Wondering if you have enough savings in your 401(k) and IRA to retire comfortably? Confused about the best way to deploy your savings in retirement so you don’t outlive your money? These are critical retirement planning decisions for most older workers who are approaching their retirement years.
The trouble is, the majority of older workers are on their own to address these two tough questions. Many 401(k) plans require you to be your own actuary and your own investment manager when managing your account. But most people don’t have the background or training to make these complex decisions.
Fortunately, a recent survey from the global advisory firm Willis Towers Watson provides hope that this situation might change in the near future.
Willis Towers Watson surveyed 164 employers about the retirement income options they offer in their 401(k) plans. The percentage of employers that offer lifetime retirement options had increased to 30 percent in the company’s most recent survey, compared to 23 percent in its 2016 survey. The survey also found that an additional 60 percent of 401(k) plan sponsors haven’t yet adopted lifetime income solutions but are considering them, or would consider them, in the near future. Lifetime income solutions include installment payments, annuities, and education and planning tools to help plan participants create steady streams of income from 401(k) and other defined contribution retirement plans.
Willis Towers Watson
It’s good news that more than half of 401(k) plan sponsors are considering adding retirement income options in their plans. Employers can help you increase your retirement income from 10% to 20% by negotiating institutionally priced retirement income solutions, instead of turning you loose in the retail financial market. This conclusion is supported by a research report I coauthored in 2016 at the Stanford Center on Longevity.
Employers can also significantly improve their 401(k) plans by offering a menu of institutionally priced, retirement income options that complements the familiar 401(k) investment menu.
Such a retirement income menu can help you implement a straightforward, effective retirement income strategy that can be implemented using virtually any IRA or 401(k) plan, as shown in our 2019 research report from the Stanford Center on Longevity.
Your first step? See if your 401(k) plan offers retirement income options to employees who retire under the plan. You can do this by reading the Summary Plan Description (SPD) for the plan. If you don’t see any retirement income options, there’s a chance your employer might be one of those 60% of plan sponsors who are considering implementing retirement income solutions in the near future.
To find out, tactfully ask your employer if they’re considering implementing a retirement income menu and, if not, to please do so. Show them this post and our research reports. If enough of your fellow co-workers also ask, your employer might step up to the plate to help you and your colleagues with your retirement planning.
Don’t be shy! Given the amount of savings that most baby boomers have accumulated, as well as the level of debt many are carrying into retirement, you’ll need all the help you can get to make your savings work for you.