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Healthcare Costs and Outliving Savings Dampen Employer Confidence in Employees' Retirement FuturesA new 2018 TIAA Plan Sponsor Retirement Survey finds nearly half of nonprofit and corporate, for-profit employers are only somewhat confident in their employees' retirement futures and one in five say they are not at all confident. Nearly all surveyed cited rising healthcare costs (91 percent) followed by outliving retirement savings (77 percent) as their biggest concerns, yet surprisingly few have built retirement plan offerings that solve for these challenges. Employers also worry that many of their employees are not saving enough (75 percent) or are choosing not to participate in a retirement plan (55 percent). While employers worry about their employees' retirement futures, budget constraints (63 percent) and attracting and retaining talent (60 percent) are also significant concerns in managing their workforce, according to the survey. "While plan sponsors face a number of workforce challenges, employees outliving their retirement savings is a top concern," said Doug Chittenden, executive vice president and president of Institutional Retirement at TIAA. "Creating a diversified retirement benefits menu that includes a lifetime income option will not only help ensure employees have enough money to cover basic expenses in retirement, it can also help alleviate the stress of rising healthcare costs." Employees would choose lifetime income over lump sum savings - if they could Giving employees access to retirement investments that guarantee income for life is something both employers and employees say they want. According to the survey, more than half (51 percent) of all employers think their employees would prefer receiving $2,700 a month for life rather than a $500,000 lump sum at retirement; this echoes an earlier TIAA study, in which 62 percent of employees said they would make the same choice. Nonprofits are twice as likely as corporate, for-profits (56% vs 25%) to believe their employees would prefer monthly lifetime income over a lump sum. The reality is that few employees have access to guaranteed options While employees voice a strong interest in lifetime income options, few have access through their employer retirement savings plans. According to the survey:
"Retirement is a critical financial pillar in our country," said Mr. Chittenden. "We must make it easier for employers to add lifetime income options to their retirement plans, not only to help today's employees reduce their financial risk, but to ensure the financial wellbeing of generations to come, and support the overall economic health of our society." Increasing access to lifetime income TIAA supports regulatory and legislative efforts that are underway to make it easier for all employers - both nonprofit and corporate, for-profit - to offer lifetime income options to employees. In a 2017 survey, TIAA found that 71 percent of individuals support legislation to make it easier for employer-based retirement plans to include lifetime income products, such as annuities, as investment options. "We are actively working with industry leaders and lawmakers to clear the path to offering lifetime income solutions and to educate plan sponsors and participants about how in-plan annuity vehicles can increase financial security," Mr. Chittenden said. In addition to policy advocacy, TIAA recently co-founded the Alliance for Lifetime Income, a nonprofit initiative to help address the risk of Americans outliving their income. The Alliance has launched a nationwide, multi-year campaign to highlight the importance of protected income in retirement. Opportunities for Improving Retirement Outcomes While creating the right investment menu is important to improving the outlook for employee retirement, the survey revealed several other opportunities for plan sponsors to consider, such as:
"Employers are right to be worried about the myriad of issues employees face in retirement, but there are many tools and approaches available to maximize the effectiveness of the plan and better prepare their employees," Mr. Chittenden said. For more information about the 2018 TIAA Plan Sponsor Survey, read the executive summary www.tiaa.org/plansponsorsurvey. *The survey was conducted by KRC Research from March 5 to April 17, 2018, via a phone survey of 1,001 plans sponsors from nonprofit and for-profit organizations. Following are the sample sizes and margin of error for the total sample and each subgroup.
About TIAA With an award-winning1 track record for consistent investment performance, TIAA (TIAA.org) is the leading provider of financial services in the academic, research, medical, cultural and government fields. TIAA has $1 trillion in assets under management (as of 6/30/20182) and offers a wide range of financial solutions, including investing, banking, advice and education, and retirement services. Guarantees are subject to the claims-paying ability of the issuing company. Investment, insurance and annuity products are not FDIC insured, are not bank guaranteed, are not deposits, are not insured by any federal government agency, are not a condition to any banking service or activity, and may lose value. TIAA-CREF Individual & Institutional Services, LLC, Teachers Personal Investors Services, Inc., and Nuveen Securities, LLC, Members FINRA and SIPC, distribute securities products. Annuity contracts and certificates are issued by Teachers Insurance and Annuity Association of America (TIAA) and College Retirement Equities Fund (CREF), New York, NY. Each is solely responsible for its own financial condition and contractual obligations. ©2018 Teachers Insurance and Annuity Association of America-College Retirement Equities Fund, New York, NY 10017 572040
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