Pre-retirees and retirees face substantial challenges with regards to handling their retirement savings in order to ensure they have a dependable stream of income for life.
Although many Americans have taken painstaking measures in order to rebuild nest eggs decimated by the Great Recession, many are inexperienced when it comes to budgeting that money to ensure that it lasts.
A recent research paper suggests that retirement income generators (RIGs) could be used to mitigate the risks associated with the mismanagement of retirement savings and proposes that employers and plan sponsors incorporate RIGs into their defined contribution (DC) plans.
The paper, “The Next Evolution in Defined Contribution Retirement Plan Design,” authored by the Society of Actuaries (SOA) Committee on Post-Retirement Needs and Risks and the Stanford Center on Longevity, strives to act as a reference for plan sponsor fiduciaries seeking to understand their RIG options and the responsibilities that accompany them.
The shift from defined benefit (DB) plans to DC plans has been a difficult one for employees and society as whole. When it was once common for a retiree to be given a certain amount of money at certain intervals, they now have to manage and withdraw savings on their own. Many are not equipped with the financial acumen needed to do so.