Younger Workers and Retirement Accounts
Posted June 5th, 2012
With the volatility in the stock market, the continuing recession and, according to some, the uncertain future of Social Security, many younger workers have indicated a strong preference for some kind of guaranteed income option as part of their retirement plan.
Some 95 percent of workers who are under 30 said they would like to have some kind of guaranteed income option as part of their retirement plan, information that may be useful to human resource departments in putting together retirement packages for employees.
The workers gave their responses in a recent poll of 2,500 people.
Almost as many workers in their 30s and 40s also expressed a preference for the guaranteed income option – about 90 percent.
One example of a guaranteed income option is a deferred annuity. With this kind of annuity, a person deposits his or her money with an insurance company and it grows tax deferred until a certain age or date. With a fixed annuity, there is a fixed rate of return guaranteed by the insurance company. The purpose of a fixed annuity is to offer a safe investment that allows people to defer income taxes on the interest.
The survey showed that older workers – those older than 60 – weren’t as eager to get the guaranteed income option. Only about 80 percent of them said they would like such a plan.
The attitude of the younger workers seems to be based on the talk they hear about the problems of Social Security and the fact that they won’t be getting any kind of defined benefits from their employer when they retire, such as a pension.
All ages liked the lifetime income option as part of a 401(k) plan, but younger workers were the most interested, according to investment advisers. Guaranteed income is now becoming a standard part of an investment portfolio.
Even college students are interested in such plans because many of them believe that Social Security no longer will be around when they retire.
Investment advisers said that younger workers, while they should diversify by putting some funds into guaranteed income accounts, also should invest in stocks and bonds as well because these workers have such a long time to invest that they can afford to take on more risk and increase the return on their money.
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