Better Outcomes from Defined-Contribution Plans

Abstract

Far too many working Americans do not have ready access to a guaranteed lifetime income stream as part of their 401(k) plan. While a growing number of employers have taken steps to increase retirement plan participation and savings through the use of auto-enrollment and auto-escalation of contributions, very few have taken steps to increase the likelihood that an employee’s retirement savings will last throughout their lifetime. The authors posit that the allocation of matching employer contributions to a guaranteed lifetime income solution will not only ensure a small degree of retirement certainty and security for employees, but may further encourage consideration of such solutions beyond the employer’s match, thereby reducing the extent to which retirees will be left to manage both investment and longevity risk on their own.