According to the study from LIMRA Secure Retirement Institute (LIMRA SRI), women are much more likely than men not to have planned how they will use their DC assets (38% vs. 19%).
“It is surprising that such a large proportion of older workers have failed to do this basic level of income planning when most are within 10 years of retirement,” says Matthew Drinkwater, associate managing director, LIMRA SRI Research. “Many believe that they can delay retirement indefinitely, or work in retirement, so it’s possible they feel that there’s no near-term need to engage in this kind of planning. But that belief is risky; people often retire earlier than anticipated. It makes sense to give thought to how you will use your DC plan balances sooner rather than later.”
Two-thirds of workers ages 55 to 64 indicated they plan to make withdrawals—either directly from their DC accounts or after rolling over the assets into an individual retirement account (IRA). Only one in six say they plan to convert some or all of their balance into a guaranteed lifetime income.
While 24% of workers age 55 to 64 who have developed specific income-generation strategies report they plan to take systematic withdraws from their retirement savings, nearly two-thirds (65%) say they plan to withdraw money on an occasional basis or when needed.
Among those who have no specific income strategy, simple procrastination is the top reason given for not yet creating one (42%). Around one-quarter each say they will have enough income from Social Security and pensions to meet their household expense needs (27%) or they are not yet close enough to retirement to create a strategy (24%).
“Going through the planning process during the pre-retirement years may prompt changes in their savings behavior, how they allocate their assets or the decision to purchase other retirement products,” notes Drinkwater. “Ultimately, our research has shown that people who take the steps to plan for retirement are more likely to feel more confident in their ability to be financially secure throughout their retirement.”