Retirement income planning can have a very positive impact on the retirement readiness of American workers. As workers take on more responsibility for their own futures, it is vitally important for plan sponsors and advisors to help participants come up with a viable savings plan to get them through retirement.
A study by ING U.S., “Retirement Income Redefined,” pinpoints some potential discrepancies in retirement planning ideologies and practices, and reinforces how retirement is being redefined fundamentally.
The Department of Labor proposed rules that would require defined contribution plan sponsors to offer plan participants a lifetime income illustration on their account statement. The snapshot would show what their monthly income would be in retirement, based on their current savings.
ING found that 33 percent of retirees say they are experiencing a lower standard of living in retirement than in their working years, based on the monthly income they have to live on. The DOL hopes that by introducing lifetime income illustrations to account statements, employees will have a better idea of how much they need to save to achieve 75 percent to 80 percent of their pre-retirement income in retirement.
Only 8 percent of pre-retirees said they expected to have a lower standard of living when they retire.
About 80 percent of those surveyed said they would be willing to make a financial trade-off and give up some spending money today to secure a level of guaranteed retirement income in the future.
More than one-third of participants said they expected their money to run out in retirement, and 34 percent thought that $500,000 or less in retirement savings would be enough to live comfortably in retirement or had no idea how much they would need.
Working with a financial advisor increased the odds a person calculated what their current savings would translate into in terms of a retirement income stream. Eighty-seven percent of those who worked with an advisor had made this calculation, compared to 59 percent of those who did not.