By Fred Reish and Bruce Ashton

Overview

It is often cited that approximately 10,000 workers retire every day in the U.S., and it is estimated that this number will increase to about 12,000 per day in 2024.1 While some of those retirees may have pension plans (which is particularly true of government and union workers) and some do not have any retirement benefits, many are participants in savings-based defined contribution plans. While those defined contribution plans have been successful in helping workers accumulate retirement benefits, they are not generally designed to provide retirement income for their participants. As a result, the burden of converting their account balances into sustainable lifelong income falls on participants in 401(k) and other participant-driven retirement savings plans.2 However, that individual responsibility can be supported by plans offering guaranteed income with the associated fiduciary protections for the quality and expense of the guaranteed products. In that case, participants will benefit from both the guarantees and the fiduciary protections for the cost and quality of the retirement income products. This raises an important question: how can plan sponsors design and operate plans that help participants convert their 401(k) savings into sustainable retirement income?