Retirement income strategy needs to be redefined given the current conventional wisdom that is moving away from simple asset accumulation. In an ING U.S. webinar, three strategies were discussed that shed light on this new way of thinking. First annuities, second financial planning and third retirement savings plans at the workplace were all held under a microscope to see how changes can or should occur.
“The need for Americans to prepare for retirement has never been more important or critical,” says Dave Bedard, President of Annuities with ING. “As a result, the need and urgency for retirement planning and retirement solutions will continue to increase.”
And although the retirement landscape is filled with investments such as target-date funds, simple interest, investing in property and more, Bedard says they all lack the guaranty offered by an annuity product. An indexed annuity, he adds, allows people to participate in equity markets when the markets perform well but also provides protection when markets are underperforming.
One proof point of its popularity is in the number of products being introduced. In 2009, there were 24 products launched which grew to 49 last year and this year is tracking even higher, notes Bedard. “The conversation has shifted the focus not just on ways to save for retirement but also ways for retirees to generate an income stream that they can’t outlive, he adds. The next wave of products, says Bedard, will incorporate hybrid strategies and longevity features.
In terms of financial planning, Richard Linton, President of Individual Markets, says the best financial advisers are shifting their thinking. “An adviser’s value starts with helping people get past inertia and framing the effort in such a way that people are engaged in their future,” he says.
There are three key elements advisers need to focus on to ensure they are in lock-step with clients to reach goals and ensure income strategies are met. First they have to increase skill sets that can help clients’ growth, asset protection and income security. Second, advisers need to view the world through their client’s eyes (needs and aspirations) to develop plans and third consistent repeatable processes are critical.
Finally, employers are recognizing the need to help make employees retirement ready, says Rick Mason, President of Corporate Markets. Although shifts might take time to implement, “interest is high across the board,” he explains.
The outcome must be looked at more so than the contribution into a defined contribution plan, says Mason. As a result things like auto-enrolment, flexibility and control of participants so that investments meet the needs of employees (e.g. the flexibility to withdraw funds) and third a need to address market and longevity risk.
Overall, the takeaway for advisers, plan designers and product vendors is to look at outcomes rather than just accumulation thereby allowing participants to adequately save and then have an income from which to draw during retirement.
Joel Kranc is Director of Kranc Communications, focusing on business communications, content delivery and marketing strategies. He has written and worked in the retirement and institutional investment space for 17 years covering North American markets, large institutional pensions and the adviser community.
