Revisiting Retirement Readiness

In Retirement, The Ultimate Outcome is Income

For many, the employer-sponsored plan might be the biggest asset

by Jamie Ohl

Ms. Ohl is president of Retirement Plan Services and leads service operations for the life and annuity businesses at Lincoln Financial Group. Additionally, Ohl serves on the company’s Senior Management Committee. Ohl has nearly 30 years of financial services experience spanning a variety of areas in the industry including retirement, operations, distribution and asset management. Visit

As an industry, we have made significant progress helping people understand the importance of saving — starting early, contributing regularly and ensuring they calculate the savings they will need to retire with financial security along the way. But there’s another important step in retirement. We must also help the customers we serve, and all American savers, understand how their savings can translate into income in retirement so that they can face the future with confidence and optimism.

We know that the retirement plans we offer will play a critical role — while 87% of Baby Boomers expect to rely on Social Security as a source of income in retirement, that number falls to 67% for Gen-X and just 50% for Millennials. So for many employees, their employer-sponsored retirement accounts will be their largest asset and will need to provide income through a retirement that could last 30 or more years. The SECURE Act passage was an important step toward helping ensure Americans won’t outlive their savings by expanding the opportunities for lifetime income.

SECURE-ing Retirement For America

By enhancing portability and giving plan sponsors the confidence to provide a plan design that can generate guaranteed income for their participants, the SECURE Act will make it easier for more American savers to get access to these important tools and products.

As a result, the defined contribution business is changing. Employer-sponsored retirement plans are no longer just accumulation vehicles — they are becoming retirement income vehicles. While 41% of Baby Boomers expect pension plans to be a source of retirement income, only 28% of Gen-X and 21% of Millennials will be able to rely on them. By offering in-plan guaranteed income products, we can help future savers create their own “DIY” pensions. And the numbers show that plan participants are interested in doing so, with 61% of workers who are currently saving in their employer’s plan reporting they would be somewhat or very likely to contribute to a guaranteed lifetime income investment option.

The Importance Of Protection

In the midst of a global health crisis and record unemployment levels, financial protection is more important than ever. The market volatility over the last six months has shown financial professionals, employers and employees — and especially those nearing retirement — that protecting what they have worked so hard to save is an essential part of retirement planning.

Market volatility and concerns about running out of money in retirement are driving interest in guaranteed income options. With guaranteed income built into a retirement plan, no matter which direction the market is going, participants will be ready. And if consumers feel that their savings are protected from market volatility, they may also feel more confident, as our Consumer Retirement Index shows that only 26% of Americans currently feel very confident about retirement. We recently started tracking this sentiment every two weeks, and have found that consumer confidence in retirement is often aligned with the performance of financial markets. The percentage reflects the number of U.S. adults ages 18-64 who feel “very” or “extremely” confident in all three of these measures: being able to accumulate enough money so they can retire when they want; being able to convert their savings when they retire into income that will last the rest of their lives; and having enough money to maintain the lifestyles they want in retirement.

Employer-sponsored retirement plans are no longer just accumulation vehicles — they are becoming retirement income vehicles. While 41% of Baby Boomers expect pension plans to be a source of retirement income, only 28% of Gen-X and 21% of Millennials will be able to rely on them...

We want to give financial professionals, employers and their employees the confidence that they will be prepared for retirement and protect them from outliving their savings.

The Critical Role Of Education

We have seen success in helping people understand the importance of saving for retirement and have improved the retirement outcomes for those we serve – in fact, while the median contribution rate for plan participants is 10%, they know they should be targeting 15%.

But while people understand that they need to save more, we must also focus on educating them on how those savings can translate to income. Just offering these products alone will not achieve that. It is critical that we continue to stay focused on educating everyone on the importance of converting their retirement savings into a stream of income that they can rely on for life. Education and tools can be powerful motivators — we found that more than half of retirement plan participants who have looked at retirement income projections increased their contribution rate.

Designing Plans For Success

It is vital that we continue to drive innovation in not just what we offer but how we offer it, working closely with financial professionals and employers to educate them on how the plans we design can meet their individual needs. Over the past decade, automatic plan design features have played an important role in helping improve retirement plan outcomes. Qualified default investment alternatives, automatic enrollment and automatic deferral increases have helped boost participation and improve plan savings rates, giving participants a better chance to achieve retirement readiness. But one concern remains: how to help participants generate a reliable income stream when they finally reach retirement.

So now is the time for us to consider how employees can automatically transition their defined contribution account balances into guaranteed income for life and create a next-generation auto feature: auto income.

Working together, our industry helps American savers plan for the retirement they envision. And now, we are positioned to help them transform their savings into income and make that vision a reality. Because in planning for retirement, the ultimate outcome is income.