Page 6 - DEL_Product-Agnostic-Client-Brochure_9.18.20

A 401(k) is not a pension or lifetime income
Few workers get a pension in retirement.1 You or your spouse may have a pension, but you will be lucky if you both do—or if it is enough to live on.
Most people have a 401(k), IRA, or similar plan. These retirement vehicles contain a “set amount,” or “lump sum,” and will be reduced by what you withdraw annually (unless your earnings growth outpaces your withdrawal amount). A pension, on the other hand, doesn’t provide a lump sum but pays a certain amount of money per year—what we call “lifetime income.”
401(k) = Set amount
When you retire with a 401(k) (or de ned contribution plan), you have a set amount that is not guaranteed to last your lifetime. (We will look at a way to turn it into lifetime income.)
Pension = Lifetime income
When you retire with a pension (de ned bene t plan) you leave with lifetime income in the form of a series of payments. (Let’s look at whether this income will be enough for you going forward.)
For most households, 401(k)/IRA assets are their largest nancial asset– other than Social Security–which puts them at risk from market downturn.2 Wouldn’t it make sense to create your own lifetime-income strategy?
1 “Only 28 percent of baby boomers receive or expect a pension,” p. 2; “The March 2018 Bureau of Labor Statistics’ National Compensation Survey reports that only about 16 percent of private-sector workers have access to a traditional pension (down from 17 percent in 2018 and 18 percent in 2017),” p. 22, State of the Insured Retirement Industry 2019 Review & 2020 Outlook, https://www.myirionline.org/docs/default- source/press-release/soti_2019report_ nal.pdf?sfvrsn=2.
2 “How Exposed Are Retirement Savings to Market Risk?” by Anqi Chen and Nilufer Gok, Center for Retirement Research at Boston College, June 2020, Number 20-10, Trustees of Boston College, Center for Retirement Research. All rights reserved, https://crr.bc.edu/briefs/how- exposed-are-retirement-savings-to-market-risk/.
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