Prudential paper discusses implications of new National Retirement Risk Index report
NEWARK, N.J., June 19, 2012 - A new Center for Retirement Research at Boston College report highlights the difference a few extra years of work can make toward ensuring that the vast majority of Americans can achieve retirement security. The National Retirement Risk Index has shown that an increasing percentage of households will not be ready to retire at age 65, from 30 percent in 1989 to approximately 50 percent today. Despite this, however, the new report finds that by working five years longer than the assumed retirement age of 65, the percentage of American households prepared to retire increases to 86 percent. A video summary of the highlights of the research is available by clicking here. The National Retirement Risk Index is sponsored exclusively by Prudential.
“While many Americans despair of ever being able to retire, the reality is that with a few extra years of work and a delay in taking Social Security, they can increase their chances of being able to have a more financially secure retirement,” said James McInnes, chief operating officer, Total Retirement Solutions, Prudential Retirement. “The question individuals have to ask is whether this is something they want to do or will be in a position to do, and companies have to ask what this would mean from a human resources management perspective.”
A new Prudential paper, “Planning for Retirement: How Much Longer Do We Need to Work?” discusses some of the implications of this report for individuals, employers, financial advisors and policymakers. The paper notes additional ways to achieve better retirement outcomes, including increasing retirement savings, enhancing employer-sponsored retirement programs that encourage greater saving, increasing the awareness of products that can help retirement savings last through retirement, and requesting that policymakers support regulations such as a creating safe harbors for employers who wish to add guaranteed lifetime income products to their defined contribution plans.
“The new NRRI data shows us the expected outcomes of current retirement savings behavior,” added Benjamin Robinson, vice president, Strategy, Prudential Annuities. “It provides a reference point for individuals, companies, advisors and policymakers who are making decisions that impact retirement security. The NRRI underscores the importance of taking individual responsibility for retirement savings and doing this as early as possible.”
Specifically, the paper lays out several steps that individuals can take to help themselves along the path to retirement security, including:
- Planning for the possibility of working a few years longer than the traditional retirement age of 65. Although not an option for everyone, doing so has the triple benefit of delaying the receipt of Social Security by a few years to increase monthly benefits, earning wages and accumulating savings for a few more years, and drawing down on savings for fewer years in retirement.
- Ramping up the rate of savings to increase the probability of retiring at age 65 or earlier.
- Insuring retirement income against the risks of longevity and market uncertainty through guaranteed lifetime income products.
The paper encourages employers to consider helping workers achieve retirement security by:
- Enhancing defined contribution plans by adding features such as automatic enrollment, automatic escalation of contributions and in-plan guaranteed lifetime income products that increase savings.
- Encouraging employees to track their savings progress in terms of an income goal, rather than a savings goal, at a realistic target retirement age.
For financial advisors, the paper notes the importance of:
- Developing an appropriate target retirement age that is customized for each individual.
- Showing the positive impact that a few extra years of employment can provide in terms of increased financial security.
- Framing the retirement planning in terms of future retirement income rather than a savings objective.
For policymakers, the paper highlights ways they can help Americans achieve a more secure retirement, including:
- Creating safe harbors that address potential employer concerns regarding the addition of guaranteed lifetime income products to defined contribution plans.
- Passing legislation that makes it feasible for more employers to offer a retirement savings plan in the workplace through Multiple Small Employer Plans.
- Adopting proposed regulations that require defined contribution plans to project future monthly income on participant statements.
Prudential Financial, Inc. (NYSE: PRU), a financial services leader, has operations in the United States, Asia, Europe, and Latin America. Prudential’s diverse and talented employees are committed to helping individual and institutional customers grow and protect their wealth through a variety of products and services, including life insurance, annuities, retirement-related services, mutual funds and investment management. In the U.S., Prudential’s iconic Rock symbol has stood for strength, stability, expertise and innovation for more than a century. For more information, please visit http://www.news.prudential.com/. Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company, Hartford, CT, or its affiliates.