Back in 2008 I wrote a blog post about the change in retirement plan focus from accumulation to “decumulation”, the academic term for the process of converting retirement plan accumulation into retirement income.
I probably shouldn’t have been so definitional, but I didn’t know what else to call it. Today, it goes by the name of lifetime income, retirement income, and variations on the same theme. The theme or rather challenge is, in the words of the Retirement Income Industry Association, “creating durable, inflation-adjusted retirement income that can last 30 years or more in retirement”.
This challenge is a three part process consisting of:
- Identifying the proper amount needed for retirement
- Saving enough during working years to accomplish that goal
- Converting the accumulation into sufficient replacement income
But for employees to be better prepared for retirement they need to know more than the usual “dollar cost averaging”, “asset allocation, and “cost of waiting”. They need to know how to deal with post-retirement issues like:
- Whether to continue to work
- When to apply for Social Security benefits
- What to do, if anything, about housing
- What choices to make about insurance and health care
- How financial assets should be invested
- What distribution options to take from employer retirement plans and IRAs
While the retirement income challenge is starting to be addressed in the retirement plan marketplace in the form of retirement planning tools and lifetime income products, there still needs to be a delivery system. That delivery system is us.
Indeed, in order for us - whether brokers, advisers, agents, consultants, voluntary benefit specialists, or TPAs – to be relevant, we need to better understand the challenge and how to help employers and employees.
The good news is that there are enough opportunities to develop our own niches and, as importantly, to make a difference.
Kalish is an EBA Advisory Board member and President of National Benefit Services, Inc., a Chicago-based third party administrator. He is a Guest Lecturer at John Marshall School of Law LLM Program in Employee Benefits and serves on the Great Lakes IRS Advisory Council for Tax Exempt and Government Entity Plans. Jerry has been publishing The Retirement Plan Blog since 2006. He can be reached via email at firstname.lastname@example.org and followed on Twitter
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