Few workplace savings plans provide resources such as annuities to guarantee that savings will last throughout retirement, according to a recent white paper from TIAA.
This “guarantee gap,” it says, undermines the very purpose of the retirement savings plan system, which is to minimize the risk of both poverty among retirees and strain on the social safety net.
“Ensuring that American retirees have sufficient income to last throughout their retirement is among the most critical issues facing our economy,” TIAA’s president and chief executive Roger Ferguson said in a statement.
“For nearly 100 years, employees with 403(b) retirement plans have benefited from access to investments that generate guaranteed lifetime income. All American workers deserve to retire with the same level of financial security — and Washington can play a key role in getting there.”
The white paper notes that Americans today can expect to live 20 to 30 years in retirement. In some two-thirds of married couples who are 65 today, at least one spouse will live to age 90 and nearly two in five will live to 95.
Longer life expectancy, it says, increases “longevity risk,” the chance that retirees will outlive their savings — and most Americans underestimate their life expectancy.
Indeed, concern about longevity risk prompted the Internal Revenue Service to ease rules to make it easier for clients to protect against the risk.