Helping Plan Sponsors Provide a Full Menu of Retirement Income Options to Their Participants
As society has transitioned from traditional company pensions that provided a lifetime income to their employees to new defined-contribution plans like 401(k) plans, employees are losing access to some of the tools they need to build an effective retirement plan. Instead, plan participants in the new regime must both select investments and self-manage market risks, including the risk of outliving their assets. The basic task for plan participants is to figure out how much to withdraw from their investment accounts while managing unknowns related to how long they need the money to last and how many market downturns they will experience during retirement. Goals for their retirement assets include maximizing spending power while ensuring that there are not too many fluctuations in the amount that they can spend, not outliving their assets, and maintaining liquid reserves to cover unexpected expenses in retirement.
Plan sponsors can help their participants achieve greater success in meeting these goals by providing a retirement income marketplace with a full menu of tools to manage these various retirement risks. It is important that plan sponsors help make the tools available for their participants to build these more-effective retirement income plans. In addition to the traditional stock, bond, and other asset class investment options provided to plan participants, they also need access to the following: annuity options that provide protected lifetime income, where income benefits can either start immediately or be delayed to a future date; investment options that provide a managed payout by using an aggressive asset allocation and managing distributions for participants to cover their discretionary expenses in a sustainable manner; and a Social Security delay bridge tool that will help participants safely defer claiming Social Security benefits if they retire before age 70.