There is currently a gap between the growing demand from retirees, those near retirement, employers, and plan participants for lifetime income options and the offerings from plan sponsors. With more people nearing retirement age, the focus is shifting more heavily towards lifetime income concerns, and it’s an area that is expected to see a lot of growth and opportunity in coming years, reports PlanSponsor.
The retirement industry has been hit heavily by a wave of unexpected early retirement brought on by the COVID-19 pandemic as the concern for the industry at large turns to ensuring that retirees have retirement income to last them their lifetimes.
“Increasingly, plan sponsors want to get their people not just to, but also through, a high-quality retirement and, as a result of that, this industry is ripe for the development of new products and solutions that speak to these needs,” said David Blanchett, managing director and head of retirement research for defined contribution solution at QMA LLC, the quantitative equity and multi-asset solutions specialist of PGIM.
“For some time now, there has been a lot of talk about making [defined contribution] plans more friendly to retirees and to efficient retirement spending, but plan sponsors are now truly starting to push this trend forward in a big way,” Blanchett said.
Recent legislation means that beginning in 2022, defined contribution (DC) plans will have to report their lifetime income projections, making them much more transparent. For retirees and those saving, being able to see in plain text what the estimated income will be over the life of their plan will allow for better planning for retirement income needs.
Recent research from PGIM indicates that plan sponsors most often addressed retirement income challenges by offering advice and tools on spending down savings in retirement (89%), followed by communicating the projected income that participants will generate (66%), and by allowing either partial or systemic withdrawals from their plans on top of lump-sum withdrawals (49%).
The focus for the past 40 years by the industry has been primarily on building retirement, but now with larger numbers of individuals retiring unexpectedly and the mass retirement that is expected from one of the largest generations yet, the concern about funding and finding steady retirement income plays prominently for advisors.
“Our challenge as advisers is trying to then gauge success post-retirement,” said Daniel Peluse, executive director of Wintrust Retirement Benefits Advisors. “The challenge then becomes: How do we make sure folks can sustain a comfortable retirement?”
Nationwide offers a variety of options with various investment strategies for advisors to provide retirement solutions for their clients.
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