Workers are now responsible for a complex financial web in retirement.
The world of retirement savings recently reached a significant milestone that has important implications for workers and retirees: For the first time, assets in defined-contribution savings plans represent more than 50% of all retirement plan assets globally, according to Willis Towers Watson.
Increasingly, workers expect their retirement plans to not only help them save, but also help them to generate and manage income through retirement. A recent report by the Georgetown University Center for Retirement Initiatives, “Generating and Protecting Retirement Income in Defined Contribution Plans”, looks at how different approaches can meet individual goals for doing just that.
One size does not fit all To better understand how different retirement income options perform, the Georgetown Center for Retirement Initiatives worked with Willis Towers Watson to analyze a range of income solutions, such as an immediate annuity, a target-date fund using a systematic withdrawal plan or a deferred annuity, as well as other options.
Retirement plans must start to meet future needs Retirement plans must shift from simply managing account balances to helping individuals think about not only when they plan to retire but also how much income they will need in retirement. This shift in focus will help workers make smarter savings and investment decisions. Although this need seems to be obvious, plans have been slow to provide lifetime income solutions.
Avoiding ‘retirement roulette’ Without more and better lifetime income choices, retirees are essentially gambling with their retirement savings. Too few have the tools and information needed to manage their nest eggs to last throughout their golden years.
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