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Investors may not need to save as much for retirement with the addition of GMWBs

07/14/11

Americans who have money in defined contribution plans may be able to reduce the amount of assets needed to achieve their financial retirement goals with the addition of guaranteed minimum benefit withdrawals, according to a report from Prudential Retirement.

The report found that by pooling the longevity risk of defined contribution participants, individuals with GMWBs may benefit from the ability to have guaranteed income for life, much like with an annuity, and get more income from the same amount of savings.

"Despite employers' substantial investments in defined contribution plans - including matching contributions and participant education - many DC participants will not be able to retire when they want without a guaranteed income solution," said Christine Marcks, president of Prudential Retirement.

Experts believe that the incorporation of these lifelong guarantees will address the challenges employers face by reducing the amount of money individuals need in order to retire comfortably. Some companies are having difficulty managing staffing needs because people are choosing to work longer to battle financial concerns, which increases workforce costs.

The addition of income guarantees may allow some employees to return to their original retirement age plan, alleviating costs on employers.  

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