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Georgetown University Center for Retirement Initiatives study demonstrates how different approaches can be used to meet the income needs of retirees
Washington, D.C., June 18, 2019 – A new report from the Georgetown University Center for Retirement Initiatives (CRI) explores potential solutions to help retirees meet their lifetime income needs.
The report, entitled “Generating and Protecting Retirement Income in Defined Contribution Plans,” was made public today during the CRI 2019 Policy Innovation Forum. It was produced by the Center in conjunction with Willis Towers Watson, a leading global advisory, broking and solutions company.
For the first time, defined contribution (DC) plan assets account for more than 50% of total retirement assets in the seven largest pension markets globally. With the shift from traditional pensions to a DC-centric system, the responsibility for making complex retirement savings and investment decisions has shifted to individuals.
“Innovative new tools, such as auto-enrollment, have made it more likely that workers will start and continue to save for retirement, but now there is a growing demand for plans to evolve from focusing on accumulating savings to generating retirement income,” said Angela Antonelli, the Center’s executive director.
Key objectives for retirement income include stability, maximization, longevity protection, growth potential, cost, and liquidity. The Center’s report examines how innovative lifetime income solutions can help improve retirement outcomes by looking at potential income strategies and balancing the risk trade-offs associated with each solution.
“Every individual has unique challenges and goals for their post-work years. Family circumstances, lifestyle expectations, health concerns, and other factors all combine to define personal retirement income requirements,” said David O’Meara, Head of DC strategy at Willis Towers Watson.
The authors studied a range of scenarios to show how different approaches achieve retiree objectives. Solutions discussed include an immediate annuity, a laddered bond portfolio, a target date fund (TDF) using a systematic withdrawal plan, a managed payout fund, a TDF with a deferred annuity, and a TDF with guaranteed minimum withdrawal benefit.
Although few would dispute the need for lifetime income solutions, adoption rates by plan sponsors and participants have been low. Many retirees have a hard time determining just how much retirement income is “enough” and what approach will help them achieve their goals. The easier that policymakers and regulators make it for plan sponsors to offer lifetime income solutions, the greater the likelihood employers will adopt them.
At the same time, “plan sponsors should not let the ‘perfect be the enemy of the good,’ Antonelli said. “A range of available solutions can help retirees convert their accumulated savings into a sustainable stream of income in retirement.”
About the Georgetown University Center for Retirement Initiatives
The Center for Retirement Initiatives is a research center of the McCourt School of Public Policy, one of the top-ranked public policy programs in the nation. Through its academic reputation and ability to engage with policymakers, business leaders and other stakeholders, the McCourt School attracts world-class scholars and students who have become leaders in the public, private and nonprofit sectors.
The Center makes its research reports publicly available. This report can be found on the CRI website at https://cri.georgetown.edu/research/ or contact Lauren Mullins at 202-687-2269 or at Lauren.Mullins@georgetown.edu for additional information or media requests related to this report.