'It’s time to solve the problem!' Workers want a steady retirement income stream
Employers depend greatly on their advisors and consultants – called “gatekeepers,” in a new retirement income white paper that says 83% of plan participants said their employers should offer in-plan retirement income options.
The paper, “A Call to Action on Retirement Income, It’s Time to Solve the Problem,” which was released by Matthew Eickman, national retirement practice leader at Qualified Plan Advisors, and Bonnie Treichel, founder and chief solutions officer at Endeavor Retirement, emphasizes that “until and unless American workers begin to regain access to retirement income from their employer-sponsored retirement plans, the price will become steeper with each passing year.”
“Workers not only are concerned about running out of money, but also legitimately run the risk of outliving their retirement savings,” the paper says. “Even as employers have made strides to solve for employees’ accumulation needs, they are failing when it comes to the ‘decumulation’ stage of employees’ meager savings.”
The paper cites surveys showing that 31% of employees think a steady income stream is most important when saving for retirement, 83% of plan participants said their employers should offer in-plan retirement income options and 89% of participants said that having guaranteed retirement income would positively impact their current well-being.
Beyond what those numbers say about participants’ preferences, the white paper points to a fiduciary’s duty to be mindful of the needs of participants and beneficiaries and to pursue solutions that can meet those needs. That begins with demonstrating an active desire to explore these solutions, Eickman said.
The white paper points to signs that employer interest in retirement income is building, noting that “as employers have begun to see the current and future implications of employees approaching their retirement years with an inadequate account balance in their defined contribution plan and without the promise of secure retirement income, they are searching for ways to provide employees a path toward retirement security.”
“Employers are best served to start the process with a simple step: indicating genuine interest in conversations with their advisors, consultants and recordkeepers,” Eickman said. “For a variety of reasons, many service providers have been hesitant to be proactive in their retirement income conversations. However, service providers respond best when their clients make them aware of their wants and needs.”
The white paper explores the influence of these advisors, consultants and recordkeepers – which it calls “gatekeepers” – and their tendency to demonstrate a risk-avoidant bias “that leads them to first search for reasons not to do something,” which has led them to recommend not making lifetime income options available to defined contribution plan participants. The paper argues that “gatekeepers may collectively harm millions of workers when they simply look for reasons to say no.”
The white paper authors explore gatekeepers’ common objections and the reasons they believe they do not hold up. For instance, one is that there is too much risk. In response, Eickman and Treichel said that the SECURE Act provides statutory safe harbor. Another objection is the difficulty in evaluating and comparing options. The authors said that many investment firms have internal resources with the tools to compare options, and there are external service providers who specialize in that area. Portability is another common concern, but the paper says the SECURE Act added new portability protections for participants’ lifetime income options.
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Eickman said once employers have their interest in retirement income options apparent, service providers should respond with a discussion about the options available on the current recordkeeping platform.
“If the platform offers good choices, employers can move forward,” Eickman said. “If not, we recommend that employers ask their relationship managers to escalate their interest to higher levels. American workers are depending on employers’ voices in order to unlock their access to retirement income.”
The paper says that recent retirees have been less likely to be able to access retirement income from their employer-sponsored plans than at any time in the last 50 years, and the trend figures to only grow worse.
“Employees want access to retirement income from their retirement plans, and they need access more with each passing year,” the paper said. “Plan sponsors have begun to lean on their trusted advisors to help them to respond to that demand. Why continue to say no when it is so important to be in a position to say yes?”