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CCH® PENSION — 09/03/10

Employees increasingly anxious about outliving their retirement benefits, survey finds

Half of employees (52%) believe they are behind in their retirement savings and a nearly equal number are very concerned about outliving their retirement money, according to MetLife's 8th Annual Employee Benefits Trends Study. The employer survey was conducted during the fourth quarter of 2009 and comprised 1,503 interviews with benefits decision-makers at companies with staff sizes of at least two employees. The employee sample comprised 1,305 interviews with full-time employees age 21 and over, at companies with a minimum of two employees.

"Against the backdrop of a still challenging market environment, large numbers of workers are concerned about making their retirement savings last a lifetime. In response, many have said they plan to work longer but, unfortunately, those extra years of earnings still may not be enough to close the gap -- and, job availability and health issues could put those plans at risk," said Robert E. Sollmann, Jr., executive vice president, Retirement Products, MetLife. The study found that 61% of workers have planned for 20 years or fewer in retirement even though, with a median retirement age of 65, half of the study's respondents will likely live beyond 20 years, and some well beyond age 85.

Employees desire income options

According to the study, employees are looking for strategies to create and protect their retirement income. Nearly half (49%) of those who have a retirement nest egg are interested in learning about how to protect their retirement income. Four in ten said that they are interested in learning more about how they could use annuities as part of their defined contribution plan and 44% would like their employer to offer an annuity option in their 401(k), 403(b) and/or 457 plan. When they retire, 55% of surveyed workers said that they would prefer to receive part of their nest egg for as long as they live rather than taking all of it in a lump sum, whereas only 9% indicated that they would prefer the lump sum.

"We know from the annuity take up rates that very few workers actually annuitize their savings at the point of retirement," said Jody Strakosch, national director for MetLife's Retirement Products group. "That said, we've long believed that the time would come when workers would shift their retirement focus from assets to income. We think that paradigm shift - from a singular focus on asset accumulation to ensuring that their retirement savings provides lifelong income - is occurring now. In the coming years, we expect that to translate into more workers being given an opportunity by their employers to annuitize at least a portion of their retirement savings."

Few employers offer annuities

The survey showed that very few companies currently offer annuities as either a defined contribution distribution option (16%) or as an IRA rollover option (13%). Among companies with 100+ employees who offer a 401(k) plan, only 20% of those companies that don't currently offer annuities as a distribution option, are considering them. However, only 14% would not consider offering them, with many others unsure if they would or wouldn't.

"With nearly five in ten workers interested in having their employers offer annuities and other lifelong income products, there may be an opportunity for more employers to give these options careful consideration," said Strakosch.

In MetLife's response to the Request for Information (RFI) from the Departments of Labor and Treasury regarding lifetime income options, MetLife proposed policy recommendations to encourage employers to offer guaranteed lifetime income in defined contribution plans and encourage individuals to choose lifetime income products, which can help to ensure that more Americans enjoy a comfortable retirement. MetLife also proposed tax law changes designed to further promote annuitization and suggested ways to facilitate the use of in-plan accumulation annuities.

Source: MetLife news release, August 9, 2010.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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