THE RETIREMENT INCOME MENU: AN IDEA WHOSE TIME HAS COME
How can older workers plan for retirement given that most employers no longer offer traditional pension plans? Deciding if you have enough savings to retire and how to deploy your savings in retirement is a complex task that is beyond the abilities of most older workers.
Research Scholar Steve Vernon recently testified on retirement income strategies to the U.S. Department of Labor’s ERISA Advisory Council. He suggests that employers offer a limited menu of options that older workers can use to simply ‘check the box’ to convert their 401(k) retirement savings into lifetime retirement income. He also suggests that the plan sponsor designate one option as the ‘Qualified Default Retirement Income Alternative (QDRIA).’ Vernon suggests that federal legislation or regulations could encourage plan sponsors to offer such a retirement income menu.
The Center recently published ‘How to ‘Pensionize’ Any IRA or 401(k) plan,’ which identified the Spend Safely in Retirement Strategy. The retirement income menu that Vernon recommends could support this strategy. He contends that the transition from traditional pension plans to defined contribution retirement plans won’t be complete until the majority of 401(k) plans offer viable retirement income options.