Prudential Financial Inc. is continuing to rev up its financial wellness outreach campaign this week.
The Newark, New Jersey-based company is trying to persuade the media, policymakers in Washington, employers and consumers to see saving a significant amount for retirement to be something as automatic as getting a checkup every year, or brushing teeth in the morning.
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Prudential organized a small press conference on the financial wellness concept for financial services reporters Tuesday. The company brought three high-level retirement plan unit executives — Douglas McIntosh Jr., vice president for full-service solutions; Srinivas Reddy, senior vice president and head of full-service investments; and John Kalamarides, head of full-service solutions — to New York to tell the reporters what annuitization is, why workers need protection against longevity risk, and why they think adding income guarantees to employer-sponsored retirement plans could help everyone.
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Prudential held the press conference, in part, to draw attention to a lifetime income white paper the company was preparing to release Thursday.
Here’s a look at three takeaways from the press conference that might be of interest to life insurance agents and to retirement advisors with roots outside the insurance industry.
1. Prudential is promoting a package of four retirement plan design elements.
Prudential says a package of four basic retirement plan design features dramatically increase the odds that workers will end up with adequate retirement income.
Enroll workers in retirement plans automatically, as the default.
Make a diversified investment portfolio that shifts more toward fixed income investments as the enrollee ages the default investment option.
Start with 6% of the worker’s income as the default initial contribution level, and set the contribution level to increase automatically.
Start putting a lifetime income annuitization feature, to guarantee that the worker’s income stream will survive at least as long the worker, into effect about 10 years before the worker wants to retire.
Prudential has a financial interest in seeing more retirement plans offer income guarantees: It, like some other insurers, offers a kind of stand-alone group annuity that can convert the assets in a retirement plan into a lifetime stream of income.
Reddy said at the press conference that Prudential believes offering an income guarantee can actually improve workers’ underlying retirement savings performance.
“Participants in retirement plans are not investors,” Reddy said.
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Retirement plan participants are savers, and, if they manage their assets on their own, they are likely to make mistakes based on emotion, Reddy said.
If workers have income guarantees, they are more likely to have diversified investment portfolios, in part because of the investment rules built into the income guarantee programs, Reddy said.
Those workers are also more likely to keep their assets in the retirement plan during market panics, when other investors pull out at the worst possible time, Reddy said.