Attractive lifetime income options for plan sponsors and members


Lifetime income options are becoming a sought-after solution for retirement plans. Lifetime income options are long overdue for workplace retirement plans. For years, plan sponsors, pension committees and members have searched for a way to turn a lifetime of savings into regular income. The hope is that lifetime income options can last up to 30 years or more in retirement. It seems that lifetime income in retirement plans is an idea whose time has come. Due to a new requirement created in the Setting Every Community Up for Retirement Enhancement (SECURE) Act passed in 2019, new lifetime income illustrations will begin to appear on the statements of pension plan members over the next year or so. Many will likely admit that they haven’t saved enough. Thus, they will seek additional help in planning their retirement income needs. This will likely stimulate a demand from plan sponsors for lifetime income options in the plan as well.

In fact, nearly nine in ten plan sponsors and participants (88%) agree that lifetime income is essential to financial security, according to the Nationwide Retirement Institute® 2021 Plan Lifetime Income Survey. Although they recognize the importance of having an income in retirement, members are not confident in their ability to make the most of it. Half (50%) are concerned about the balance between spending and lifestyle in retirement. And, 48% are concerned about outliving their income, according to the survey.

These concerns have fueled the belief among plan sponsors and pension committees that employees want guaranteed lifetime income investment options in their workplace pension plans. Four in 10 plan sponsors and pension committees said they do not currently offer guaranteed lifetime income in their plan, but would consider it to help meet this employee need. However, among advisors and consultants, 60% do not think their plan sponsor clients want to evaluate guaranteed lifetime income options. This may be a missed opportunity for advisors and consultants to deepen and develop their relationships with plan sponsors.

According to the Nationwide Retirement Institute survey, participants are ready to take action once a guaranteed lifetime income option has been added to their employer-sponsored retirement plan. Indeed, 8 in 10 participants say they are quite likely to transfer some of their current retirement savings to a guaranteed lifetime income option. That’s even higher for older plan members aged 45 to 54: 87% say they would invest some of their savings in a guaranteed lifetime income option. According to Nationwide, this is an opportunity for financial professionals to engage plan sponsors and plan members even earlier than usual “early retirement“phase.

Advisors and consultants who are reluctant to bring up the subject of guaranteed income for life with their plan sponsor clients need only raise the subject, according to Nationwide. The survey found that nine in ten plan sponsors trust their financial advisors or consultants to give them advice on choosing the right options for their retirement plan. They consider their provider to be a primary source for learning more about guaranteed lifetime income options.

Additionally, the Nationwide survey showed that plan sponsors evaluate their retirement plan options every six months, more frequently than most advisers and consultants realize. More than eight in ten advisors indicated that only a few, if any, of their plan sponsor clients will consider their retirement plan investment options in the next six months. Again, this shows a mismatch between the perceptions of plan sponsors and advisers and consultants – another potentially missed opportunity for plan service providers to provide timely and valuable advice.

Plan sponsors and pension committees considering guaranteed lifetime income options should discuss the matter with their advisor or consultant. Given the obvious disconnect in the perception between advisors and sponsors, a proactive approach may be warranted to get the ball rolling.

Chalk Steff

Chalk Steff

Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff is also executive director of The Plan Sponsor University and is currently a professor at The Retirement Adviser University.

Chalk Steff

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