During National Retirement Security Week, shine a light on protected income for retirees

Dramatic shifts in longevity and retirement demographics have led to an unprecedented opportunity – and obligation – to help current and future retirees protect their life’s work.

This month’s National Retirement Security Week (Oct. 20-26) provides a great reminder that it will take a shared responsibility across government (public policy/legislation), employers (optimizing workplace retirement plans), and individuals (turning personal savings into protected income) to enable tomorrow’s retirees to live a better life, longer.

We talked to Ann Nanda, head of Future Growth Initiatives and Distribution Enablement at Prudential Retirement Strategies on how the financial services industry is working to solve the retirement puzzle.

Q: What are some of the shifts in longevity and retirement demographics that have led to an employer obligation protect retirees’ retirement?

A: An unprecedented opportunity and obligation exists to help retirees protect their life’s work amid changing longevity and retirement demographics. Currently, approximately 805 million people worldwide are 65 or older – and that’s expected to reach 1.65 billion by 2050. At the same time, the ratio of working people to help support those retirees has dropped from 13:1 in 1950, to just 6.5:1 in 2023. And, even more alarming, by 2050 that ratio is projected to fall to 2.5:1. If left unchecked, these shifts challenge public finances, healthcare, and economic growth.

Q: What is the importance of National Retirement Security Week?

A: National Retirement Security Week highlights the need for shared responsibility among employers, individuals and legislators to ensure retirees have the financial tools, solutions and knowledge they need to live better lives, longer. It also emphasizes the importance of closing the gap between employees understanding the need to save for retirement and actually taking action, such as participating in plans, maximizing deferral rates, and protecting assets for income.

Q: How can employers help employees take concrete steps this week toward a secure retirement?

A: We need a disciplined partnership to expand the focus beyond just retirement savings to creating balanced financial plans that ensure retirement income security. People need help protecting their life’s work, from optimizing Social Security claiming, to identifying their most essential expenses in retirement, to planning for their unique, desired retirement outcomes.

Employers can support this by promoting education programs that help employees better prepare for retirement, while offering additional plan default options that help them automatically take the right actions, tailored to their age and life events.

Q: What are some new strategies for bringing protected lifetime income to workplace retirement plans?

A: Defined contribution plan providers are increasingly seeing the need to combine insurance-based income solutions with a strong participant experience to address the decumulation dilemma. While the industry has excelled in helping people save for retirement, the focus has now shifted to helping them ensure those savings wisely will last a lifetime.

Related: T. Rowe Price launches new in-plan lifetime income solutions

New strategies include protected income annuity solutions being attached to 401k plans and target date fund strategies and platforms, to help retirees have the income they need to cover expenses and live a better life, longer.

Q: Is there a growing collaboration between plan sponsors, asset managers and insurers to solve the retirement puzzle?

A: Collaboration is increasing between plan sponsors, insurers, and asset managers to enhance retirement income security. Plan sponsors recognize that while asset managers handle investment risks, insurance-based solutions are essential for managing individual longevity risks.

Q: Do financial advisors have more access to better income planning tools on digital platforms?

A: Financial advisor tools are rapidly evolving to address the changing retirement landscape, making it easier to model growth and lifetime income strategies. We must collaborate with top financial platforms to improve the advisor experience, equipping them with the tools to help retirees protect their life’s work. This effort will emphasize the importance of decumulation and ensure protected retirement income is a key part of every comprehensive financial plan.