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Non-Profit Market Sponsors Prize Offering Advice Access

More than half, or 59%, of not-for-profit plan sponsors are
concerned that their participants will run out of money in retirement, and 69%
worry employees will delay retirement because they don’t have enough money,
according to a new survey by TIAA.

However, the research also points to various strategies sponsors
can adopt to address these concerns, including taking advantage of in-plan
lifetime income solutions

According to the survey, 54% of non-profit plan sponsors offer a
guaranteed lifetime income option as part of their investment menu, while 46%
don’t. Out of those that don’t offer one, 21% say fees behind these products
are too high, and 34% say their employees can access such products outside the

David Ray, senior managing director at TIAA, tells PLANADVISER,
“There are more and less successful ways to offer lifetime income. Relying on
participants to wait until they retire to get a lifetime income product is
probably one of the least successful ways of doing it. Behavioral economics
shows most employees won’t do it on their own.”

Furthermore, TIAA’s survey suggests that lifetime income products
offered through workplace retirement plans can offer more valuable benefits at
lower fees, at least in most cases. Ray points to a variety of potential
benefits an in-plan lifetime income solution can provide to participants as
they save for retirement. “In the accumulation years, the lifetime income
concept, knowing you’ll always have some base level of income, significantly improves
the confidence and commitment of participants.”

He also notes workers can have some piece of mind as they move
through changing interest rate environments in the bond market. “A lifetime
income product like a fixed annuity is a product that will insulate you, to a
certain extent, from interest rate influx.”

Still, Ray says that the potential benefits of guaranteed income
products need to be communicated
more effectively
 to participants.

“Simplifying the message is important and it’s critical to use
different methods to communicate the value of lifetime income products,” he
explains. “There is a high percentage of employees in target-date funds (TDFs) that
believes TDFs offer lifetime income, when in fact almost none of them do. So,
education is critical to increasing adoption and understanding of these

NEXT:  Targeted communication is more effective 

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