Nearly everyone agrees that encouraging the use of guaranteed income options within retirement plans is a positive step to solving the retirement dilemma.
A new Nationwide survey confirms that offering more annuity products, for example, in plans would likely be well received.
Nearly nine in 10 plan sponsors and participants (88%), respectively, agree that income in retirement is vital to financial security, according to the Nationwide Retirement Institute’s 2021 In-Plan Lifetime Income survey of plan sponsors, plan participants, and plan advisors or consultants.
However, despite recognizing the importance of income in retirement, the survey found participants don’t feel confident in their ability to maximize it. Half of participants (50%) are concerned about being able to manage expenses and lifestyle choices in retirement and 48% are concerned about outliving their income.
Because of these concerns, eight in 10 plan sponsors (81%) believe their employees want guaranteed lifetime income investment options in their employer-sponsored retirement plan.
“There is this level of interest that goes beyond just the kind of cursory level need and interest, but that plan sponsors really are starting to evaluate it,” said Amelia Dunlap, vice president of retirement plans marketing at Nationwide. “But they’re looking for more help, they’re looking for more advice. And they’re really looking for advisors, and plan consultants to fill that role.”
Many plan sponsors are already looking to solve this need for their employees, with four in 10 (41%) saying they don’t currently offer guaranteed lifetime income options but would consider it. Despite this interest, about 60% of advisors and consultants don’t think their plan sponsor clients want to explore these options, which Nationwide called “a missed opportunity.”
Ready To Act
Nationwide has not done this exact survey in the past, Dunlap said, but the insurer is excited about the results.
The study shows many participants are ready to act once a guaranteed lifetime income investment option is available in their retirement plan, with eight in 10 participants (79%) reporting they are at least somewhat likely to rollover a portion of their current retirement savings into one.
This percentage is even higher for participants ages 45-54 at 87%, which serves as an opportunity for financial professionals to begin engaging plan sponsors and participants even earlier than the traditional “pre-retirement” stage.
“For many Americans, understanding how their employer-sponsored retirement plan savings translates to retirement income will soon come into greater focus,” said Eric Stevenson, president of Nationwide Retirement Solutions.
The Department of Labor is still finalizing rules for a key aspect of the 2019 SECURE Act: lifetime income statements that are to be mailed to every plan participant illustrating the lifetime income that their money would provide.
“For some it will be a wake-up call that they haven’t saved enough, and we believe this visibility will lead to even greater interest from plan sponsors for new investment options that help their plan participants address their lifetime income needs,” Stevenson said.
For advisors and consultants looking to begin conversations with plan sponsors about guaranteed lifetime income investment options, it’s likely their clients are only waiting for them to make the recommendation.
Approximately nine in 10 plan sponsors trust financial advisors or consultants to counsel them on choosing the right options for their company’s retirement plan and consider them to be the primary source for learning more about guaranteed lifetime income investment options.
‘Go Talk To Them’
Retirement plan decision makers are ready to talk about this now. The survey shows seven in 10 plan sponsors report they evaluate their company retirement plan options at least every six months.
This is more frequent than most advisors and consultants realize, with more than eight in 10 advisors (82%) saying only a few or none of their plan sponsor clients are evaluating their company retirement plan in the next six months.
Nationwide’s advice to advisors is simple, Dunlap said: “Go talk to them.”
“Not only are [plan sponsors] looking for help, but they’re thinking about this and evaluating it on a regular basis,” she said. “So, go talk to them now. Don’t wait for your annual review. This is something that could definitely come up with kind of an off-cycle conversation.”
Edelman Data and Intelligence (DxI) conducted the online survey on behalf of Nationwide July 19-August 4, 2021. Respondents included:
- 500 company plan sponsors, including business executives, business owners, human resources professionals, and financial management professionals who are full-time workers at U.S. businesses with at least 10 full-time employees. They must also be decision-makers for company retirement plans including 401(k), 403(b), or 457(b) plans.
- 300 financial advisors or consultants who advise at least one plan sponsor on investment decisions, financial planning, and options.
- 1,000 plan participants 45+ years of age who work full-time and have access to a 401(k), 403(b), or 457(b) plan through their employer.