The Retirement Income Challenge in 401(k) Plans: Overcoming Legal Obstacles
The first generation of participants in 401(k) and other participant-funded and -directed retirement savings plans are now retired or approaching retirement, and they need to use those defined-contribution benefits to provide themselves sustainable lifetime income in retirement. Unfortunately, most participants do not have the knowledge, education, or experience to evaluate the issues such as life expectancies, withdrawal rates, investing for decumulation, and use of insured income products. To remedy that situation, participants need education, services, investments, and insured products to help them understand those considerations and to generate sustainable lifetime income from their retirement savings.
Plan sponsors have been reluctant to offer some of the available products, such as annuities, in their retirement plans because of concerns about their own fiduciary responsibility to prudently select and monitor insurance companies and insured lifetime income products, as well as possible fiduciary liability if the insurer were to become insolvent.