A news release said that is in part because of features in retirement benefit plans sponsored by institutions in the academic and non-profit fields. The study was published by TIAA-CREF and the think tank PostPartisan Foundation as part of its Campaign for Economic Security.
Lessons for Retirement Plan Design, by Christopher Spence, public policy director for government relations at TIAA-CREF, finds that four practices of academic and other non-profit institutions’ retirement benefit plans help to explain the differing confidence levels by workers in the non-profit sector.
According to the news release, non-profit sector retirement plans:
- Encourage participation through employer contributions, which often motivate employees to start saving themselves. The goal is to use the power of the employer match to help workers save between 10% and 15% of their annual pre-tax income.
- Frame the goal of retirement savings as lifetime income in retirement, as opposed to amassing funds. Unlike a typical 401(k) plan, many non-profit sector retirement defined contribution retirement plans provide workers with quarterly displays of how much monthly income their current savings will generate in retirement. Such projections can help workers to save by providing a regular reminder of how close, or how far away, they may be from meeting their retirement income needs.
- Emphasize retirement income by providing workers the choice to invest in a deferred annuity during their working years. While only 14% of 401(k) plans offer the opportunity to save via a deferred annuity, 90% of retirement plan participants favor the idea of investing some of their savings to produce a guaranteed monthly income in retirement.
- Provide workers with objective advice and guidance that includes specific recommendations for building a diversified portfolio consistent with their goals and risk tolerances. Non-profit sector retirement plans tend to assure that advice comes from an independent third party, encompasses workers’ complete retirement savings, and remains available to workers throughout their lifetime.
“Non-profit sector employers build their workers’ retirement security by using the employer contribution to spur workers to save, by framing the goal of retirement savings as lifetime income, and taking other steps to maximize participation and assist workers in making sound financial decisions at every age,” said Spence. “Such features, if adopted broadly and appropriately, could very well help increase retirement security for all Americans.”
More information is athttp://www.tiaa-cref.org/public/about/press/about_us/releases/pressrelease371.html.