NEWARK, N.J., June 22, 2016 - More than three-quarters of Americans familiar with guaranteed lifetime income options that are hoping their defined contribution plans will provide the same level of retirement income protection once afforded by pension plans say they would likely choose guaranteed lifetime income options—if their plans offered them—according to recent research from Prudential Retirement, a business of Prudential Financial, Inc. (NYSE:PRU).
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But many of those retirement plan participants will have to wait. About 35,500 DC plans so far offer guaranteed lifetime income solutions*—often paired with auto-enrollment—representing only 4 percent of plans, because many plan sponsors have assumed there would be very little interest from employees.
Plan participants: Make it easier to secure lifetime income
Prudential Retirement’s findings, which summarize a 2015 survey of 1,000 employees¹, are outlined in The Ease of Automation and Guaranteed Lifetime Income. It’s the fourth in a series examining how plan sponsors can help American workers save for retirement and shows employees have a keen interest in auto-enrollment, auto-escalation and guaranteed lifetime income options as part of DC plans such as 401(k) or 403(b) plans.
“Plan sponsors clearly want their employees to be able to secure lifetime financial stability,” said Sri Reddy, head of Full Service Investments at Prudential Retirement. “But our findings show there is an obvious confidence gap between solutions many plan sponsors actually offer and available options that could increase employees’ belief that they can truly save enough to fund their hopes and dreams for the future.”
Prudential found 78 percent of plan participants who said they were familiar with guaranteed lifetime income options believe it’s “very important” to include them in workplace savings plans. And 77 percent said they would choose such an option.
Among other important findings:
- Fifty-four percent of participants say they believe guaranteed lifetime options offered as a default investment option would provide better-than-average retirement outcomes.
- Eighty percent of plan participants plan to rely on their workplace plans as a source of lifetime income more than any other source—including Social Security.
- Seventy-one percent say auto-enrollment is an importance feature of DC plans.
- Forty-five percent worry they won’t meet their retirement goals through their current plans.
- Millennials are more enthusiastic about automatic plan features and guaranteed income solutions than any other age group.
Earlier reports in the series, all aimed to help chief financial officers, human resources directors, intermediaries and other decisions makers understand how to get the most out of their defined contribution plans for their organizations and employees, include:
- What Employers Lose in the Shift from DB to DC Plans…and How to Get It Back
- Better Participant Outcomes through In-Plan Guaranteed Retirement Income
- Guaranteed Lifetime Income and the Importance of Plan Design
“American workers need retirement solutions that have the potential to offer pension-like outcomes,” Reddy said. “So it’s critical to offer guaranteed lifetime income solutions, particularly as a default investment option and used in tandem with automatic features. As we’ve found, these features can help plan sponsors address many of participants’ greatest unmet needs and provide help with choosing the right investments to meet their retirement goals, maximizing the growth potential of their account balances and securing an adequate source of retirement income.”
About Prudential Retirement
Prudential Retirement delivers retirement plan solutions for public, private, and nonprofit organizations. Services include defined contribution, defined benefit and non-qualified deferred compensation record keeping, administrative services, investment management, comprehensive employee education and communications, and trustee services, as well as a variety of products and strategies, including institutional investment and income products, pension risk transfer solutions and structured settlement services. With more than 85 years of retirement experience, Prudential Retirement helps meet the needs of 4.1 million participants and annuitants. Prudential Retirement has $371.8 billion in retirement account values as of March 31, 2016. Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company (PRIAC), Hartford, Conn., or its affiliates.
Retirement products and services are provided by Prudential Retirement Insurance and Annuity Company (PRIAC), Hartford, Conn., or its affiliates. PRIAC is a Prudential Financial company.
Prudential Financial, Inc. (NYSE:PRU), a financial services leader, has operations in the United States, Asia, Europe, and Latin America. For more information, please visit http://news.prudential.com.
*Source: 2015 LIMRA In-Plan Income Guarantee Availability and Election Tracking Survey, as of 12/31/15
¹Source: 2015 Prudential Retirement Defined Contribution Research Report