Current DC Plan Participants Considering Income Products for Retirement
The Employee Benefit Research Institute’s (EBRI) 28th annual Retirement Confidence Survey (RCS) finds the share of employees who feel very confident in their ability to live comfortably in retirement remains low at just 17%.
Three in 10 employees with a defined contribution (DC) plan intend to roll at least some of their assets into an individual retirement account (IRA) when they retire, fewer than the 44% of retirees who did so, according to the Employee Benefit Research Institute’s (EBRI) 28th annual Retirement Confidence Survey (RCS).
One in four intend to leave at least some money in their DC plans, but two in 10 say they will use plan assets to purchase a product that provides guaranteed lifetime income, far more than the 7% of retirees who did this. Eight in 10 DC plan participants are very or somewhat interested in an in-plan investment option that would guarantee monthly income for life in retirement, and the same number express interest in taking money out of their plan at retirement and moving it to a financial product that would guarantee them monthly income for life.
Employees with a DC plan also express interest in longevity insurance—guaranteed income products that pay out once a specified age (80 or 85) is reached. Nearly half (48%) report being very or somewhat interested in these products, compared to fewer than two in 10 retirees.
This interest in guaranteed income products may be related to the confidence level of employees. The RCS found that the share of employees who feel very confident in their ability to live comfortably in retirement remains low at just 17%. Forty-seven percent are somewhat confident.
Only half of employees are confident that they know how much income they will need each month in retirement or how to withdraw income from their savings, with only one in eight very confident.
Eight in 10 employees with DC plans feel their plans will be a major or minor source of income in retirement.The RCS found that some expectations of employees may be giving them a false sense of confidence. For example, employees expect to retire later than retirees actually do. Also, employees plan to work in retirement and two in three expect work for pay to be a major or minor source of income; however only one in four retirees say working is a source of income for them.
EBRI’s 2018 RCS report is here.
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