Seven in 10 U.S. workers between the ages of 40 and 80 with at least $100,000 in investable assets say they’d be “very” or “somewhat” likely to select an in-plan annuity option if it were available within their employer-sponsored retirement savings plan, according to a new report by LIMRA.
It also found younger plan participants (between ages 40 and 49) were especially interested in this option. Indeed, two-thirds (64 per cent) of millennials and generation Z respondents said they’re interested in contributing to an in-plan annuity.
However, while a majority of plan participants are interested in in-plan annuity options, some employers were still hesitant to offer them. Notably, plan sponsors who were unlikely to add these options said it was because the products are expensive, complicated, resource-intensive, hard to explain, not flexible and not portable.
Still, more than 40 per cent of plan sponsors said they’re either actively considering or have decided to add an in-plan annuity within their retirement plans. Among these respondents, roughly two-fifths (43 per cent) said it was because they feel obligated to help employees generate retirement income, while more than a third said they were following recommendations by a plan consultant/advisor (39 per cent), they feel the best place to generate retirement income is from the plan (37 per cent) or it was to manage workforce turnover/retirements (36 per cent).
“The idea of a guaranteed income product in a defined contribution plan has been around for years,” said Bryan Hodgens, head of LIMRA’s research team, in a press release. “Up until recently, however, plan sponsors have been a little reluctant to put annuities inside of a 401(k) plan. The Secure Act removed some of the obstacles that had deterred plan sponsors from adopting these products and now we are beginning to see growth and momentum in this market.”
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