Being prepared for retirement is no longer an after-thought as President Barack Obama boldly claimed at last night’s State of the Union; TIAA-CREF’s new survey adds to this national conversation, noting that one-in-three covered Americans say they place guaranteed income at top of their retirement to-do list, but many are faced with problems that their traditional retirement offerings can’t answer.

According to the startling findings, despite the high grouping which afforded guaranteed income as a top priority, approximately 72% “do not have or are aware of lifetime income options” that is available through their employer retirement plans.

Forty-four percent of the survey’s participants are concerned that they will run out of money in retirement, while 61% are “planning for their retirement savings to allow them to live comfortably for 15 years or more.”

The TIAA-CREF Lifetime Income Survey finds only 21% expect to receive income from annuities, which offers “a guaranteed stream of income in retirement that cannot be outlived.”

Failure to communicate this to participants and employees is credited to benefit plan sponsors. Eighteen percent of the survey state that they are currently invested in a lifetime income option such as annuity, approximately 33% didn’t know or were not sure and 28% said they were signed up to the option.

“Plan participants often say they don’t hear enough about lifetime income products from plan sponsors, but plan communication, education and advice are a key part of retirement plan design,” says Tim Walsh, managing director, Investment Services for TIAA-CREF. “Defined-contribution plans have emerged as the primary savings vehicle for most American workers. The “do it yourself” approach to DC plans works for some people who take a strong interest in their investments, but the majority of participants need help from plan sponsors to avoid missteps and ensure retirement readiness.”

He adds that “Plan sponsors have an opportunity to trail-blaze with innovative mechanisms for their participants’ retirement portfolios to help them build nest eggs and ensure income flows that will last throughout participants’ lifetimes.”

Appropriate saving levels for this personal nest egg are in 10-15% range of their annual income, according to recommended levels. Forty-four percent who haven’t retired yet are saving less than 10% and about 21% are not stashing a dime for their retirement. For those who plan to retire early, this may be a pipedream. From the survey, about 51% state they plan to retire before age 65, but 18% of respondents who are aged 65 and older are still in the workforce.

To add, 66% said that social security would serve as a source of monthly retirement income, 53% plan to use withdrawals from their retirement accounts, 42% note payments from a defined benefit pension plan, 7% are not sure and 5% listed other undisclosed options.

As more than 30% “want to ensure their savings are safe regardless of what happens in the market,” TIAA-CREF says that lifetime income option needs to become a popular and viable option for Americans that can serve to address this disconnect.

“Forward-thinking plan sponsors have an opportunity to fine-tune their participants’ portfolios from a pot of savings into income that will last for the rest of their lives,” says Walsh. “A transition to obligatory pension-like payouts, likely in the form of annuities, is most likely a trend that will be seen in the coming years, but leading-edge plans don’t have to wait to see it emerge.”

Source: Employee Benefit News