Majority of Plan Sponsors Concerned Future Retirees Will Run Out of Money in Retirement - Seite 2

According to the Poll, more than half of plan sponsors (54%) identified inflation risk, a decline in purchasing power, as the greatest retirement risk, while 23% identified longevity as the greatest retirement risk.

“While inflation can have a significant negative impact on retirees’ ability to rely on their savings, longevity risk should not be ignored,” says Rafaloff. “During retirement, individuals face a number of risks, including inflation, investment and interest rate risk. But the impact of these risks can be exacerbated the longer an individual lives in retirement.”

Solutions Addressing Longevity Risk

Currently, most plan sponsors offer a systematic withdrawal program (SWiP) or other drawdown strategy to help retirees spend down their assets. However, this may pose a challenge to ensuring successful retirement outcomes. When asked what they believe the safe starting annual withdrawal amount for an individual retired at age 65 with a DC plan savings of $100,000 and a 30-year time horizon, 31% overestimate how much a retiree can safely withdraw annually.

Beyond these drawdown strategies, plan sponsors are now looking at offering solutions that provide guaranteed streams of income. When shown a hypothetical example of how much yearly income an immediate income annuity and a longevity annuity would provide, a majority (81%) of plan sponsors say they would consider offering an immediate income annuity and 66% would consider offering a QLAC. For those plan sponsors who identified longevity as the greatest retirement risk, 72% would consider offering a QLAC.

Not only are plan sponsors open to offering these solutions to participants, 70% of plan sponsors say they would consider purchasing a QLAC for their own retirement.

“By using a QLAC to insure their longevity risk, plan participants will have an easier time determining how much they can draw down from their retirement savings before benefit payments begin,” says Rafaloff. “Because of this, MetLife believes that QLACs and other retirement income solutions should be given careful consideration by plan sponsors to help protect their participants’ retirement security. And, we are seeing them take action by discussing these options with their advisors.”