A recent survey by MetLife highlights a trend in retirement planning by employers. Those employers who sponsor defined contribution plans (you and we put money in, it’s invested, and you get whatever is there at retirement), which is now most employers, are starting to think more about what retirement income a given level of savings will produce. In an earlier era, when most employers sponsored defined benefit plans (we promise a specific benefit or benefit formula, and it’s up to us to fund it), the amount of retirement income was explicitly stated or easy to calculate. But those plans are mostly gone, remaining generally in government service and unionized industries. Now, more employers are embracing a retirement income “culture”, in which they offer more information to plan participants about what level of income they can expect from their account balances, rather than saying, in effect, good luck in picking your investments. More employers are considering an annuity income feature in their defined contribution plans, which is still not very common, and more are providing information to participants to help them determine what kind of retirement they can expect. It’s probably a good employee relations step to offer more information about retirement. In my practice, I have seen that many educated and sophisticated investors have little idea of what they will be able to spend in retirement, as well as what their spending requirements will be.

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