New realities of retirement abound, require novel approaches to saving

Just a quarter of Americans working today — mostly union members — have the security of a pension, according to the U.S. Bureau of Labor Statistics. Over the past 30 years, pensions have been replaced by workplace-based savings plans, like 401(k)s, which took much of the financial burden off the employer and shifted it to the employee.

New forces are altering the traditional approach to retirement planning. Consumer Reports offers this overview of the new realities.

■ Your 401(k) is getting better. Pitfalls of 401(k) plans include confusing or duplicative investment options, high-cost actively managed funds and poorly performing funds. But more and more, 401(k) investors aren’t taking lousy plans lying down. To avoid lawsuits — and to encourage employees to save — employers are improving their retirement plans by, among other things, offering target-date retirement funds. These typically lowfee mixes of index mutual funds, which reallocate over time based on your expected retirement date, are the lowcost, default options in 75 percent of 401(k) plans, according to a 2015 report by the Investment Company Institute and BrightScope. com, a website that analyzes 401(k) plans. That’s up from 32 percent in 2006. Investment fees also are dropping.

■ Retirement advice is more reliable. If you’ve always thought that your financial adviser chose investments with your best interests in mind, you might have been making an expensive assumption. But last year, the Department of Labor mandated that professionals who give retirement advice must uphold the fiduciary standard and make decisions in the best interests of the client. The DoL has estimated that eliminating ”conflicted” advice could reduce costs to retirement savers by $17 billion, or 1 percent of their assets, each year.

■ If you want a pension, you’ll have to pay for it. You can craft your own pension-style guaranteed cash flow by buying an annuity. These products, which are a type of insurance you usually buy from an agent, require you to invest a large sum upfront in return for guaranteed payments for a set period, or until you die.

David Blanchett, head of retirement research at the investment research company Morningstar, says a good choice for most people is a simple, immediate annuity, which starts paying income right after you invest. Another decent option, a deferred-income annuity (DIA), enables you to pay upfront and begin collecting payments years later.

■ Don’t count on packing up and moving on. Though some new retirees still head to classic retirement destinations, most of those leaving the workforce today are choosing to stay put: Eighty-seven percent of individuals 65 and older want to stay in their current location, according to a 2014 survey by AARP.