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Retirement Planning > Saving for Retirement

Older workers have no plan for DC plan assets

By Warren S. Hersch

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A new LIMRA Secure Retirement Institute (LIMRA SRI) study finds that 27 percent of U.S. workers, ages 55-64, say they do not know how they will use their defined contribution (DC) plan savings after they retire. Women are much more likely than men not to have planned how they will use their DC assets (38 percent vs. 19 percent)

“It is surprising that such a large proportion of older workers have failed to do this basic level of income planning when most are within 10 years of retirement,” says Matthew Drinkwater, associate managing director, LIMRA SRI Research. “Many believe that they can delay retirement indefinitely, or work in retirement, so it’s possible they feel that there’s no near-term need to engage in this kind of planning.

“But that belief is risky; people often retire earlier than anticipated,” he adds. “It makes sense to give thought to how you will use your DC plan balances sooner rather than later.”

The study finds that two-thirds of workers ages 55-64 planned to make withdrawals, either directly from their DC accounts or after rolling over the assets into an IRA. Only one in six say they plan to convert some or all of their balance into a guaranteed lifetime income. 

While 24 percent of workers ages 55 to 64 who have developed specific income-generation strategies say they plan to take systematic withdraws from their retirement savings, more than double (65 percent) say they plan to withdraw money on an occasional basis or when needed. Among those who have no specific income strategy, simple procrastination is the top reason given for not yet creating one.

“Going through the planning process during the pre-retirement years may prompt changes in their savings behavior, how they allocate their assets or the decision to purchase other retirement products,” notes Drinkwater. “Ultimately, our research has shown that people who take the steps to plan for retirement are more likely to feel more confident in their ability to be financially secure throughout their retirement.”

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