Have financial professionals found a new appreciation for in-plan guarantees and annuities? A new study by Nationwide suggests that is the case since the SECURE Act cleared the way for guaranteed income in workplace retirement plans.

The sixth annual Advisor Authority study found that in the wake of the passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act late last year, nearly two-thirds (64%) of financial professionals and advisors indicated they are likely to adopt in-plan guarantees to provide guaranteed income within clients’ defined contribution plans, and more than two-thirds (70%) said they will increase their use of annuities. Further, 39% indicated they use in-plan guarantees to protect clients against outliving savings.

The SECURE Act, passed with bipartisan support, removed barriers for in-plan guarantees for defined contribution plans, including 401(k)s and 403(b)s, as well as governmental 457(b) plans.

“Recent market turbulence and changing regulations have put a new lens on retirement needs. The pandemic is driving greater volatility, confidence in Social Security is eroding, access to defined benefits are on the decline and systemic shifts continue placing greater responsibility—and greater pressure—on individuals to fund their own retirement,” Eric Stevenson, president of Nationwide Retirement Plans, said in a statement.

“As defined contribution plans have become a predominant vehicle for retirement savings in the workplace, the SECURE Act will now help more plans to adopt in-plan guarantees, a crucial new solution with the potential to provide what Americans are looking for in the post-Covid world: a guarantee,” he added.

The study found that financial advisors are most likely to recommend in-plan guarantees to emerging wealthy clients ($500,000 to less than $1 million in investable assets). It also said those investors are the segment most likely to incorporate in-plan guarantees within their defined contribution plans. It further noted that millennial and Gen X investors are the generations most likely to adopt in-plan guarantees.

Two-thirds of both millennial investors (65%) and Gen X investors (66%) are likely to incorporate in-plan guarantees within their defined contribution plans, compared to only 28% of boomer investors, the study said. And while 24% of investors overall use in-plan guarantees within their defined contribution plans, more millennials (30%) and Gen Xers (37%) use in-plan guarantees compared to 17% of boomers.

The need for guaranteed income among investors who are ages 55 and younger is clear, as they face greater responsibility to save for their retirement than preceding generations, and they are likely to spend more years in retirement, according to the study. “The SECURE Act will not only give millennials and Gen X investors the opportunity to potentially save more, by taking advantage of tax-deferred and tax-free accumulation over time, it also gives them the opportunity to generate a protected stream of lifetime income in retirement by leveraging in-plan guarantees,” the study said.

The SECURE Act also is driving greater use of annuities among young investors, the study found. It noted that while only 42% of the overall population of investors plan to increase their use of annuities due to the SECURE Act, nearly three-fourths of millennials (70%) and nearly two-thirds of Gen Xers (63%) are likely to do so, compared to one-quarter (25%) of boomers.

Additionally, the study found that financial professionals (79%) and investors (54%) are likely to choose an annuity as part of a holistic financial plan to protect against outliving savings. Millennials (71%) and Gen Xers (69%) outweigh boomers (44%) in this category, according to the survey.

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