Page 43 - Investment Advisor March 2021

Conclusions

RETIREMENT PLANNING
By Ginger Szala

Do 401(k) ‘Bridges’ Help Retirees Maximize

Social Security?

Also, a look at current retirement trends and how COVID-19 has affected
savings for women.

401(k) plans as default payments for
those 60-69 could equal what they
would be getting if they were taking
Social Security at the FRA.
“The expectation is that providing a
temporary stream of income to replace
the Social Security benefit would break
the link between retiring and claiming,”
the authors stated.
Comparing this strategy to imme-
diate and deferred annuities, they
found the 401(k) drawdown plan was
“the clear winner,” at least for median
households; the success overall is tied
to wealth distribution.
For higher-wealth households, “the
hould clients drawdown retire- of that money to buy immediate and deferred annuity strategy is again com-
ment savings first, as a “bridge” deferred annuities. petitive, edging out the Social Security
Sto delay taking Social Security The research aimed to find a strat- bridge options,” the authors said.
until age 70? egy to set withdrawals from retirement However, depending on required
While this idea has been around for savings so people don’t outlive their minimum distributions that hit at age
some time, a recent study by the Center resources. It also found only 5% of men 72, “the deferred annuity remains a
for Retirement Research at Boston and 7% of women wait until age 70 to very poor choice, for both median- and
College (CRR) looked at taking auto- take Social Security. 75th percentile wealth households,” the
matic withdraws from 401(k) plans Also, it found just 23% of men and 16% study found.
from ages 60–69 before touching Social of women wait until their full retirement
Security benefits. age (or FRA). A large number — 35% of EXPERT REVIEW
The study — How Best to Annuitize men and 39% of women — begin taking Both Michael Finke, professor of
bbay/Shutterstock CRR Director Alicia H. Munnell, as their benefit dramatically. It is estimated College of Financial Services, and David
wealth management at The American
Social Security at age 62, which cuts
Defined Contribution Assets — by
Blanchett, Morningstar’s head of retire-
well as researchers Gal Wettstein and
that claims taken at age 70 are 76%
higher than those taken at 62.
Wenliang Hou, also compared the
ment research, support delaying taking
Thus, the study looked at how using
401(k) withdraw plan to using some
Social Security benefits.
MARCH 2021 INVESTMENT ADVISOR 41