It’s been brewing slowly but surely for years and plan advisers and plan sponsors are equally curious about the future of retirement income options. James Lyday, Senior Vice President, Distribution SecureRetirement Solutions at Prudential Retirement, began the discussion describing retirement income as “evolutionary, not revolutionary,” meaning it’s the logical next step in retirement planning. However, he said, as it stands right now, most advisers aren’t knowledgeable enough on the subject to properly pitch it to sponsors.
Lyday said that in the past, the only options for retirement income were constricted to being in-plan or out-of-plan. He said the out-of-plan options–annuities and rollovers-have failed and that more advisers who are studying this new terrain are favoring in-plan retirement income choices.
George Revoir, Senior Vice President, Distribution at John Hancock Financial Services, said advisers should stop thinking about retirement income in terms of annuities and start thinking in withdrawal balance language. “Basic understanding of the verbiage will change the view on it from the market standpoint,” he said.
Fred Conley, Vice President at Goldman Sachs Asset Management, suggested that advisers think about retirement income options on a spectrum; on one side you have more control over account balances, and on the other you have riskier investments that generate more money. It’s a matter of finding balance between the two sides.
In order for retirement income options to really take-off as the panelists expect them to do, a few things still need to happen.
For one thing, vendors need to be producing and pushing more products into the market, said Revoir. Not only do we need more products, he said, but we need to be able to differentiate between them–what are the selling points of one product versus another?
Conley said that Goldman Sachs is working on something, but he was unable to disclose any details or a timeframe, only assuring the audience that Goldman’s approach is “actively being researched.”
Start the conversation…
Relatively speaking, in-plan retirement income options are still new. But they won’t be new forever, said Lyday. He predicted that they will be mainstream in six to twelve months. By starting to talk about the options with current–or prospective–clients now, you’ll be giving yourself an edge. Even if they don’t chose to incorporate it into their plan, at least they’ll know they have an adviser who is forward-thinking.
Lyday also mentioned a main concern of sponsors is the safe harbor provision, and that they’re nervous they would be liable to a participant for life–something they don’t want to deal with. He said the Department of Labor is still working on those details and he expects them to come out soon.
Revoir left the advisers with this though: “People will continue to talk about this, so the more comfortable you are with the products, the better off you’ll be.”
And Conley reassured the audience that retirement income is something they can handle: “Lifetime income is a natural extension of your retirement practice;” it’s not an entirely new plan, but a feature to add to existing plans.