By Cyril Tuohy
A majority of people aged 50 or older (65 percent) are interested in having a guaranteed income option in their defined contribution plan, yet are also far more evenly divided as to whether they would actually invest in one, according to a new survey by Transamerica Retirement Solutions.
If they had the option of investing for guaranteed income through their defined contribution (DC) plan, 43 percent of the respondents said they would invest now, but 40 percent said they were “not sure” if they would invest in such an option, the survey found.
“It is extremely encouraging to see so many participants aged 50 and older showing interest in these types of benefits,” Gerry Katz, senior vice president of Transamerica Retirement Solutions, said in a news release. “But the ‘not sure’ population is of concern.”
Katz said that guaranteed distribution options help retirees mitigate risks linked to market volatility, discourage the participant from taking out a lump sum for a “nonessential” purchase, and pay an amount for as long as the participant lives, even if the retiree lives much longer than he planned.
Older participants, however, lacked an awareness of what their defined contribution plans offered with regard to distribution options, the survey found.
Younger plan participants appeared even more interested than their older cohorts in guaranteed income options in their defined contribution plans, the survey found.
More than three in four (78 percent) of people between the ages of 40 and 49 said they were interested in having a guaranteed income option in their DC plan, and 62 percent indicated that they would invest in it if they had the option of doing so now, the survey also found.
Katz said interest in guaranteed income plans among younger participants was “very good news.”
“The earlier participants begin to think about and plan their retirement security, the greater likelihood that they will ultimately be retirement ready,” Katz said.
The survey was conducted online for Transamerica Retirement Solutions by EACH Enterprise in the third quarter of 2012 among 602 active defined contribution plan participants.
Cyril Tuohy is a writer living in Pennsylvania. He has covered the financial services industry for more than 15 years. He has also written about food, restaurants and travel. Contact him at [email protected].
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