Daily Local News (West Chester, PA)
Social Security
their benefits are permanently reduced.
Few retirement plans help with payout strategies
Many employers provide matches to encourage people to accumulate money for retirement, but few help with payout strategies when it’s time to retire, Wettstein notes. A few offer the option to annuitize, which means turning some or all of the account balance over to an insurance company in exchange for a guaranteed stream of payments.
Most people don’t much like the idea of giving up big chunks of their savings,
Wettstein notes. His study presented an alternative — the employer-provided bridge — to a nationally representative sample of 1,349 people ages 50 to 65 who had not retired and who had at least $25,000 in their 401(k). The strategy would allow participants to use up to half of their retirement account balances to replace Social Security checks while they delayed claiming.
A “substantial minority” said they would use the strategy if offered, the researchers found. About 27% of those who were given a brief description of how it worked said they would use it. The percentage willing to use the strategy rose as participants were given more information, with 35% of those given the most complete explanation saying they would use it. In addition, 31% said they wouldn’t opt out if their employer made the bridge strategy the default option.
Wettstein says to his knowledge no employers are currently offering a bridge strategy, but he hopes the research will spur some to consider it. Figuring out when to claim Social Security is daunting enough for the average worker, let alone deciding how and when to tap retirement funds, he says. An employer-provided bridge strategy could make waiting easier for many.
“If it’s all set out for you in a way that is effortless, that is definitely attractive,” Wettstein says.
The nationally representative survey of 1,349 respondents was conducted online in July 2021 by the NORC at the University of Chicago. Participants were ages 50-65, not retired, and had balances of at least $25,000 in their 401(k).