The numbers behind increasing life expectancies are staggering. Consider the financial risks of a lengthy retirement. This is essentially why most organizations are eliminating their traditional pensions. Employees looking toward retirement are not well-equipped to foresee how a savings account balance might align with many financial uncertainties in a decades-long retirement.
Without a traditional company pension, and insufficient retirement account balances among employees, many employers no longer have effective financial incentives to facilitate workforce turnover at desired retirement ages. Qualified Longevity Annuity Contracts (“QLACs”) within a 401(k)/403(b) plan are one tool plan sponsors can use to help retirees manage these risks in a prolonged retirement.
By providing additional income to supplement Social Security benefits in the later years of retirement, a QLAC can give many employees more confidence with their retirement decision. This, in turn, can aide employers in meeting their workforce objectives.