Featured Topics
Retirement Industry
Magazine Archive
Education/Advice
Where Do you Go for Financial Advice?
As the nation’s retirement system structure has shifted from a defined benefit (DB) orientation to one more focused on defined contribution (DC), the focus for many also shifted—from an appreciation for the benefit outcome to an awareness of the size, timing, and cost associated with those programs. However, a growing number of plan sponsors are taking a more holistic view—one that once again focuses on the benefits produced and is cognizant of the importance of addressing concerns about risk when tomorrow is so full of uncertainties. To discuss those trends, and the implications for employers, PLANSPONSOR recently met with a team of experts from Prudential Retirement Services: James Mcinnes, Senior Vice President; Srinivas Reddy, Senior Vice President; Dylan Tyson, Senior Vice President; and Veronica Charcalla, Vice President.
PS: Over the past several years, there has been a vigorous debate about the best ways to provide retirement income, but I think it’s fair to say there has been no real discussion about solutions. Where do things stand today? Reddy: When you look back over the past five years, things seem bleaker today for many defined contribution plan participants. There’s a greater sense of desperation on the part of those participants. They feel that they can’t do this—saving and planning for retirement—by themselves. They look around them, and they see that the solutions and tools available are abundant, but they still need help choosing the right ones. With all of that uncertainty surrounding their financial lives, they are understandably looking for certainty. Mcinnes: Another big change is the growing number of advisers and consultants in the marketplace who are increasingly focused on outcomes and retirement security, not just the mutual fund menu for the plan. Today, the discussions with plan sponsors are increasingly about more than just retirement income; it’s about taking a more holistic view and being able to provide a comprehensive solution set to address a multitude of needs of both sponsors and participants alike. Tyson: The game clearly has changed. DC is the predominant retirement vehicle today, but we haven’t started from scratch. More than $2 trillion in liabilities are going to be paid from DB plans to individuals. As we lose the predictable retirement income coming from DB plans, we need to replace that income in a world of 401(k) plans. It’s important to address that challenge head on. Charcalla: The conversations about these solutions have increased along with the emergence of more solutions in the market. Today, there are more options than ever, and a greater plan sponsor focus on the importance of retirement readiness. PS: What is “retirement readiness”? Mcinnes: Retirement readiness means different things to different people. For the DB retiree, it’s about the certainty of the benefit they receive. For a highly compensated executive, readiness might mean the ability to defer a larger amount of their compensation to replace their income needs. Charcalla: For DC participants, retirement readiness often is viewed from a quantitative perspective. What is my replacement ratio? What draw-down rates should I think about? However, I think there is an element to it that’s personal and unique to everyone. It’s about being able to envision your future, define those longer-term life goals, and secure the peace of mind that comes with knowing you can retire when you choose. Note: Please see sources and as of dates at the end of this document
PS: Over the past several years, there has been a vigorous debate about the best ways to provide retirement income, but I think it’s fair to say there has been no real discussion about solutions. Where do things stand today?
Reddy: When you look back over the past five years, things seem bleaker today for many defined contribution plan participants. There’s a greater sense of desperation on the part of those participants. They feel that they can’t do this—saving and planning for retirement—by themselves. They look around them, and they see that the solutions and tools available are abundant, but they still need help choosing the right ones. With all of that uncertainty surrounding their financial lives, they are understandably looking for certainty.
Mcinnes: Another big change is the growing number of advisers and consultants in the marketplace who are increasingly focused on outcomes and retirement security, not just the mutual fund menu for the plan. Today, the discussions with plan sponsors are increasingly about more than just retirement income; it’s about taking a more holistic view and being able to provide a comprehensive solution set to address a multitude of needs of both sponsors and participants alike.
Tyson: The game clearly has changed. DC is the predominant retirement vehicle today, but we haven’t started from scratch. More than $2 trillion in liabilities are going to be paid from DB plans to individuals. As we lose the predictable retirement income coming from DB plans, we need to replace that income in a world of 401(k) plans. It’s important to address that challenge head on.
Charcalla: The conversations about these solutions have increased along with the emergence of more solutions in the market. Today, there are more options than ever, and a greater plan sponsor focus on the importance of retirement readiness.
PS: What is “retirement readiness”?
Mcinnes: Retirement readiness means different things to different people. For the DB retiree, it’s about the certainty of the benefit they receive. For a highly compensated executive, readiness might mean the ability to defer a larger amount of their compensation to replace their income needs.
Charcalla: For DC participants, retirement readiness often is viewed from a quantitative perspective. What is my replacement ratio? What draw-down rates should I think about? However, I think there is an element to it that’s personal and unique to everyone. It’s about being able to envision your future, define those longer-term life goals, and secure the peace of mind that comes with knowing you can retire when you choose.
Note: Please see sources and as of dates at the end of this document
Sponsored by