The decades-long phasing out of traditional pension plans in favor of defined contribution (DC) retirement savings plans has effectively saddled Americans with managing both investment risk and longevity risk through the decumulation phase of their retirement journey. Many struggle with this challenge. Although DC plans have made great progress in helping participants save and invest for retirement, most still fall short in helping workers convert their savings into a steady stream of lifetime income.
Now, however, with Congress’ passing of the SECURE Act, employers have a fresh new opportunity to help employees generate a stream of lifetime income. The SECURE Act not only includes provisions that make saving for retirement easier and retirement savings plans more accessible, but the Act also encourages DC plan sponsors to evolve their plans so that participants can think about, and generate, lifetime income with their retirement savings.
The time for plan sponsors to act is now. Sponsors must begin to evolve their DC plans to facilitate not just saving for retirement, but also generating lifetime income in retirement. Fortunately, the SECURE Act provides the incentives and assurances for plan sponsors to take their DC plans to the next level – redefining the retirement savings plan as a lifetime income plan.