Retirement income! There’s a lot of activity, and it’s starting to take into account the needs of clients who are about to retire and who have retired for several decades from a new chapter of life — finally! Not just a focus on product and profitability – a focus on the diverse real-life reality of product end users. Who is responsible for this?

The Inaugural NTSA and NAPA ERISA 403(b) Conference in Washington, DC looked at the state of resolving retirement income needs for plans, plan sponsors, and members, and whether it acts as a “big brother” approach or activation of mature flexible choices.

The panel of experts who spoke on these issues included:

  • Mike Doshier, Senior Retirement Strategist, T. Rowe Price
  • Elizabeth Heffernan, Head of Partnerships and Advisory Strategy, Micruity
  • Bill Hermann, Benefits Investment Committee, AARP
  • Hugh Penney, Senior Benefits Planning Advisor, Yale University
  • Mike Westhoven, Managing Director – Sales Implementation and Business Development, TIAA

The subject of “retirement income” may elicit various reactions from stakeholders in the retirement industry. Suffice it to say, there has yet to be a coalescence around design, vehicle financing, portability, and other critical components. Is there real innovation, or is it stuck in the ‘like we’ve always done’ mentality that, while profitable, is too easy?

The desire of plan sponsors to continue their responsibility to members to provide solutions in the new chapters for their employees is increasing dramatically. Creating default paths similar to repos is now in vogue on the distribution side, but still avoided on the accumulation side. Retirement “security” takes precedence over the “income” aspect of retirement for some.

Rapid product development in many flavors

type of product Examples
Not guaranteed
  • target date income fund
  • stable value funds
  • RK Pull Capabilities
  • withdrawal services
income annuity
  • make profitable fixed return stable value
  • annuity as plan distribution option
  • IRA annuity rollover
Term funds with annuity
  • monetize part of the glide path at or near retirement
  • fixed annuity as part of the glidepath
  • variable annuity package around TDF
  • some designed as QDIA

A survey by T. Rowe Price indicates that 75% of the best plans launch such programs. Considering the behavior of plan sponsors, 85% want participants’ funds to stay in the plan, but a third don’t know how to help and so far only 3% have taken action! From a member behavior perspective, the number of those leaving their money in the plans is increasing.

Yale, as an institution of significant size, was able to initiate a “100-year change” with a new QDIA in the form of an accumulated annuity as a fixed income investment, with a personalized target date service – and at a lower cost. AARP combines financial counseling and wellness (loans, spending plans, etc.) so that participants can implement what they want to do. TIAA has been developing products and there are many coming in rapid product development.

Kristine J. Coffey, CPC, CPFA, CRES; member ASPPA, NTSA, NAPA, was the 2019 NTSA President.