PLANADVISER - March/April 2022 - 15

It became the standard when financial planner Bill Bengen first demonstrated in 1994
that the 4% withdrawal rule had succeeded over most 30-year periods in modern market
history. However, recent research from Morningstar found that a 3.3% starting withdrawal
rate is more sustainable given today's low bond yields and high stock valuations.
Meanwhile, MetLife's study found that one in three retirees (34%) who had taken a
lump sum from their defined contribution plan had depleted it in five years, on average.
This is more than in the company's inaugural study, in 2017, in which 20% of retirees who
took the lump sum depleted it, on average, in 5.5 years.
In comparison, nearly all annuity-only retirees (97%)
One in three
retirees (34%)
who had
taken a lump
sum from
their defined
contribution
plan had
depleted it in
five years, on
average.
said they use their DC plan money for some type of ongoing
expense such as day-to-day living or housing, and 94%
agreed that receiving annuity payments makes it easier
for them to pay for basic necessities. Further, 95% said
that receiving monthly annuity payments makes them
feel financially secure. In fact, virtually all annuity-only
recipients (96%) said they are happy they chose to receive
the paycheck from their DC plan.
Most retirees (80%) and pre-retirees (74%) reported
having received some form of information about what to
do with the balance of their DC plan when they retired.
The majority of retirees indicated the amount of
information they had available at decision time was just
right (77%)-especially those who had an annuity only
(87%), vs. an annuity/lump sum hybrid option-compared
with 63% of lump-sum retirees.
Pre-retirees generally said the information they have
received is " just right " (69%) for their needs. Still, 21% said
it has been too little.
Both retirees and pre-retirees (89% and 94%,
respectively) said they think it would have been/would be helpful if plan sponsors were
required to provide an annual lifetime income statement showing employees how much
monthly income they can expect their DC plan account balance to provide in retirement.
Participants will get their wish this year, as the Setting Every Community Up for
Retirement Enhancement-aka SECURE-Act and subsequent Department of Labor
regulations require plan sponsors to begin providing such statements. Notable for
advisers: Participants will need education and help to understand the projections and
how to use them in retirement planning. -Rebecca Moore
talking points
A Cents-ible Approach
Penny-framing can be used
effectively to ease savings
decisions for participants.
For example, a 7% saving rate
would be expressed as saving
" 7 pennies " from every dollar earned.
Source: Voya, " A Working Paper: Reducing Savings Gaps Through Pennies Versus Percent Framing "
ON THE MOVE
➜ SageView Retirement
Group has hired Jim
Dario as its first head of
wealth management. He
will support SageView's
work in acquiring wealth
management firms.
➜ PGIM, the global
investment management
business of Prudential
Financial Inc., appointed
Eugenia UnanyantsJackson
to the newly
created role of global
head of environmental,
social and governance.
➜ PGIM also appointed
Michael Miller as head
of its new defined
contribution solutions
business.
➜ Vestmark Inc., a
provider of portfolio
management tools
and trading software,
named Agnes Hong as
chief investment officer
and head of advisory
services for Vestmark
Advisory Solutions,
Vestmark's registered
investment adviser.
➜ Jack L. VanDerhei,
former research director
of the Employee Benefit
Research Institute, has
become director of
retirement studies at the
Morningstar Center for
Retirement and Policy
Studies.
planadviser.com March-April 2022 | 15
➜

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PLANADVISER - March/April 2022

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