The U.S. House of Representatives passed the SECURE Act in May by an overwhelming 417-3 vote. Among other things, this legislation – the first major retirement legislation since 2006—would give Americans greater access, choice and the option (not mandate, as some have asserted) to include annuities in their employer-sponsored retirement plans.
While the Senate continues to deliberate this legislation, there has been no shortage of false information, misunderstanding and conjecture about annuities propagated in opinion columns, most-often by those looking to protect their own retirement investment business rather than the best interests of consumers.
Debating the various provisions of the legislation is one thing. However, using it as an opportunity to spread misinformation and distort the facts about annuities themselves is a huge disservice to millions of Americans looking for better ways to protect their financial future.
This is especially true right now, given the volatility and growing uncertainty in the markets where most of our retirement savings are invested.
What is unassailable is the need for a serious national discussion about retirement preparedness that goes beyond simply stating that Americans need to save more for retirement and focuses on finding better ways to give retirement savers greater access to protected lifetime income from annuities.
Americans are living longer than ever before, so it’s not surprising that running out of money is the number one financial concern of people planning for retirement, according to a recent survey by the American Institute of Certified Public Accountants.
Protected lifetime income is a universal need among retired Americans, which was historically met through employer-sponsored pensions. Generations of workers retired with peace of mind knowing they would have a guaranteed source of income every month, however long they lived, regardless of the markets.
Today, pensions have virtually disappeared, to a point where only 17 percent of private-sector workers have access to a pension.
There’s no denying that over the past 40 years, the 401(k) has grown to become the most popular retirement plan in the U.S. and has been a vitally important and easy way for employees to save for retirement. Like most other retirement investments, however, they are subject to market volatility and various other risks.
Unfortunately, most employer-based retirement plans fail to include an option for protected lifetime income, a critical flaw that has contributed to 63 percent of Americans being unprotected and vulnerable to running out of money in retirement, according to the 2019 Protected Lifetime Income Index, a landmark survey of 3,119 U.S. adults by the Alliance for Lifetime Income.
Each employee’s goals and needs for retirement is going to be different and depend on their stage in life. Most plans give employees the choice of investing in mutual funds with different risk levels—aggressive, balanced and conservative.
But for a retirement plan to be truly diversified, there should be an option to protect part of an employee’s portfolio with an annuity – the only source of protected lifetime income available other than Social Security.
Surveys show that Americans want choice and greater access to annuities. Seventy-three percent of respondents say guaranteed lifetime income is highly important to their financial security, according to a 2018 Greenwald/Cannex study. And a 2018 LIMRA Secure Retirement Institute study found that nearly 7-in-10 retirees who own an annuity are more confident their savings and investments will not run out if they live to age 90.
There’s a reason that annuities are popular and have been vitally important to peoples’ lives for hundreds of years. They’re the only product that has protected retirement for millions of Americans, giving them a source of guaranteed income they can count on for life.
All of which brings us back to the SECURE Act. With company pensions virtually gone, and Social Security only able to cover about 40 percent of our pre-retirement income, it’s high time we all supported any effort that helps more Americans have greater choice and access to protected lifetime income through an annuity.
The SECURE Act is an important step in the right direction to achieving that.
Jean Statler is the executive director of the Alliance for Lifetime Income.
Jean Statler is the executive director of the Alliance for Lifetime Income.
