Opinion: Why small amounts saved now can boost retirement income later in life

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One way to help retirees stretch their savings further

Did you know that seemingly small differentials in the price points at which investments, annuities and other elements of retirement income strategies can be delivered from within a Defined Contribution (DC) plan can, for certain retirement plan participants, add up over the course of a lengthy retirement to several hundred thousand dollars of additional income, relative to income solutions offered at retail price points?

According to a white paper recently released by the Institutional Retirement Income Council (IRIC), self-directed participants in employer-sponsored retirement plans can, in many cases, generate more income and/or higher asset balances by using products and programs offered within their defined-contribution plan than they can by rolling those assets over to a retail account within an IRA.

Specifically, IRIC estimates the accumulated balance and retirement income of a hypothetical, middle-income participant that remained in her DC plan for both investment services and retirement income services for her entire life, relative to what that participant might have experienced if she had rolled her accumulated balance to an IRA at retirement. The participant in this hypothetical case was able to accumulate about $1 million at retirement by saving consistently from age 23 through age 65.

IRIC reviewed the income this participant would receive through age 95 from in-plan investment relative to investments with a retail fee structure under an IRA under three different income approaches:

  1. Estimating the additional income and additional remaining balance using withdrawals through 95 under the IRS required minimum withdrawal table
  2. Estimating the additional income and additional remaining balance at 95 using institutional versions of guaranteed minimum withdrawal benefits (GMWBs)
  3. Estimating the additional income through 95 when using institutional immediate and deferred immediate annuities

Read the entire article: https://www.marketwatch.com/story/why-small-amounts-saved-now-can-boost-retirement-income-later-in-life-11639075197?link=MW_latest_news

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersOpinion: Why small amounts saved now can boost retirement income later in life

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