Well over half of defined contribution participants who are over the age of 50 say they are interested in a guaranteed income option in their 401(k) plan.
A survey by Transamerica Retirement Solutions of its DC plan participants also found that 43 percent of respondents would invest in one now if they had the chance.
“In-plan guaranteed distribution options offered by a growing number of defined contribution plans have been designed to mitigate three critical retirement security risks: market, longevity and withdrawal,” said Gerry Katz, senior vice president, Transamerica Retirement Solutions. “Most of these guaranteed options lock in upside gains at predetermined time intervals and guarantee minimum retirement income withdrawals, protected against market risk. Because the income withdrawals are guaranteed for life, participants are also protecting against longevity risk, the risk of outliving their retirement income.”
Guaranteed income options also reduce the likelihood that participants will succumb to the temptation of withdrawing a lump-sum from their retirement accounts for non-essential purchases, he added.
“It is extremely encouraging to see so many participants aged 50 and older showing interest in these types of benefits,” Mr. Katz said. “But the ‘not sure’ population is of concern. This response could indicate either a lack of understanding of retirement security risks, or uncertainty about how guaranteed income products address these risks. The fact they are unsure reveals the need for more effective communications targeted to pre-retirees.”