A survey from TIAA-CREF reveals another 40% of participants want to ensure their savings are safe regardless of what happens in the financial markets. Yet 72% either do not have a retirement income option in their defined contribution retirement plan or are unaware if their retirement plan has one.

In terms of potentially running out of money in retirement, 20% of participants are somewhat concerned and 24% are very concerned. But, just 21% expect to receive income from annuities.

Fifty-three percent of participants plan to use savings withdrawals as one of their sources of monthly retirement income. Yet TIAA-CREF research shows if retirees make withdrawals from their retirement savings that are equal to the income payments they would receive from a lifetime annuity (assuming the same interest rate), there is a greater than 50% chance they will outlive their savings. Annuity payments, however, would continue for as long as the retiree lives.

“All workers deserve a secure retirement, but many need help in setting realistic plans to achieve that goal,” explains Teresa Hassara, executive vice president of TIAA-CREF’s Institutional Business. “With life expectancies increasing rapidly, lifetime income options are essential to sustaining financial well-being over a retirement that could last for 30 or 40 years. Plan sponsors play a key role in educating employees on the value of these options.”

Most experts agree Americans will need 70% to 90% of their pre-retirement income to maintain their standard of living in retirement, according to the New York-based Hassara. Yet one-third (33%) of surveyed participants who have not yet retired believe they will need only 25% to 50% of pre-retirement income, and another 33% believe they will need 50% to 75%. Only one-fifth (21%) of those surveyed believe they will need more than 75% of pre-retirement income to live comfortably in retirement.

Experts also recommend saving at least 10% to 15% of income for retirement annually, TIAA-CREF says. However, the survey found 44% of those who have not yet retired are saving 10% or less of their annual income. Another 21% are not saving for retirement at all.

“The survey shows that most Americans underestimate the amount of retirement income they will need,” adds Hassara. “But a bigger concern is that more than one-fifth of Americans are not saving at all for retirement, and many more are not saving enough.”

“These findings seem to affirm what we’ve heard anecdotally—that there is a disconnect between what participants say they want and what they actually do regarding retirement,” Tim Walsh, managing director of Investment Services tells PLANADVISER. “It also reveals the lack of focus on what the true objective of a retirement plan is. When plan sponsors are asked whether the goal is to maximum wealth or provide participants with monthly retirement income, many are hard pressed to answer.”

Walsh, who is based in Waltham, Massachusetts, observes that despite the popularity of defined contribution plans as a retirement vehicle, the survey results with regard to lifetime income products seems to signal a nostalgia for the kind of retirement benefits produced by defined benefit pensions. 

Walsh recommends plan sponsors use plan management and plan design to help participants. He notes that inclusion of lifetime income projections on quarterly participant statements, as well as the use automatic plan features, can be quite helpful in this respect.

KRC Research conducted the survey by phone among a national random sample of 1,017 adults, ages 18 and older, between January 3 and 5. An executive summary discussing the survey results can be downloaded here. A related report can be downloaded here.