By Paula Aven Gladych
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.”
Younger participants in the plan were more likely to show interest in guaranteed income options
. Seventy-eight percent of those between the ages of 40 and 49 said they were interested in having this option in their DC plan and another 62 percent said they would invest in the option if it was available to them currently.
Older participants were not aware of their distribution options. Nearly 43 percent of participants over the age of 50 said they were not sure what distribution options were available and 48 percent of participants over age 50 said they were not sure if a guaranteed income option was even available in their plan.
The survey was conducted online for Transamerica by EACH Enterprise in the third quarter of 2012 among 602 active defined contribution plan participants.
Originally published on BenefitsPro.com