The national spotlight shines on the private retirement savings system this month, during National Save for Retirement Week. This weeklong initiative is an opportunity for the industry to reflect and reminds insurance companies — who capitalize on their risk management expertise to provide Americans with compelling retirement solutions — of their duty to preserve a system that has worked for so long and provided for so many.
Although the national conversation often focuses on the perceived shortcomings of the system, the fact remains that the primary, and often the only, way Americans save for retirement is through their employer-sponsored retirement plan.
Our industry must affirm its commitment to helping Americans reach better retirement outcomes through collaboration and innovation. We simply have to work with legislators, regulators and other industry leaders to simplify — not complicate —the system and make it easier for people to succeed.
Helping today’s savers think about retirement in a more positive way will reinforce their confidence in achieving personal retirement savings goals. The tax advantages afforded by saving in a retirement plan are a key advantage for savers. Roth IRA investment options also give participants the choice of paying taxes on contributions now instead of when they retire. Imposing limits on tax-advantaged savings creates barriers, adds complexity and promotes a false notion that a certain amount of savings is sufficient.
Additional support for savers comes through enhancements to plan education and communication. Addressing the needs of a diverse workforce and encouraging participants to accumulate enough assets to take them not only to but also through their retirement years are essential tools in a plan sponsor’s offering. Education, including one-on-one communication, is a primary way to help participants stay on track through all life stages.
Simplify the Process
Since 2006, doors have opened for innovations in plan design, including automatic plan features. In recent years, providers and sponsors have pioneered innovations such as automatic enrollment, deferral and escalation to streamline the savings process and enhance retirement outcomes for plan participants. The combination of simplified plan design and outcomes-focused, action-oriented communication has the power to make retirement planning and saving more meaningful and tangible.
Potential fiduciary requirements that may disrupt service and education offered by providers could force savers to switch to higher cost, unknown resources for retirement guidance at critical life stages, like a separation from service or a job change. Our industry must work to ensure this does not happen.
Strengthen the System
The industry regularly brings solutions to market that enhance employer-sponsored plans. Innovations continue to make it easier for people to see the value in saving in their plans and help them achieve retirement readiness.
The proliferation of fee disclosure has helped participants understand the costs associated with their plans and weigh the costs with the benefits to gauge the plan’s true value. Education through disclosure has empowered participants to make more informed investment and savings decisions.
To this day, the focus of the financial services industry has been on accumulation. However, a shift in mindset is redirecting strategies to converting savings into an income stream, especially at the time of retirement. The evolution of solutions with guaranteed withdrawal benefits, lifetime income features and principal protection strategies are strengthening the system, helping participants achieve financial protection and growth potential.
As we recognize National Save for Retirement Week, we must pledge our leadership and continue to work together to simplify the system and make it easier for people to succeed. After all, our industry’s proficiency in managing risk makes us uniquely able to rise to the challenge and take charge.
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates.