PANC2017: Improving Plan Design for Retiring Participants

Participants age 50 and older need more personalized advice, advisers say.

By Lee Barney | October 16, 2017
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“Target-date funds [TDFs] may not be appropriate for everyone,” said Clint Barker, senior vice president, retirement investment solutions at PGIM Investments, the asset management group of Prudential, speaking at the “Improving Plan Design for Retiring Participants” panel at the 2017 PLANADVISER National Conference (PANC), Thursday. “Everyone is not the same.”

Helping people approaching retirement “is one of the key questions we spend our time on at Franklin Templeton,” said Tom Waters, senior institutional DC strategist, Franklin Templeton Investments. Helping people retire really means “working with people over age 50 who are thinking about retiring. This group is drastically different from the monolith called ‘the participant base.’ Sixty percent of the assets in the DC [defined contribution] system are with people 50 and older.”

Advisers need to realize that participants in that age group are very engaged with their retirement savings—and looking for personalized help, Waters said. “Among the married people age 50 and older, only 39% of their assets are in a DC plan. They have assets in other plans. This is only a piece of the puzzle,” he said. “Financial Engines’ TDF study found that 95% of TDF investors use other options. Fifty-four percent said it was because their TDF wasn’t aggressive enough or was too risky. We need to build better DC plans for this group. People are more engaged than we give them credit for.”

Jeffrey Bograd, director, managing ERISA [Employee Retirement Income Security Act] consultant at John Hancock Retirement Plan Services, said a big part of helping people approaching retirement is focusing on life after retirement, taking into consideration that “people are living longer, returns are projected to be lower, and, today, people have less access to pensions with guaranteed income.”

NEXT: ‘The bigger challenge’