Young workers want sure things as 401(k) options

Forget time horizon; 20-somethings want guaranteed income

May 20, 2012 @ 12:01 am

By Darla Mercado

Employees in their 20s may have decades of investing ahead, but right now, they are craving access to guaranteed income through their 401(k) plans.

Fully 95% of workers under 30 who don't have access to a guaranteed-income option at work would like to be able to do so, according to a poll of 2,500 people by The Hartford Financial Services Group Inc.

Those numbers were high for individuals in their 30s and 40s, too. About nine of 10 individuals in both age groups said that they would like to turn some portion of their retirement savings into guaranteed income, according to The Hartford.

That sentiment seemed to diminish somewhat among the oldest individual surveyed, as just 77% of those over 60 said that they would like guaranteed income via their workplace retirement plans.

That large numbers of young people are seeking lifetime income seems to be tied to their attitudes toward Social Security and the realization that a traditional defined-benefit plan is a thing of the past, said Patricia Harris, assistant vice president of product management for The Hartford's retirement plans group.

“We're finding very broad appeal [on in-plan lifetime income] across all age groups, but strong appeal at the youngest ages,” she said. “I think having guaranteed income as a portion of the 401(k) portfolio is here to stay, and we see it as more of an asset class, as there is more reliance on the 401(k).”

Ms. Harris added that a recent meeting with university students showed that college-age kids are intrigued by having pensionlike guaranteed-income options.

Many are convinced that Social Security will no longer be around by the time they need it.

Although younger people are more interested in in-plan lifetime income products, they shouldn't put all their money into them, according to Ms. Harris. These workers have the longest time horizons and ought to take advantage of some market risk to up their returns, she said.

“This [lifetime-income option] is only part of a whole diversification strategy. It's not something you look at without weighing all the other options in a plan's offering,” Ms. Harris said.

The amount of risk that an employee should take in his or her retirement plan “depends on the person, and you need good tools to look at different investment mixes over time,” she said.


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