The retirement benefits 80% of employees are asking for

Despite a plunge in job openings from July to August_, companies can still find themselves fighting for talent. In fact, in some in-demand professions, job-seekers can still receive multiple job offers.

That’s a sobering fact for any recruiting department trying to attract and retain talent.

So, how do employers grow and hang onto their best people amid some of the fiercest competition in decades? Offering competitive compensation and benefits remains at the top of the arsenal list. But another effective weapon for winning the war on talent could be hiding in plain sight.

Is the key to winning talent right in front of us?

Our research shows retirement benefits, sometimes an overlooked part of the overall benefits package offered to employees, have captured the attention of today’s workforce. Specifically, more employees are asking for lifetime income options in their retirement plans.

In fact, according to the 2022 TIAA Retirement Insights Survey, more employees say they are very or extremely interested in guaranteed lifetime income within retirement plans than they were in 2020 (54% in 2022 v. 51% in 2020), and nearly half (48%) say their interest increased during the pandemic.

One reason employer interest has picked up

Our Retirement Insights Survey revealed employers are worried traditional target-date funds (TDFs) – long considered the go-to qualified default investment alternative – aren’t setting up their employees for confidence in retirement since TDFs cannot guarantee predictable, sustainable income for life. As a result, they’re investigating the merits of providing guaranteed lifetime income options, known as annuities, to work in tandem with non-guaranteed retirement income strategies.

According to our survey, almost three-quarters of employers say they’re highly interested in a new generation of traditional target-date funds/other asset allocation solutions that can incorporate an allocation to lifetime income solutions.

Dispelling myths about lifetime income

Advisors and consultants can help start the lifetime income conversation by first dispelling widely held myths about annuities.

In-plan annuities, those found within defined-contribution plans, are regarded as a major source of lifetime income. Yet, some plan sponsors view annuities as hard to implement, expensive and unpopular with employees.

Other employers may have the idea that employees aren’t demanding annuities yet. This is simply untrue. Aon found that 80% of employees want some form of guaranteed income in retirement, and that more than 70% of plan sponsors agree their DC plan should include lifetime income options.

What’s the value of lifetime income in retirement? 

A simple comparison might be helpful here. Many employees purchase disability insurance to ensure they still have income if they’re unable to work. People also purchase life insurance to protect their families if they pass away prematurely. Converting a portion of your retirement savings to income for life is no different. Instead of protecting your income during your earning years, annuitizing is simply protecting your income during your retirement years.

Before beginning any default discussion, benefits departments need to have frank conversations about whether they want their plan to continue to simply be a tax-deferred savings plan or whether they want to take the fairly easy steps to modernize it into a true retirement income plan. If the latter, then step one is researching and selecting the category of lifetime income solution that best fits with the plan sponsor’s objectives. Our latest white paper contains more information about that process to help advisors, consultants or employers.

We also offer the TIAA Secure Income Account, a group flexible premium deferred fixed annuity for inclusion in 401(k) plan target-date defaults that offers principal protection while participants save for retirement and the option to obtain a predictable, steady stream of guaranteed income for life in retirement. For the 403(b) market, we offer RetirePlus, which allows plan sponsors to use their prudent fiduciary processes and leverage their in-house investment expertise to build a custom default solution that includes TIAA and CREF fixed and variable annuities.

Now is the time for a full benefits check-up

The upcoming annual enrollment period is an opportune time for plan sponsors to remind employees about the value of their retirement benefits and their importance within the total compensation package. While the benefits enrollment period is normally focused on health and welfare benefits, it’s also good time to encourage employees to refamiliarize themselves with the retirement program(s). This includes encouraging them to:

• Participate to the fullest extent in their retirement plans.
• Begin thinking through a strategy to not only convert assets to lasting income in retirement, but also to ensure they have a plan for continued income to their loved ones when they pass.
• Make sound decisions now that will help to position them for a confident and secure retirement.

It’s also a good practice to continue the reminders throughout the year.

When you highlight the value of your retirement plan and lay out the total value of your benefits package, employees – and potential employees – listen and react. It could mean the difference between attracting and retaining star employees and missing out on potential talent.

Phil Maffei is Managing Director, Corporate Retirement Income Products, TIAA.