and diligence. Contact us for support.
Another SECURE Act requirement goes into effect this year; lifetime income illustrations will begin appearing on participant statements. These projections may motivate your employees to save, or they could instill a sense of dread if the illustration paints a bleak picture. Either way, this may prompt some employees to knock on your door and ask questions about the company’s retirement plan.
If you are curious about guaranteed income options or other ways to enhance your retirement plan, we can help. Whether you need plan assistance or help getting your employees on track toward retirement, we support our clients through every step of the journey.
Jerome Pfeffer, CRC, AIF
INVESTMENT SOLUTIONS GROUP
6020 Academy NE, Suite 206
Albuquerque, NM 87109
(505) 888-4015 Direct
(505) 515-0036 Fax
Securities and Advisory Services Offered Through LPL Financial. A Registered Investment Adviser.
Member FINRA / SIPC.
This information was developed as a general guide to educate plan sponsors and is not intended as authoritative guidance or tax/legal advice. Each plan has unique requirements, and you should consult your attorney or tax advisor for guidance on your specific situation.
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