Bold Reforms Needed to Close ‘Guarantee Gap’ Jeopardizing Retirement Security
In a new paper titled, “Closing the Guarantee Gap,” TIAA maps out what it calls “essential, urgent reforms policymakers, industry leaders, and plan sponsors should consider to close the guarantee gap,” providing workers with greater protection against financial risks and uncertainty in retirement.
“The persistence of the guarantee gap—and the fear of outliving their savings—threatens too many retirees’ lifelong financial security, underscoring the urgent need for bold, systemic reforms.”
TIAA President and CEO Thasunda Brown Duckett
And to advance the conversation, TIAA is hosting a summit on Tuesday where it will bring together industry leaders, lawmakers, academics, and innovators with TIAA leaders for a series of discussions on the future of retirement.
TIAA says that guarantee gap—the lack of adequate savings and income guaranteed to last throughout life in retirement—is at risk of widening further, especially as many Americans expect Social Security to be their primary source of retirement income at a time when broad cuts to those benefits loom if no congressional action is taken to prevent them.
“A secure, dignified, and fulfilling retirement from start to finish should be a given, not just the dream, for American workers,” said Thasunda Brown Duckett, President and CEO of TIAA. “The persistence of the guarantee gap—and the fear of outliving their savings—threatens too many retirees’ lifelong financial security, underscoring the urgent need for bold, systemic reforms.”
The inaugural FUTUREWISE conference in Washington, D.C. on Tuesday, Nov. 18 will seek to advance the conversation on retirement security while exploring actionable solutions to close the guarantee gap.
“FUTUREWISE is more than an event, it’s a catalyst for needed change to ensure our retirement system works for all American workers,” added Brown Duckett. “By bringing together visionaries, policymakers, experts and thought leaders, we aim to inspire actionable solutions and chart a course to secure Americans’ retirements for generations.”
Among an impressive speaker lineup at the invitation-only event are:
• Thasunda Brown Duckett, CEO and President, TIAA
• Rep. Richard Neal (D-MA), U.S. House of Representatives
• Rep. Young Kim (R-CA), U.S. House of Representatives
• Jay Leno, Writer, Comedian, and Television Host
• Jack Otter, Global Head, Barron’s Wealth & Asset Management Group
• Joe Coughlin, Founder and Director, MIT Age Lab
• Haleh Nazeri, Lead, Longevity Economy, Centre for Financial & Monetary Systems, World Economic Forum
• Michael Finke, The American College of Financial Services
• Brendan McCarthy, Head of Retirement Investing, Nuveen
• Kenneth Levine, Executive Director, Global Retirement Strategy, RTX Corporation
• Aaron Schumm, Founder and CEO, Vestwell
• Ndidi Oteh, CEO, Accenture Song
• Chris Whitlow, Senior Director, Head of CAPTRUST
Call for reforms
In the paper, TIAA examines the origins of this gap in workers’ retirement savings and retirement income: a product of the shift toward defined contribution (DC) plans that has been exacerbated by increasing life expectancy, peak retirements among the Baby Boomer generation, and the projected shortcomings in Social Security benefits as soon as 2033.
While the paper notes recent federal policy changes have helped to improve access to and increased savings in retirement plans, and lowered some barriers to lifetime income options, critical challenges persist. Building on recent progress through the SECURE Act and SECURE 2.0, TIAA put forward the following recommendations:
- Guaranteed income reforms: To improve workers’ access to guaranteed lifetime income, DC plan sponsors should be encouraged to provide participants with a menu of qualified payout options (Q-PONs) at retirement that could include options such as guaranteed lifetime income, systematic withdrawals, and managed payout options.
- Retirement investment expansion: Workers need greater choice and access to retirement savings investment options that can help address and close the guarantee gap. Extending access to collective investment trusts (CITs) in 403(b) plans would allow public sector and nonprofit employees to have the same investment options as those in the for-profit 401(k) space.
- Longevity literacy education: DC plans should be encouraged to provide retirement income education covering life expectancy at retirement, financial risks, and Social Security optimization to improve workers’ understanding of how long they are likely to live.
“American workers are looking for greater financial and retirement security and the supporting solutions,” said Bret Hester, TIAA’s Chief Legal Officer. “With policies like these, rooted in sound government policy and feasible private sector action, we can improve workers’ retirement outcomes as millions are living longer lives in retirement.”
Access the paper here: Closing the Guarantee Gap.
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Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
