Echoing the famous quote by savvy investors, many DC investors are more concerned about return of capital than return on capital. To that point, as well as longevity risk, a LIMRA’s Secure Retirement Institute study showed meaningful increases for in-plan guaranteed incomes in 2013.
The study found a 31% increase in assets, 28% more workers with access and 10% more plans offering in-plan guarantees. About 8 in 10 workers think guaranteed income options should be offered, including 90% of workers age 18-34, who tend to be more conservative.
But issues still remain with in-plan retirement investments made up of either Guaranteed Lifetime Withdrawal Benefits (GLWBs) or Deferred Income Annuities (DIAs), including portability and higher costs to cover risk. In reality, there’s only $2.9 billion in assets (a bad year for a Tier 2 DCIO) and fewer than 50,000 participants. So before the industry starts claiming victory, it might make sense to think about the issues that keep what should be an attractive investment option from taking off in DC plans.
