Individuals and institutions can take three important steps to improve retirement security prospects, according to a paper issued by Christine C. Marcks, president of Prudential Retirement.
First, the bad news:
The Center for Retirement Research (CRR) at Boston College reported that the percentage of U.S. working-age households at risk of being unable to maintain their pre-retirement standard of living once retired rose from 30% in 1989 to 51% by 2009. The cost of retirement is rising, life spans are getting longer and healthcare costs are getting higher while interest rates are anemic, among other enormous societal and economic factors, Prudential and many others have pointed out.
In fact, Federal Insurance Office (FIO) Director Michael McRaith, identified the interest rate environment and the demographic realities as the first epic focus of the Federal Advisory Committee on Insurance (FACI) work recently. See: http://www.propertycasualty360.com/2012/04/02/mcraith-steers-faci-discussion-away-from-pet-issue
Prudential is marking National Retirement Planning Week beginning April 9 by encouraging American workers who are not currently saving for retirement to begin investing at least 1% of their income in a 401(k) plan with the hope of increasing those savings over time.
Now the solutions, as seen by Prudential:
The first step is most critical in combating this risk, and goes straight to a worker’s and an employer’s behavior via improving overall saving and investing–only about half the U.S. workforce is offered a pension or retirement plan at their place of employment, the paper noted.
Marcks highlighted as a potential partial solution a proposal calling for the widespread creation of Multiple Small Employer Plans (MSEPs).
“MSEPs would allow employers with fewer than 100 employees to pool resources under a single defined contribution (DC) plan, resulting in lower costs and simplified administrative requirements,” the paper noted.
Second, Prudential Retirement is suggesting the return of guaranteed income–however, it can no longer be in the defined benefit plans that were the hallmark of the past century. Instead, it promoted new variable annuity products with guaranteed income streams and flexible payment and withdrawal schedules.