RICHMOND, Va., May 16 /PRNewswire-FirstCall/ -- As America's employers
continue to move from defined benefit (DB) to defined contribution (DC) plans,
the responsibility for saving for retirement and securing retirement income
has shifted from employers to employees. Plan participants are now faced with
a myriad of 401(k) investment options, and they must manage their longevity
risk to ensure they do not outlive their retirement savings. Indeed the "risk
of ruin", that is, the risk of running out of money in retirement is now a
significant issue for American workers. While the introduction of Qualified
Default Investment Alternatives (QDIA) has enabled Plan Sponsors to help
participants accumulate retirement savings, a new study released today by
Genworth Financial at their 2008 Retirement Symposium in Washington, DC,
reveals that adding guaranteed income to a QDIA can help to avert the risk of
ruin for participants and help them generate even higher income levels in
Conducted by Oliver Wyman in partnership with Mercer Retirement
Consulting, the study, entitled Providing for Secure Retirements: Guaranteed
Income as a Qualified Default Investment Alternative, reveals that adding
guaranteed lifetime income to a traditional Target Date Fund (which
reallocates risk with age) or Balanced Fund can increase a 401(k)
participant's starting retirement income by up to 53% and improve average
retirement income by up to 30%. At the same time, guaranteed income
eliminates the significant risk that a participant will exhaust their savings.
In fact, the study shows that an individual who retires at age 65 and annually
withdraws an inflation adjusted 5% of his or her initial account balance from
a traditional Target Date Fund stands a 75% chance of running out of money by
"The addition of guaranteed income to a QDIA offers Plan Sponsors the
opportunity to provide their participants with the best attributes of a
defined benefit plan in a defined contribution vehicle," said Fred Conley,
president of Genworth's Institutional Retirement Group. "This solution helps
participants to get the best of all worlds -- flexibility, growth potential
and security -- all within one investment choice."
The study shows that guaranteed income products allow 401(k) participants
to benefit from strong financial markets, while also offering protection
against periods of poor market returns. Additionally, with increasing
retirement expenses and longer life spans, participants can lock in the
certainty of having a source of guaranteed lifetime income.
"This research aims to provide Plan Sponsors with information to help make
QDIA decisions best suited for their particular workforce," Conley added. "If
a Plan Sponsor's employee base requires help with proper asset allocation
during the accumulation phase, there is a good chance they will also need help
converting those assets into lifetime income during the distribution phase.
Now there is a quantitative study that can help Plan Sponsors better compare
approved QDIA options. "In response to the Pension Protection Act of 2006, the
U.S. Department of Labor issued a regulation in 2007 creating a fiduciary
safeharbor for Plan Sponsors using QDIAs.
ClearCourse(R), a group variable annuity issued by Genworth Life and
Annuity Insurance company, Genworth Financial Company, combines the lifetime
income benefit feature of a DB plan with the growth potential normally
associated with stock and bond investments found in DC plans. ClearCourse
offers both an Annuitization Benefit, which helps maximize a participant's
lifetime income amount, and a Withdrawal Benefit, which provides lifetime
income with more control over assets during retirement.
Genworth Financial, Inc. (NYSE: GNW) is a leading public Fortune 500
global financial security company. Genworth employs approximately 7,000
people in 25 countries. Its products and services help meet the investment,
protection, retirement and lifestyle needs of over 15 million customers.
Genworth operates through three segments: Retirement and Protection,
International and U.S. Mortgage Insurance. Its products and services are
offered through financial intermediaries, advisors, independent distributors
and sales specialists. Genworth Financial, which traces its roots back to
1871, became a public company in 2004 and is headquartered in Richmond,
Virginia. For more information, visit http://www.genworth.com.
SOURCE Genworth Financial, Inc.
CONTACT: Kirby Kriz of Genworth Financial, Inc., +1-804-662-2579,
Web site: http://www.genworth.com