Majority of Plan Sponsors Concerned Future Retirees Will Run Out of Money in Retirement

In 2024, more Americans are reaching the traditional retirement age of 65 in the same year than at any time in history, creating more than 4 million potential new retirees this year alone. While the U.S. faces this significant milestone, findings from MetLife’s 2024 Qualifying Longevity Annuity Contract Poll show a vast majority (91%) of plan sponsors are concerned that their future retirees will run out of money in retirement. When asked about what percentage of future retirees will run out of money in retirement, 83% of plan sponsors believe more than 1 in 4 retirees will deplete their retirement savings prematurely.

“When planning for a successful retirement, the biggest risk facing plan participants is longevity risk, which means living beyond the average life expectancy. As a result, individuals can potentially underestimate the savings they will need,” says Roberta Rafaloff, vice president and head of Institutional Income Annuities at MetLife. “Longevity insurance, like qualifying longevity annuity contracts, can help address this challenge by generating income at a later age.”

A qualifying longevity annuity contract (QLAC) is a fixed deferred annuity provided as a distribution option from qualified retirement plans, such as 401(k) plans, 403(b) plans or individual retirement accounts (IRA). QLACs are typically purchased at the point of retirement, with the guaranteed annuity benefit commencing at an advanced age, typically age 80 or 85. By deferring payments to a later age, participants can maximize their income and ensure they have a guaranteed income stream when other retirement income sources may run short. In addition, the portion of the defined contribution (DC) plan balance that participants use for a QLAC will be excluded from the account balance used to determine the Required Minimum Distribution (RMD). As a result, more money can remain in the plan, with the potential to grow, and participants continue to have access to low-cost funds.

Plan Sponsors’ Understanding of Longevity Risk

While plan sponsors are concerned about retirees running out of money, the Poll found that many plan sponsors underestimate longevity risk. When asked about the chances that an individual will live beyond age 86, 54% of plan sponsors underestimate that half of individuals will live beyond average life expectancy. Additionally, most plan sponsors (78%) underestimate the number of centenarians – those who reach the age of 100 – projected for the United States in the future.