Plan sponsors should tap into the pension-like outcomes guaranteed lifetime income offer
With the continued decline of pensions, employees enrolled in workplace retirement plans are yearning for a consistent stream of income they can rely on throughout their retirement years, aside from Social Security.
"Unbeknownst to many employees, this consistent stream of income once only available in pension plans is offered in more than 35,000 defined contribution plans today and is known as a guaranteed lifetime income option," says Sri Reddy, head of Full Service Investments at Prudential Retirement. "Plan sponsors need to educate participants about guaranteed lifetime income solutions and should tap into the pension-like outcomes they provide by incorporating them into their retirement plans as a default investment option."
According to "The Ease of Automation and Guaranteed Lifetime Income," a new white paper from Prudential Retirement based on a recent survey of retirement plan participants, education will be the key to greater adoption of guaranteed lifetime income solutions.
Why? Because although 32 percent of all participants surveyed believe guaranteed lifetime income is important, only 4 percent of defined contribution plans offer a guaranteed lifetime income solution. This is likely because plan sponsors underestimate their participants’ interest in them.
The research found that the more familiar participants were with auto enrollment, auto escalation and guaranteed lifetime income solutions, the more they saw the value in them and the more likely they were to use them if offered.
In fact, 78 percent of plan participants who said they were familiar with guaranteed lifetime income options said they believe it's very important to include them in workplace savings plans, while 77 percent said they would choose such an option. Even more striking is the 54 percent of participants surveyed that said they believe guaranteed lifetime income options offered as a default investment option would provide better-than-average retirement outcomes.
“The findings from our research are promising and underscore how receptive plan participants will likely be to guaranteed lifetime income solutions once plan sponsors start educating participants about them," Reddy says.
Interested in learning more? Read the report, "The Ease of Automation and Guaranteed Lifetime Income" or the news release. Want to speak with Sri? Contact Monique Reuben.