plans focus on boosting the number of participating
workers and the percentage of pay being saved, but few
prioritize how employees will actually fare financially
once in retirement, a new study shows.
Sponsor Council of America survey of 605 retirement
plans found just 31 percent of plans benchmark their
success based on income replacement ratios, which are
projections of a worker’s retirement income as a
percentage of final pay using estimates of future
investment returns. More than 90 percent use
participation rates and 76 percent use salary deferral
replacement rates as a benchmark can be tricky, and not
just because of the return assumptions. Some formulas
include an estimate of Social Security income, which can
vary significantly based on a worker’s employment
history and other factors, for example.
laudable to try to figure out not just how much workers
are saving today, but whether that will translate into a
sustainable lifestyle in retirement. Laudable, and rare.
guaranteed pensions largely gone (the Pension Rights
Center said in January that just 15 percent of the
private-sector workforce participates in a pension
plan), it’s up to savers to figure out how much they
can safely withdraw from their nest eggs each year
without risking running out of money.
aim to offload some of that risk, but it’s important
to bring a critical eye to any financial product geared
toward the elderly.
traditional long-term care insurance premiums jumped
significantly in the last decade, sales of new
stand-alone policies have fallen dramatically, industry
trade groups report. That means more people are entering
their older years without coverage for nursing home and
other types of assisted living care.
medically underwritten annuity. These products are for
people over 70 who are already in need of medical care
and who have a shorter life expectancy than other people
their age. Compared with regular single premium,
immediate annuities, they pay a higher amount of monthly
income because of this shorter life expectancy. Costs
vary by age and medical condition, but someone might get
up to 50 percent more in monthly income than a healthy
anyone with a shorter life expectancy even think about
annuities? With medical advances, the thinking goes, the
possibility of outliving assets is still there.
children are buying these policies for their elderly
parents, said Maria Tabb, a senior product manager for
Genworth, which began offering its Income Assurance
Immediate Need Annuity about two years ago. Tabb said
sales are gaining momentum, but it’s still early.
“We’re still building interest,” she said. A
handful of other carriers offer similar products.
Stern, an insurance agent and owner of
ImmediateAnnuities.com, urges families to realize their
loved one may die before annuity returns even the
suggests comparing any quotes from medically
underwritten annuities with traditional single-premium
income annuities. “You might be looking at a third
more income but your life expectancy is half that” of
a healthy person, he said.
if you can even qualify for the product, said agent Stan
of the time, clients aren’t sick enough” to qualify
for higher payouts based on the underwriting, he said.
“They’re often getting turned down.”