Broadening Lifetime Income Solutions

Retirement Plan Advisors has reported employers “warming” to lifetime income solutions with 23% having adopted “…at least one approach in their DC retirement plans”. 18% more are considering it.

Willis Towers Watson’s Lifetime Income Solutions survey shows a gradual warming and that employers indicate “…more interest in educating participants about drawdown strategies or partial withdrawals than using guaranteed insurance-backed products.”

81% of the employers who reported no consideration state they are worried about fiduciary risk, 66% named cost and 60% indicated the solutions currently on the market are too new.

The 23% of employers offering lifetime income solutions report as follows:

  • 71% want to help their workers convert DC balances into lifetime income
    • 73% are offering systematic withdrawals
    • 60% offer education
    • 33% offer managed account services with a non-guaranteed payout
    • 19% offer out-of-plan annuities
    • 10% offer in-plan annuities
    • 21% are considering offering out-of-plan annuities

The participating employees are slow to use lifetime income solutions:

  • 61% of the surveyed sponsors reported that no more than 25% of their participants use in-plan managed account services with a non-guaranteed payout service.
  • 50% of the sponsors said one-quarter or fewer of their participants use lifetime income education, and
  • 50% reported one-quarter or fewer of their participants using partial or systematic withdrawals.

Bill Dewalt, senior investment consultant at Willis Towers Watson pointed out the difficulty both sponsors and participants are dealing with: “…employers are increasingly concerned about financial well-being and retirement readiness”. People are living longer and have many financial responsibilities thereby making it more difficult to save for retirement and secure their future.

Encouraging lifetime income solutions allows employers to assist participants in preparing for their retirement years.

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