Retirement preparedness on the upswing, due to auto features, guaranteed income options
When asked what solutions would increase their confidence in their retirement plans, workers’ top response was an in-plan protected retirement solution, says Cathy Marasco at Nationwide, which published a new Protected Retirement survey.
Despite inflation, workers are feeling confident in their retirement preparedness, according to Nationwide’s Protected Retirement survey. “Many workers are actively engaged with and managing their retirement accounts throughout the year – three-quarters report checking their balance at least monthly. These actions are exciting to see as a record-keeper and insurer and may be leading to their high confidence levels when it comes to their preparation for retirement,” said Cathy Marasco, leader of Protected Retirement Solutions at Nationwide.
There are three reasons for the increased confidence in employees’ retirement preparedness, according to Nationwide.
No. 1: Guaranteed income trend
“It’s also worth noting that workers are increasingly thinking about their 401(k) in terms of the income it’ll provide in retirement as opposed to just a savings vehicle,” said Marasco. “Still, our research continues to show that they are looking for more support when it comes to translating their savings into income they won’t outlive in retirement.”
Nationwide, T. Rowe Price and other financial services leaders have been following this guaranteed income trend and working to address through the availability of in-plan protected retirement solutions to help participants convert their savings into lifetime income.
“When asked what solutions would increase their confidence in their retirement plans and financial security, workers’ top response was an in-plan protected retirement solution,” said Marasco. “Employers should ask their consultant or advisor about these offerings and benefits for their workforce.”
Related: Retirement preparedness: Would income projections affect employee saving behavior?
Nearly 50% of Americans are at risk of not having enough retirement income to maintain their pre-retirement income, according to a report by the National Institute on Retirement Security. That’s why integrating retirement income options into 401(k)s can provide a stable income stream for retirees.
No. 2: Automatic features
Additionally, automatic enrollment and automatic escalation are making an impact on retirement readiness “and are viewed favorably by employees,” said Marasco. “Our survey found workers want their employers to take these features even further, with 73% responding that they would like an automatic feature within their workplace retirement plan that converts their assets into a stream of income in retirement.
“In fact, we’re seeing more and more plan sponsors electing to adopt in-plan protected retirement solutions as the default investment option for their employees,” said Marasco. “We’ve even launched a new Dynamic Default feature based on the positive feedback, which allows workers to use their employer’s initial default fund but automatically transfer to a second default fund as the worker gets close to retirement age (around age 50, for example) that offers guaranteed income benefits.”
No. 3: Online planning resources, tools
“Finally, employers should also check in with their advisor or record-keeper to see what online planning resources and tools are available to help their employees better understand their retirement readiness and develop a plan to meet their goals,” said Marasco. “Nationwide’s My Interactive Retirement Planner Tool is one example of such a tool that’s available to the public at no cost and provides this support.”