A two day hearing with Department of Labor and Treasury officials discussing lifetime income options for retirement plans drew almost 800 letters, highlighting how important the issue is for a secure retirement.
Regulators and legislators are looking at Americans’ retirement security because life expectancies are increasing and savings have shifted from traditional pension plans — where employers generally provide retired employees with lifetime payments — to defined contribution plans such as 401(k)s, according to the Labor Department. Participants in defined contribution plans increased to 67 million in 2007 from 11 million in 1975, the agency said.
The Employee Benefit Research Institute estimates 47 percent of Americans born between 1948 and 1954 may not be able to afford basic expenses and uninsured health-care costs through retirement.
To help, insurers told the Labor and Treasury department officials it should be easier for employers to include annuities in their retirement plans because Americans are at risk of outliving their savings. Data from Fidelity Investment shows the average age of a retiree purchasing an immediate income annuity is 67, later than experts would recommend.
“This suggests it’s only after retirement that people begin to truly assess and understand their various income needs,” said Elizabeth Heffernan, a vice president at the Boston-based firm at the hearing.