The need for lifetime retirement income options was a theme and the 2021 NAPA 401k Summit in Las Vegas, something more plan sponsors and participants are aware of and increasingly demanding.
New research released on Monday finds that despite recognizing the importance of income in retirement, participants don’t feel confident in their ability to maximize it.
The Nationwide Retirement Institute’s 2021 In-Plan Lifetime Income survey also found half of participants (50%) are concerned about being able to manage expenses and lifestyle choices in retirement and 48% are concerned about outliving their income.
Because of these concerns, eight in 10 plan sponsors believe their employees want guaranteed lifetime income investment options in their employer-sponsored retirement plan.
Many plan sponsors are already looking to solve this need for their employees, with four in 10 saying they don’t currently offer guaranteed lifetime income options but would consider it.
Despite this interest, about 60% of advisors and consultants don’t think their plan sponsor clients want to explore these options, which may indicate a missed opportunity.
Advisor opportunity
The survey shows many participants are ready to act once a guaranteed lifetime income investment option is available in their retirement plan, with eight in 10 participants reporting they are at least somewhat likely to roll over a portion of their current retirement savings into one. This percentage is even higher for participants ages 45-54 at 87%, which serves as an opportunity for advisors to begin engaging plan sponsors and participants earlier than the traditional “pre-retirement” stage.
“For many Americans, understanding how their employer-sponsored retirement plan savings translates to retirement income will soon come into greater focus,” said Eric Stevenson, president of Nationwide Retirement Solutions. “New lifetime income illustrations will begin appearing on participant statements over the next year, based on a new requirement created by the 2019 SECURE Act, with some participants seeing this as soon as this month. For some, it will be a wake-up call that they haven’t saved enough, and we believe this visibility will lead to even greater interest from plan sponsors for new investment options that help their plan participants address their lifetime income needs.”
For advisors and consultants looking to begin conversations with plan sponsors about guaranteed lifetime income investment options, it’s likely their clients are only waiting for them to make the recommendation.
Approximately nine in 10 plan sponsors trust financial advisors or consultants to counsel them on choosing the right options for their company’s retirement plan and consider them to be the primary source for learning more about guaranteed lifetime income investment options.
Retirement plan decision-makers are ready to talk about this now. The survey shows seven in 10 plan sponsors report they evaluate their company retirement plan options at least every six months.
This is more frequent than most advisors and consultants realize, with more than eight in 10 advisors (82%) saying only a few or none of their plan sponsor clients are evaluating their company retirement plan in the next six months.
“There is an immediate business opportunity for advisors and consultants to initiate conversations with plan sponsors about adding guaranteed lifetime income investment options,” Stevenson concluded. “Plan sponsors are telling us they’re hungry for more guidance and advisors and consultants are in prime position to help by exploring these solutions with their clients today.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
