Research finds that incorporating insurance
into a participant's asset allocation may improve sustainable
withdrawal rates by 70% or more¹
NASHVILLE, Tenn., June 6, 2023
/PRNewswire/ -- AllianceBernstein L.P. (AB), a leading global
investment management and research firm, today released an in-depth
research report to help Defined Contribution (DC) plan sponsors
compare different methods for delivering sustainable income
throughout retirement. "Leveling the Retirement Income Playing
Field: A Comprehensive Framework for Evaluating Diverse Lifetime
Income Solutions," provides plan sponsors with a framework to
weigh the potential outcomes against the costs and risks of each
approach—all through the lens of the individual participant.
"For more than a decade, we've been partnering with plan
sponsors to help them provide financial security in retirement to
their plan participants, and we remain committed to this mission,"
said AB's President and CEO Seth
Bernstein. "We are excited to now share this research to
better equip plan sponsors to evaluate the various lifetime income
options and successfully prepare participants for the future."
Key findings from AB's research based on AB's Capital Markets
Engine assumptions as of June 30,
- Over one-third of participants may run out of money in
retirement if they don't have explicit lifetime income insurance.
- Incorporating insurance into a participant's asset allocation
may improve sustainable withdrawal rates by 70% or more.
- Using certain forms of insurance can result in significant
"side effects" for participants, such as growth opportunity
cost and mortality risk.
- A framework to evaluate different income solutions must assess
the individual rather than the average participant, measure total
costs not just explicit fees and consider both income and
- Longevity risk can be significantly reduced without an
incremental cost, on average, versus a traditional target-date
fund. This is due to the presence of insurance enabling a higher
exposure to growth assets within that fund's asset mix.
"Following the passage of the SECURE Act in 2019, the number of
retirement income solutions has continued to increase. Plan
sponsors need to both understand and evaluate a wide variety of
options, including those that utilize insurance," said AB's Head of
Glide Path Strategies (US) and Co-Author of "Leveling the
Retirement Income Playing Field" Christopher Nikolich. "By publishing this new
research, we strive to create a more level playing field for
assessing, quantifying and illustrating the trade-offs for each
path to securing income for life."
"Today, defined contribution plan participants are facing a
significant challenge when determining how to spend down their
savings in retirement—either overspending and outliving their
assets or underspending due to market uncertainties," said AB's
Managing Director, Head of Defined Contribution Jennifer DeLong.
"This research seeks to change the current narrative. Given AB's
expertise and experience, we're in a unique position to help
empower plan sponsors to adopt solutions that will make a
difference in the lives of their employees."
To read more about "Leveling the Retirement Income Playing
Field," visit here.
(1) Based on a Monte Carlo
simulation of 10,000 trials from age 65 to 100, using the AB
Capital Markets Engine 2Q:2022 forecast. The income rate
improvement estimate is based on a 100% allocation to an income
insurance contract and estimates will vary as market conditions
change. Regardless of the changing market environment,
incorporating income insurance may significantly improve the
sustainable withdrawal rate. As of June 30,
2022. Source: AB
(2) Based on a Monte Carlo
simulation of 10,000 trials from ages 65 to 100 with AB's Capital
Markets Engine 2Q:2022 forecast, using a weighted average
withdrawal rate based on AB's 2023 Inside the Minds of Plan
Participants survey results as of May 31,
2023. Source: AB
AllianceBernstein is a leading global investment management firm
that offers high-quality research and diversified investment
services to institutional investors, individuals, and private
wealth clients in major world markets. As of April 30, 2023, AllianceBernstein had $676
billion in assets under management. Additional information
about AB may be found on our