Principal Financial : Today’s guarantees for tomorrow’s retirees

For retirees, 'risk' may be a four-letter word. But employers who sponsor retirement plans have an opportunity to help employees plan for you know what before their paychecks stop and retirement starts.

A new white paper, The Retirement Income Dilemma: An In-Plan Solution, walks through how in-plan deferred income annuities offered within a retirement plan help future retirees manage different risks such as outliving their savings, downturns in the market and changing interest rates.

Principal Financial Group commissioned Bruce Ashton of Drinker Biddle & Reath LLP to write the paper.

'Today's retirees will live longer and face different financial issues. They may be entering retirement with mortgages, credit card balances and even student loans,' said Jerry Patterson, senior vice president of retirement and income solutions at Principal. 'The prospect of living longer, combined with higher fixed expenses, makes it even more important to strike a balance between investments that grow and investments that are guaranteed.'

The paper includes sections on:

• The risks retirees and near-retirees face when it comes to making their income last through retirement.
• How an in-plan deferred income annuity addresses more of these risks than other products available today.
• What steps a plan fiduciary should take to research options and make a prudent decision.

The paper is available in condensed and full versions. It also includes checklists for plan sponsors to use in researching different in-plan products and providers.

Principal's income outcome

Principal launched an in-plan deferred income annuity late last year. Principal Pension Builder lets retirement plan participants make a lump sum transfer or direct future plan contributions to it, just like an investment option within the plan. Each transfer or contribution purchases a known amount of regular, guaranteed income in retirement.

When they near retirement, participants select the age they want to start receiving payments and what form those payments will take.

'We have been in the market for several months now and interest among advisors and plan sponsors has been very high. They love the simplicity of the design and see it as a powerful way for employees to begin to set the stage for life without a paycheck,' Patterson said. 'By making guaranteed income easier and more convenient to access through a retirement plan, millions of Americans can make progress today toward a more secure tomorrow.'

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