Lincoln Financial Distributors (LFD), the wholesale
distribution subsidiary of Lincoln Financial Group, announced enhancements to
its Lincoln Investor AdvantageVisualizer, a mapping tool designed to help advisers illustrate the
potential benefits of incorporating annuities as part of a client’s
comprehensive retirement plan.
Powered by investment research firm Morningstar, the
interactive and online income-planning tool now includes a Tax Deferral
Illustrator (TDI) designed to demonstrate the long-term impact of investing in
a tax-deferred account versus a taxable account.
John Kennedy, head of Retirement Solutions Distribution,
Lincoln Financial Distributors, says the latest enhancements will help advisers
address the impact taxes have on retirement planning and the need for income in
retirement, “enabling them to tell a more dynamic, compelling story” about
annuities.
Through a collaboration with Morningstar, the enhanced Lincoln Investor AdvantageVisualizer
is “fully integrated with i4LIFE,
Lincoln’s patented living-benefit rider.” The tool allows advisers to
help clients “visualize their potential retirement income with Lincoln
Financial Group, giving advisers the ability to quickly illustrate and explain
the various options available that can better help clients meet their financial
goals.”
For more information about i4LIFE Advantage
and the Lincoln Investor AdvantageVisualizer, visit www.investoradvantage.com.
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According to ICI data, at year-end 2014, nearly a third of Roth IRA
investors were younger than 40, compared with just 15% of traditional IRA
investors.
Two new reports published by the Investment Company
Institute (ICI) demonstrate that withdrawal activity is lower, equity holdings
are higher, and investors tend to be younger in Roth Individual Retirement
Accounts (IRAs) than in traditional IRAs.
Sarah Holden, ICI’s senior director of retirement and
investor research, observes there are significant differences between
traditional and Roth IRA investors, “yet both
vehicles provide savers with important flexibility in their retirement
savings options.”
“Traditional IRAs can be a convenient option for savers
looking to roll over a workplace retirement plan,” she explains, while “Roth
IRAs are typically created with contributions, and have only recently allowed
for rollovers.” The differences appeal to workers at various stages in their
life savings cycles, “making traditional and Roth IRAs an effective means for
helping Americans prepare for retirement.”
According to ICI data, at year-end 2014, 31% of Roth IRA
investors were younger than 40, compared with just 15% of traditional IRA
investors. “Only 24% of Roth IRA investors were 60 or older, compared with 39%
of traditional IRA investors,” ICI explains. “This younger age distribution
reflects in part the rules governing access to Roth IRAs, including income
limits on contributions and (until 2010) on conversions, as well as prior
limitations on rollovers into Roth IRAs, which have been eased recently.”
Other findings show the vast majority (85%) new traditional
IRAs in 2014 were opened only with rollovers and nearly half of traditional IRA
investors with an account balance at year-end 2014 had rollovers in their
traditional IRAs.
“By contrast, rollovers play a less important role in Roth
IRAs—only about one in 15 Roth IRA investors at year-end 2014 had rollovers in
their Roth IRAs,” ICI finds. “Rather, contribution activity plays a more
important role in Roth IRAs, with nearly three-quarters (74%) of new Roth IRAs
opened only through contributions in tax year 2014.”
ICI urges advisers and other industry service providers to
consider these facts as they adjust their approaches to servicing different
types of IRAs and making rollover recommendations under the new
fiduciary standards taking effect in 2017 and 2018.
NEXT: IRA investors
are an interesting group
The ICI reports show
Roth IRA investors tend to have higher equity holdings than traditional IRA
investors. At year-end 2014, nearly 80% of Roth IRA assets were invested
in equity holdings of some type, compared with less than two-thirds of
traditional IRA assets.
Digging a little deeper, ICI finds the majority of equity
holdings are accessed through mutual funds, exchange-traded funds (ETFs), and
closed-end funds. Equity holdings in IRAs “also occur through target-date funds
and non-target date balanced funds.”
“Some of the difference in allocation to equity holdings
reflects the different age distributions, as Roth IRA investors are younger,
and younger investors typically weight their portfolios more heavily toward
equity investments than older savers,” ICI speculates.
In terms of spending out of IRAs, ICI finds withdrawal activity is much lower among Roth
IRA investors than traditional IRA investors. This is influenced by the fact
that, in contrast to traditional IRAs, which require investors aged 70½
or older to take required minimum distributions (RMDs), Roth IRAs are generally
only subject to RMDs if the account was inherited.
In 2014, 4% of Roth IRA investors made withdrawals, compared
with 23% of traditional IRA investors.
“Early withdrawal penalties can apply to both Roth and
traditional IRA investors aged 59½ or younger, and withdrawal activity is lower
among investors younger than 60 compared with investors aged 60 or older,” ICI
warns.
Additional findings on traditional IRA investors are here,
while the Roth-focused research is here. Readers can also review the ICI IRA database here.