The Institutional Retirement Income Research Council (IRIRC) has launched a series of planned white papers with its first release, "A Call to Action." The IRIRC, which is comprised of a dozen plan consultants and advisors who work directly with plan sponsors and their providers, notes that "according to the Center for Retirement Research, more than $2 trillion of 401(k) and IRA assets was lost during the one-year period ending October 9, 2008.
Consequently, urgency is building as the risk of retirees outliving their nest eggs continues to escalate due to insufficient savings, increased life expectancy and poor investment decisions.
The white paper highlights the range of risks workers face when they retire and find themselves responsible for creating an income from their retirement assets. Those risks include:
– Insufficient savings that will lead some to invest too aggressively and suffer investment losses they cannot sustain.
– Fear of loss that will cause some to over-invest in capital preservation funds and suffer income erosion due to inflation.
– Unrestricted access to their retirement savings that will tempt some to spend down their savings on large discretionary items.
– Increasing longevity that is not fully accounted for, causing them to spend down their savings too rapidly.
The study notes, "Each of these factors contributes to a heightened risk that retirees will outlive their assets, forcing many to subsist solely on their Social Security benefits."
The white paper argues that it's time for defined contribution (DC) plans to include retirement-income solutions for several reasons:
