Investors had reason to be excited when they learned of the offer last week of new guarantees on retirement savings.
After all, anyone who watched their 401(k) balances shrink during the financial crisis can remember fearing that a key retirement safety net might disappear. The news that the Pension Benefit Guaranty Corporation, or PBGC, will guarantee assets that savers roll over from 401(k) accounts to certain defined benefit plans seemingly provides a safer alternative.
"It's really a recognition of the state of retirement for most Americans and the desire to be able to provide a nice wrapper, a guarantee, around pension benefits," said Janet Stanzak, president of the Financial Planning Association. The move, she said, acknowledges that "a lot of individual investors do not necessarily manage their 401(k) or IRA assets well, and those assets could well run out in their early retirement years."
But while the new guarantees sound promising at first, experts say their potential impact is less so. Companies may not open up the relevant options to their employees, and employees themselves may decide that the new guarantees come with unappealing conditions.
"It's a worthwhile idea, but I'm not sure how much traction you are going to get," said Robyn Credico, defined contribution practice leader at the consulting firm Towers Watson.