New research sponsored by
According to a release, the findings of the latest National Retirement Risk Index (NRRI), published by
The latest NRRI update also indicates that the percentage of households at risk of being unable to maintain their pre-retirement standard of living has improved slightly to 52 percent from 53 percent three years earlier.
Every three years, the
The research indicates that households who have defined benefit income are in better shape than those who only have a defined contribution plan, and those who have a defined contribution plan are in much a better position than those who have no workplace retirement plan. However, the prevalence of defined benefit plan income for workers in the private sector will continue to decline, as companies freeze, close, or terminate defined benefit plans.
"The disparity in retirement preparedness for those households with a defined benefit plan and those with only a defined contribution plan speaks to the need for plan sponsors to evolve their DC plans with features already in the marketplace," said
A new Prudential paper, "Planning for Retirement: The Importance of Workplace Retirement Plans and Guaranteed Lifetime Income," summarizes the latest NRRI research, including the increasing importance of financial advisors, who can assist individuals in managing the risks in the shift from defined benefit to defined contribution plans, including helping households decide which products and strategies to use to generate a retirement income stream that lasts a lifetime.
The key implications of these findings are:
-Defined benefit plan obligations to workers are critically important: The latest NRRI results reinforce the importance of defined benefit plan income to those households who will be receiving retirement benefits from these plans.
-Defined contribution plans should be enhanced to take on more characteristics of defined benefit plans: The difference in retirement preparedness for those households with a DB plan and those with only a DC plan is significant.
-Greater access to defined contribution is needed: While 74 percent of all full-time employees have access to a workplace retirement plan, only 50 percent of full-time employees who work for a small employer have access.1 Prudential has long supported the use of Multiple Employer Plans as vehicles to enable small employers to offer workers access to a retirement plan. As generally envisioned, the plans would allow companies employing fewer than 100 people to band together and offer a single defined contribution plan, thereby achieving economies of scale that serve to lessen administrative burdens, costs, and potential fiduciary liability.
-The importance of financial advice will continue to increase: Financial advisors will play an even greater role as defined contribution plans increasingly become the only workplace plans available to private sector employees.
"In addition to participants utilizing financial advisors more and more, smart strategies for claiming
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