83% of plan sponsors believe more than 1 in 4
future retirees will deplete their retirement savings prematurely,
according to MetLife’s 2024 QLAC Poll
In 2024, more Americans are reaching the traditional retirement
age of 65 in the same year than at any time in history, creating
more than 4 million potential new retirees this year alone. While
the U.S. faces this significant milestone, findings from MetLife’s
2024 Qualifying Longevity Annuity Contract Poll show a vast
majority (91%) of plan sponsors are concerned that their future
retirees will run out of money in retirement. When asked about what
percentage of future retirees will run out of money in retirement,
83% of plan sponsors believe more than 1 in 4 retirees will deplete
their retirement savings prematurely.
“When planning for a successful retirement, the biggest risk
facing plan participants is longevity risk, which means living
beyond the average life expectancy. As a result, individuals can
potentially underestimate the savings they will need,” says Roberta
Rafaloff, vice president and head of Institutional Income Annuities
at MetLife. “Longevity insurance, like qualifying longevity annuity
contracts, can help address this challenge by generating income at
a later age.”
A qualifying longevity annuity contract (QLAC) is a fixed
deferred annuity provided as a distribution option from qualified
retirement plans, such as 401(k) plans, 403(b) plans or individual
retirement accounts (IRA). QLACs are typically purchased at the
point of retirement, with the guaranteed annuity benefit commencing
at an advanced age, typically age 80 or 85. By deferring payments
to a later age, participants can maximize their income and ensure
they have a guaranteed income stream when other retirement income
sources may run short. In addition, the portion of the defined
contribution (DC) plan balance that participants use for a QLAC
will be excluded from the account balance used to determine the
Required Minimum Distribution (RMD). As a result, more money can
remain in the plan, with the potential to grow, and participants
continue to have access to low-cost funds.
Plan Sponsors’ Understanding of Longevity Risk
While plan sponsors are concerned about retirees running out of
money, the Poll found that many plan sponsors underestimate
longevity risk. When asked about the chances that an individual
will live beyond age 86, 54% of plan sponsors underestimate that
half of individuals will live beyond average life expectancy.
Additionally, most plan sponsors (78%) underestimate the number of
centenarians – those who reach the age of 100 – projected for the
United States in the future.
According to the Poll, more than half of plan sponsors (54%)
identified inflation risk, a decline in purchasing power, as the
greatest retirement risk, while 23% identified longevity as the
greatest retirement risk.
“While inflation can have a significant negative impact on
retirees’ ability to rely on their savings, longevity risk should
not be ignored,” says Rafaloff. “During retirement, individuals
face a number of risks, including inflation, investment and
interest rate risk. But the impact of these risks can be
exacerbated the longer an individual lives in retirement.”
Solutions Addressing Longevity Risk
Currently, most plan sponsors offer a systematic withdrawal
program (SWiP) or other drawdown strategy to help retirees spend
down their assets. However, this may pose a challenge to ensuring
successful retirement outcomes. When asked what they believe the
safe starting annual withdrawal amount for an individual retired at
age 65 with a DC plan savings of $100,000 and a 30-year time
horizon, 31% overestimate how much a retiree can safely withdraw
annually.
Beyond these drawdown strategies, plan sponsors are now looking
at offering solutions that provide guaranteed streams of income.
When shown a hypothetical example of how much yearly income an
immediate income annuity and a longevity annuity would provide, a
majority (81%) of plan sponsors say they would consider offering an
immediate income annuity and 66% would consider offering a QLAC.
For those plan sponsors who identified longevity as the greatest
retirement risk, 72% would consider offering a QLAC.
Not only are plan sponsors open to offering these solutions to
participants, 70% of plan sponsors say they would consider
purchasing a QLAC for their own retirement.
“By using a QLAC to insure their longevity risk, plan
participants will have an easier time determining how much they can
draw down from their retirement savings before benefit payments
begin,” says Rafaloff. “Because of this, MetLife believes that
QLACs and other retirement income solutions should be given careful
consideration by plan sponsors to help protect their participants’
retirement security. And, we are seeing them take action by
discussing these options with their advisors.”
According to the Poll, 94% of plan sponsors say their DC plan
consultants or advisors discuss retirement income options with
them. For QLACs, 82% of plan sponsors report they are being
discussed with their DC plan consultants or advisors.
About the Study
The MetLife 2024 Qualifying Longevity Annuity Contract Poll was
fielded between January 9 and January 16, 2024. MetLife
commissioned MMR Research Associates, Inc. to conduct the online
survey. Survey responses were received from 250 plan sponsors in
human resources/benefits, treasury, and finance whose organizations
have one or more DC plans. Respondents had either final
decision-making authority or a lot of influence regarding their
company’s retirement benefits and programs, and they had to be
familiar with the various DC plan retirement income options
available today. The average size of the DC plans represented is
$513 million. Two-thirds of plan sponsors surveyed also maintain
one or more defined benefit (DB) pension plans. To read the full
MetLife QLAC Poll report, visit
http://www.metlife.com/QLACPoll/.
About MetLife
MetLife, Inc. (NYSE: MET), through its subsidiaries and
affiliates (“MetLife”), is one of the world’s leading financial
services companies, providing insurance, annuities, employee
benefits and asset management to help its individual and
institutional customers build a more confident future. Founded in
1868, MetLife has operations in more than 40 markets globally and
holds leading positions in the United States, Japan, Latin America,
Asia, Europe and the Middle East. For more information, visit
www.metlife.com.
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version on businesswire.com: https://www.businesswire.com/news/home/20240326694538/en/
MetLife: Judi Mahaney jmahaney@metlife.com 212-578-7977
MetLife (NYSE:MET)
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