Last week, I asked NewsDash readers, “Other than Social Security, do you have a source of guaranteed income for retirement?” I also asked them what source of guaranteed income in retirement they think is best.
More than two-thirds (67.6%) of responding readers said they do have a source of guaranteed income in retirement other than Social Security.
As for what source of guaranteed income in retirement they think is best, the vast majority (71.4%) selected “a defined benefit (DB) plan.” This was followed very distantly by “an annuity or annuity-type product” (17.1%) and “a managed payout fund/service” (5.7%). No one selected “a reverse mortgage.” Other responses included “personal investments, 401(k) & bank CDs” and “rental property.”
Grateful for their DB plans is what many of those who left verbatim comments said. There were some who expressed lament for DB plans—and suggested reasons for the abandonment of them by some plan sponsors. Annuities are met with a skeptical eye, and some don’t have faith that there are any guarantees. Editor’s Choice goes to the reader who said: “Excited to see what decumulation options become available from DC plans institutionally. Hopefully, annuity-like without the retail annuity costs/fees.”
A big thank you to all who participated in our survey!
DB plans are more secure for participants, and more efficient for plan sponsors. DUH!
I’m thrilled to be a participant in my employer’s closed pension plan. DB plans (when properly funded) provide stability, security, lifetime income and some restraints for spendthrifts. But, the trend towards multiple employer changes over a career, and DB plans’ often crippling funding obligations have made the switch to DC plans a no-brainer. The retirement industry has yet to come up with the perfect solution for guaranteed lifetime income in the age of DC plans.
Excited to see what decumulation options become available from DC plans institutionally. Hopefully, annuity-like without the retail annuity costs/fees.
Make sure you save and invest in a prudent fashion. Beyond Social Security and my two pensions we have a great deal in the market. Plan young and limit all unnecessary and foolish spending.
Although I believe I have sufficient 401(k) savings, I am nevertheless about outliving that amount. I bought a variable annuity that will be annuitized and start payouts at age 85. That ensures that I and my wife will have lifetime income and, in the event of early death, some value will be left for my kids. I trust an insurance company more than some employer who might make future changes to my benefits. I’m a belt and suspenders type of guy.
It’s nice for a safety net.
As the population continues to live longer, people need to think about how their retirement income will fund their lifestyle.
The loss of defined benefit plans is a retirement scourge and will lead to greater poverty in retirement as time goes on. Annuities are a disaster – costly, complicated, restrictive and by no means “guaranteed” if the provider goes out of business. And 401(k) plans were NEVER intended to be one’s principal source of retirement income.
Everyone needs every source possible. I have other sources, but they wouldn’t be considered guaranteed income. Rental properties.
While I think a fully funded DB plan would be best, I don’t have one (like the majority of people in the U.S. workforce). I would submit that a managed payout fund/service combined with a longevity annuity component and the opportunity for joint and survivor payout options would provide the most financial security in the long term.
I have concerns about the strength of current and future annuity providers; I worry many will jump in with fees and commissions but not have long-term financial strength.
I just wished my employer had not followed the pack years ago when it froze our final average pay DB plan.
The DB plan and annuity would have the same security if the DB plan was properly funded over time which we know did not occur as assumptions were too aggressive and bound to produce losses. Hopefully the insurance industry in providing all these guaranteed annuities can survive with their assumptions. The reverse mortgages and managed payout fund are simply processes which one hopes will provide a means to disburse ones investments over one’s lifetime. All have issues to deal with and will have issues arise if and when we hit a prolong downturn in the markets.
If we’ve learned anything as benefit professionals, then it is that there are few guarantees in life or when it comes to benefits. I prefer to plan for various contingencies, hoping it will all work out but preparing just in case it doesn’t.
With the future so uncertain, is there really such thing as guaranteed income? I don’t think so………….
I am fortunate to have earned 2 DB Plan benefits, having worked for 2 large labor unions.
My philosophy is to build enough assets to be able to withdraw as I desire, mainly living on the earnings, as opposed to buying an annuity, which comes with added risk of loss due to a premature death. Assets would transfer to someone of my choosing, while annuities become gains to the annuity company.
The only thing that’s guaranteed is death & taxes.
My husband. Ha, ha. Not really. My father taught us at a young age to start saving money. I have three other sources of income in 401(k), IRA’s, etc.
My husband and I both have pensions as employees of the school system. It is a valuable benefit that will allow us to transition into a secure retirement.
I’m one of the lucky ones who works for a firm that sponsors a DB plan.
So happy to be a participant in three DB plans!
NOTE: Responses reflect the opinions of individual readers and not necessarily the stance of Institutional Shareholder Services (ISS) or its affiliates.
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