PLANSPONSOR - August - September 2022 - 2

Purchasing Stability
INSIGHTS
S
eems like the question of the times is " What's going on
with the economy and what does it mean for me? " It's
understandable that people can't make sense of it all;
it's hard to keep up with what the indicators are supposed
to be telling us-and, frankly, they seem at odds with each
other. Yes, there are some negative ones regarding inflation
and slow economic growth, but how do employers reconcile
those with unemployment so low that finding workers to fill positions now takes
forever-and, when you do find them, wage inflation means you'll pay a lot more
in salary and benefits.
Inflation and recession anxiety have those close to retirement worried about
their coming standard of living. Research done for Alliance for Lifetime Income
and CANNEX's " Protected Retirement Income and Planning Study " found that four
out of five U.S. workers ages 45 through 75 cited concerns that high inflation will
reduce their spending power in retirement (81%) and that a recession will drive the
economy downward and may reduce the retirement income they can expect (79%).
We know that those concerns may lead employees to rethink when and how
they will leave the workforce. At the PLANSPONSOR National Conference in June,
a few plan sponsors told me some of their employees weren't retiring this year as
planned because the market affected their savings in ways for which they weren't
prepared. That is sequence-of-return risk-over the course of their savings career,
their overall return might still be strong, but, in the time right before or in retirement,
such returns can affect the portfolio's overall value and therefore change how
one can live off of it.
Considering all the above, I've been wondering whether the appetite might
change for pre-retirees, guided by the plan sponsor, to look more closely at
protecting their assets and asking for annuities. With the concerns about the future
of Social Security, and fewer workers in line for a pension, to expand access to guaranteed
income may become a higher priority.
That same ALI and CANNEX research found that, among investors 45 through
64, 45% of the cohort has no source of protected income from a pension or annuity
being set aside for retirement. Yet, slightly over half (56%) of investors who have a
401(k)-type account are at least moderately interested in investing in annuities via
their employer plan, but most lack access to any. For plan sponsors, there is some
guidance about how to adopt such options, as the Setting Every Community Up
for Retirement Enhancement Act supplied additional protection for provider selection,
and there are ways to provider access-e.g., the marketplace offered by Hueler
Income Solutions-that don't require endorsement of a particular annuity provider.
I'm not an investment, or insurance-product, expert, but I do think guaranteed
income products could play a role in a participant's financial planning. They don't
hedge against diminishing purchasing power due to inflation, but they do secure
income. Therefore, if the goal of your plan is to help employees have a secure retirement,
perhaps such products are worth looking at.
Perhaps it's time to speak with your counsel or advisers and/or to poll your
participants and discuss whether annuities might be worth examining as a way to
help mitigate some financial stress in this time of economic uncertainty.
-Alison Cooke Mintzer, Publisher
2 PLANSPONSOR.COM August - September 2022
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