Deals & People June 27, 2011

Great-West Enhancing Distribution Solutions

Great-West Life & Annuity Insurance Company is launching a retirement planning and education program to assist workers when they are eligible to take distributions from their plans at retirement or when leaving their employers. 
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Sam Ghazaleh, a 12-year veteran of Fidelity Investments, has been appointed to head the program. He will report to Bob Shaw, executive vice president of Individual Markets.   

“We’re building an education resource center, further improving our IRA and retirement planning offerings, and adding new functionality to our distribution process,” said Mitchell Graye, president and CEO of Great-West.  

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Ghazaleh spent more than twelve years in a variety of executive roles in Fidelity Investments’ Retirement Services business, and brings experience as a former executive of Rollover Systems and a management consultant. He served for five years as an Air Force officer as well.He graduated from Duke University with bachelor’s degree in electrical engineering and earned his MBA from the Wharton School at the University of Pennsylvania.  

Great-West developed the “Distribution Education” program to provide retirement plan participants with personal counseling regarding distribution options when they are preparing to leave their plans, including the ability to roll over their account balance into the new Great-West Lifetime Advantage IRA Solution. 

Data & Research June 27, 2011

Stuck at a Crossroads

In a recent white paper, J.P. Morgan explains that participants want income replacement projections, but don’t know how to translate their 401(k) savings into retirement income. 
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J.P. Morgan survey data found that 86% of respondents said they want to know how much of their pre-retirement salary they can replace, yet almost one quarter (22%) aren’t sure what they are on track to receive after they stop working.  Overall, only 40% of respondents feel comfortable that they will be able to reach their financial goals in retirement.   

Americans are also underestimating how much money they will need in retirement, according to the data. Among respondents who had a target retirement income replacement level in mind, nearly half (45%) thought they would need less than 75% of their pre-retirement salary level.  However, J.P. Morgan research shows that a minimum guideline for successful retirement income is a replacement ratio of at least 70% or more.

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“On the positive side, some 91% of participants agreed that they were personally responsible for their own financial futures,” says Diane Gallagher, vice president, product development, J.P. Morgan Retirement Plan Services. “However, there’s still a significant gap between acknowledging responsibility and acting upon it.”

The paper, titled “Searching for Certainty,” also discusses how two-thirds of respondents admitted that they don’t know how much they should be saving for retirement and that nearly half of respondents are scared that they will outlive their retirement savings. Of the participants who said they would need 75%-100% of their pre-retirement salary after they stop working, less than a third had enough savings to provide this income.

Largely due to the lasting effects of the recession, most Americans have pushed aside retirement savings priorities, which came in a distant second to paying monthly bills in the survey. This is despite the fact that 401(k)s are the only or the primary source of retirement savings for two-thirds of Americans.   

Interestingly, higher income employees are facing the most challenging shortfalls in closing the retirement income gap, which highlights the significant need for supplemental savings channels for this demographic.

Employees earning $165,000 annually cannot replace their salary on their 401(k) contributions alone, even with making catch-up contributions. As a result, the availability of a non-qualified plan is increasingly important with the full complement of savings plans working together.  According to J.P. Morgan’s research, however, 46% of non-qualified plan participants do not currently contribute to their primary defined contribution plan.

J.P. Morgan used data from an online survey of 1,014 respondents conducted from July 12 - 23, 2010. A copy of the J.P. Morgan white paper “Searching for Certainty” is available here.   

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