Half of today’s households will not have enough retirement income, says the Center for Retirement Research at Boston College.
More than 40% of even the highly compensated won’t have enough.
Thus the need for Supplemental Retirement Plans (SRP): for all those folks that simply will not have enough retirement income. Not a SERP (Supplemental EXECUTIVE Retirement Plan), a SRP. The big difference? A SRP is not just for executives…it’s for everybody, including executives.
A SRP is used in conjunction with existing qualified programs to supplement 401k and 403(b) plans.
A SRP can help ALL (or a few) of a firm’s employees get ready for retirement. Even without ANY company funds.
The SRP allows the company to meet the needs of today’s plan sponsors, professionals, executives and other participants with:
Last, but not least, there is security – minimize creditor, longevity, interest rate, market and other risks.
How do they work? Generally, a first step is to determine how much income is needed at retirement. This can be accomplished with as few as ten questions posed to participants. The answers may take some time to put together but are also vital for participants to see where they are. The questions get at future retirement expenses as well as guaranteed retirement income sources such as social security.
For those with a gap in retirement income most would be better off with a form of corporate annuity offered through their company.
Companies are under pressure to trim retirement benefits expenses. Most already have frozen or eliminated their defined benefit pension plans and many more are looking to reduce or suspend their 401k match. The bottom line result is that individuals are trying to retire with less and less from their companies.
Personal Pensions are annuities purchased by individuals through their employer; institutionally priced products that are generally superior, at better rates, than those available at retail. They allow employees convenience and wholesale prices. They are a growing segment of the Corporate Annuity universe and can be used for a variety of benefit scenarios including:
Incentive Comp Alternatives - Millions of individuals in companies nationwide receive incentive comp/bonuses. An opportunity to direct a portion of these funds into guaranteed, institutionally priced annuities can help personnel take care of their own retirement.
Planned Savings - The minimum amounts that can go into Personal Pension plans are quite low so most can avail themselves of these programs at modest savings levels.
Qualified Plan Options – 401k plans are fine for accumulation but don’t provide lifetime income. Converting a portion of 401k proceeds to income annuities can complete the deal and make a 401k plan a true replacement for defined benefit pension plans.
With less disposable income to spend it’s hard to think people have money for retirement income deposits. In fact though, savings rates are up. People are getting ready to retire and doing it themselves with a mix of employer based and individual sources. They can use all the help they can get.
Personal Pensions are easy to make available, costing plan sponsors nothing but a minimum amount of HR resources. Carriers in this market provide comprehensive communications, 800 numbers, salaried advisors, website tools, administration, etc.
Corporate annuities enable companies to trumpet a valuable benefit at little or NO COST.