PANC 2020: Retirement Income and Participant Outcomes

The last session on Day 3 of the 2020 PLANADVISER National Conference (PANC) emphasized helping participants create a solid foundation for retirement security: adequate guaranteed income.

While most participants don’t annuitize their assets, most do accrue what amounts to an annuity in their Social Security benefit. For many Americans, this supplies a large portion of their guaranteed retirement income. The jury is out as to whether more defined contribution (DC) plan investors will choose to purchase guarantees with their plan assets moving forward.

Panelist Barbara Delaney, principal and founder at StoneStreet Renaissance LLC, which was acquired in 2019 by Hub International, said participants need to recognize the critical importance of income guarantees.

“We try to give everyone a little exercise before they come in for a meeting—to list five things they want to do in retirement,” Delaney said during the virtual event. “We ask them to start doing those things now, before they retire. We do this because many people say they want to do things in retirement and never get them done. This exercise helps them understand what their expenses will be, which makes income planning much easier.”

Christopher Kulick Jr., principal and financial adviser at CAPTRUST who previously won the PLANADVISER Retirement Plan Adviser of the Year designation, said his firm has created a Retirement Blueprint program. The program provides a consolidated view of a participants in-plan and out-of-plan assets.

Nathaniel Miles, head of retirement at Wells Fargo Asset Management, listed three key points to keep in mind when matching a type of lifetime income product to a participant or employee base. These are simplicity, longevity and flexibility.

On the topic of income simplicity, the trio suggested rethinking the jargon that often gets used with plan sponsors. For example, most employers don’t know the difference between “in-plan” and “out-of-plan” income. There also needs to be collaboration among the plan’s stakeholders, meaning that the asset manager, consultant and plan sponsor need to work together to present straightforward income solutions.

“Some solutions that we’ve seen come online from insurance providers can take 40 minutes to talk through with a plan sponsor,” Delaney observed. On the point of flexibility, she recommended looking into partial annuitization, where a retiree annuitizes a portion, perhaps 10% or 20%, of assets. This reduces longevity risk while also ensuring participants maintain an adequate degree of control and flexibility.

Kulick said they are currently educating and advising clients to stay in the plan. “We want to work with sponsors to create retiree-friendly plans,” Kulick said. “Once you have that element of plan design in place, it should really be paired with a strong advice component, as well. It is likely that in-plan guarantees will be paired with non-guaranteed strategies, such as bond ladders and stable value funds.”

The experts also polled adviser attendees to see whether their clients are asking about retaining retirees in their plan. Almost half of the attendees said yes. Twenty-eight percent said their clients are not asking, and about one-quarter said, while their clients aren’t asking, they, themselves, are bringing the subject up.

Delaney said more plan sponsors are taking a greater interest in retaining retirees because they now recognize that people want help during this post-work period. Looking to the rest of 2020 and into 2021, she expects the adviser community to work as activists for the plan sponsor, to help ensure their clients have simple income solutions that work for the plan and its participants.