The retirement plan industry needs to switch gears to get participants to start thinking about the decumulation phase of retirement savings, according to Pentegra Retirement Services. Pentegra bases this conclusion on a survey that found 56% of retirement plan participants have not come up with a plan for how to make their money last throughout retirement, and 20% have given this no thought at all.
The survey also found that the average age that participants plan on retiring is 66, with 20% not expecting ever to retire. They plan on starting to take Social Security benefits at age 67, and, on average, those who plan to retire think they will need $3,200 per month to live on.
“The retirement industry has spent the last 20 years advising people how to accumulate retirement savings and reach a magic number,” says Rich Rausser, senior vice president of client services at Pentegra. “Many may not ever be able to reach that goal, and we must shift some of the focus to helping educate people on what to do with their savings when they retire.”
Retirement plan advisers and providers need to ask people,
“How will you actually receive your money? What age will you retire? How much
do you think you need to live on each month, and how can you make sure you
don’t run out of money and outlive your savings, even without that magic number
of savings? Our survey confirms that people need to learn about their options
and solutions to maximize what they saved.”
Few people are aware of the available options for distribution, Pentegra found, with only 24% knowledgeable about lump-sum payouts, 29% aware of routine quarterly or monthly payments, and 23% familiar with annuities.
“More people need to know about these annuities,” Rausser says. “They take the stress and guesswork out of distribution, stretching your savings as far as possible. We call it ‘pension-izing’—meaning they replicate some of the most important features of pension plans.”
The survey was conducted in April among 2,095 adults by Harris Poll on behalf of Pentegra.