Experts at MetLife say workers are in a state of shift with how they approach saving for retirement. Research shows employees in defined contribution plans are now focused on preserving lifetime income, rather than a singular focus on asset accumulation.
According to MetLife’s study, employees are looking for strategies to create and protect retirement income they can’t outlive. Indeed, nearly half (49 percent) of those who have a retirement nest egg are interested in learning about how to protect their retirement income.
Four in ten (40 percent) are interested in learning more about how they could use annuities as part of their DC plan, and 44 percent would like their employer to offer an annuity option in their 401(k), 403(b) and/or 457 plan.
When they retire, 55 percent of workers say that they’ll prefer to receive part of their nest egg for as long as they live rather than taking all of it in a lump sum, whereas only 9 percent strongly disagree with that statement (likely indicating that they prefer the lump sum).
“To some extent, these findings buck conventional wisdom. We know from the annuity take up rates that very few workers actually annuitize their savings at the point of retirement,” said Jody Strakosch, national director for MetLife’s Retirement Products group. “That said, we’ve long believed that the time would come when workers would shift their retirement focus from assets to income.
“We think that paradigm shift – from a singular focus on asset accumulation to ensuring that their retirement savings provides lifelong income – is occurring now. In the coming years, we expect that to translate into more workers being given an opportunity by their employers to annuitize at least a portion of their retirement savings.” [See related: No wrong way to a guarantee]
Very few companies currently offer annuities as either a defined contribution distribution option (16 percent) or as an IRA rollover option (13 percent). Among companies with 100-plus employees who offer a 401(k) plan, of those companies that don’t currently offer annuities as a distribution option, only 20 percent are considering them. However, only 14 percent would not consider offering them, with many others unsure if they would or wouldn’t.
“With nearly five in ten workers interested in having their employers offer annuities and other lifelong income products, there may be an opportunity for more employers to give these options careful consideration,” added Strakosch.