The hope of those backing this initiative is that participants would become more aware of how much they will have on an ongoing basis during retirement – and how long those savings would last. After factoring in Social Security and other sources of retirement benefits and savings, employees would then be able to plan accordingly. In many cases, they might recognize the need to modify their strategy much earlier in the savings process.
A second initiative is being undertaken jointly by the Departments of Labor and Treasury, which recently conducted a request for information (RFI) from providers, financial experts and the public at large. Their goal is learn how the financial security of Americans can be improved by encouraging greater use of guaranteed lifetime income options, especially within the framework of a workplace retirement plan. The agencies will be evaluating this information with an eye towards current laws, regulations and plan practices that inhibit these offerings from being more attractive to employers and participants.
While the government is just starting their process, advisers need not wait to counsel clients about lifetime payment options. A few helpful tips can get participants thinking in the right direction, well before they reach retirement:
- A first step is to review a client’s needs and leverage one of the many retirement income calculators that are available for these purposes. Do they have sufficient savings and resources to meet their lifestyle objectives? Is there a gap to be filled? Is there a risk of outliving their savings? Would securing a guaranteed income stream be a good idea?
- Next, identify the options in the employer’s retirement plan. If a lifetime guaranteed payment is not available to your client, then purchasing a separate annuity product from an insurance provider might be the right answer.
- Third, if the plan does not offer lifetime guaranteed payments, an adviser can support a client’s interests even further. Supplying a list of reasons to give their benefits department – such as the avoidance of employee dissatisfaction – may help persuade that employer to consider offering this as an important plan option.
No matter what action is taken, the real key is to start the process early. Discovering a shortfall for your client sooner than later will better prepare them for their future – and demonstrate your value as they work towards achieving a positive retirement outcome.
Robert M. Kaplan, CFP, CPC, QPA, APA, is Vice President and National Training Consultant for ING’s U.S. Retirement Services. In this role, he leverages his 30 years of experience in the retirement industry to help educate a variety of ING stakeholders on complex regulatory topics, plan design matters, administration and sales strategies. Kaplan is a member of various retirement services organizations and a frequent speaker at industry events, conferences and meetings.
(This material was created to provide accurate information on the subjects covered. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation. These materials are not intended to be used to avoid tax penalties, and were prepared to support the promotion or marketing of the matters addressed in this document. The taxpayer should seek advice from an independent tax adviser.)