This week in the world of retirement-related news: Millennials and retirement savings, and how a mix of stocks and annuities impacts your retirement portfolio.
Some millennials using retirement funds to purchase homes. Some millennials are using retirement savings to fund home purchases, with 29% who own homes reporting having taken loans against their retirement accounts and 19% who plan to purchase a home intending to use retirement funds to do so, a survey by Bank of the West finds. Advisers note this is cause for concern and a sign that these millennials are not financially ready to buy a home.
Adviser: Mix of stocks, annuities allows larger withdrawals in retirement. By building a diversified portfolio of stocks and high-quality fixed-indexed annuities, retirement savers can enjoy the benefits of growth and protection from losses in market downturns, says Brian Saranovitz, co-founder and president of Your Retirement Advisor. One benefit of this approach is that it opens the door to a higher safe withdrawal rate, he says.
Report: Earnings inequality leads to inequality in retirement. The idea that because of Social Security benefits, retirement income doesn't reflect the inequality in workers' earnings is wrong, according to a report from the Urban Institute that was funded by the Labor Department. Because Social Security benefits, defined contribution plans and most other retirement saving products are based upon earnings, inequality in earnings will follow workers into retirement, the report finds.
Study: Employees want workplace plans to do more to prepare them for retirement. Many workers are more interested in preparing for retirement than plan sponsors realize, according to a recent study by Transamerica Center for Retirement Studies. The center found that 81% of employees favor automatic 401(k) enrollment, but only 22% of employers have implemented that feature, with employers citing potential employee resistance as a top reason for not having it.
Cerulli report: Plan sponsors warming to guaranteed retirement income options. 401(k) plan sponsors are becoming interested in transforming their plans into retirement income vehicles that function like defined benefit plans, according to a report from Cerulli. Among the approaches that could achieve that objective are offering in-plan annuities and combining a target-date product with a managed payout scheme.
MIT research examines Americans' attitudes toward retirement. Chaiwoo Lee and Joseph Coughlin, both of the MIT AgeLab, recently examined Americans' attitudes toward retirement. Advisers can use these findings to better understand clients' emotional needs at different age levels, which can help when giving financial planning advice.
SmartBrief/Journal of Financial Planning
Many employers expect workers to want guaranteed retirement income. A survey from TIAA finds 51% of employers think employees would want $2,700 monthly throughout retirement, instead of a $500,000 lump sum upon retirement. The survey also finds 57% of employers think employees would get retirement income from nonguaranteed sources, while 14% of employers say income would come from an in-plan annuity.