It boils down to this: who will make sure you don’t run out of money in retirement? Is it your responsibility to get educated, learn the risk, navigate your way around the myriad of choices that you may or may not have in your defined contribution plan and invest enough to ensure a long and steady retirement income? Is it the governments job to pass regulation that is well-defined to allow you to achieve the highest possible chance of not outliving your money? Or is a plan sponsor’s responsibility to a lifetime income distribution option?
No easy answer emerged from the Department of Labor’s open questionnaire to retirement industry experts. Over 700 companies responded to the survey of 39 questions. The current level of guarantees is no good according to William B. Gulliver, managing director of North American retirement business. In his statement to the DOL, he wrote: “A review of Towers Watson & Co.’s database of more than 1,400 large employers reveals only 20% to 25% offer the option.”
There is growing concern that many plans are simply opting out of any responsibility when they allow a significant number of retiring employees to take the lump-sum payment. This group, who is likely to not take into account the potential for longevity well beyond current levels may set loose with too much cash and nowhere to put it.
My biggest fear, and one the industry doesn’t necessarily share, is the overselling of annuities. This hybrid mutual fund.insurance product is not the best solution. Larry H. Goldbrum, general counsel for the Spark Institute Inc. disagrees. He wants guidance mandated by the DOL. “Specifically stating that providing information about lifetime income options, available both inside and outside of the plan, is not investment advice”, he was quoted as telling Robert Steyer of Pensions and INvestments Online recently suggesting that by giving the employer the option of not saying anything, they simply shed a layer of responsibility.
Many in the industry simply want encouragement and options built into the plan. The investor will still have the option but the employer must be willing to give it to them and once they do, educate them about what these products are.
You can read the full article here.
Related posts:
Pingback: Building a Boomer Annuity without the Insurance Company « Adult Retirement