PD08: The End in Mind: Retirement Income Solutions

Consequently, helping participants make the right retirement income decisions is vitally important for the success of any plan.

Panelists Rebecca Ades, VP of Institutional Sales at AXA Equitable; Rob Kieckhefer, Financial Consultant at RBC Wealth Management; James Lyday, Senior VP of Distribution at Prudential Retirement; Matt Smith, Managing Director of Retirement Services at Russell Investments; and moderator Erik Vander Kolk, Group Publisher at PLANSPONSOR , discussed the concerns facing participants in the years before their retirement and what plan sponsors can do to help them face those challenges at PLANSPONSOR ‘s 2008 Plan Designs conference in Chicago.

align=”center”> The Panel Audio File

Smith began by outlining the major topics plan sponsors should talk about with their participants, noting that it is vital that they help participants understand how much money they will need for retirement, what a reasonable distribution rate is, and that asset allocation requires careful attention in the years leading up to retirement.

When determining how much to defer into their accounts, Lyday said participants should be reminded that, because they are likely to enjoy longer lives than previous generations, they will also rely on those accounts to sustain them over a longer period of time.

When calculating the amount needed for retirement, he said, thinking about how much income they want on a monthly basis will make future needs more concrete and accessible to participants.

Smith suggested advising participants to postpone retirement for a few years, noting that adding more money to their account while effectively decreasing the number of years they will be dependent on those savings, could benefit the quality of their retirement.

Kieckhefer added that participants need to consider any dependants that might need care, and factor in rising health costs that will likely continue to climb throughout their extended life spans.

Ades listed market volatility protection, inflation, and continuing market investments among the concerns that would continue into participants' retirements.

She pointed out that approximately 90% of people would prefer withdrawing a lump sum over an annuity option, and said that while in the past "annuity" has been seen as a "four-letter word," there is a "new generation" of products that people should be aware of when planning for retirement.

"They are designed to be easy to understand, they come with an education component so people can see how this fits in the context of their overall retirement needs, they are liquid, they are accessible, flexible. The money is yours-even when you pass away-to leave to your heirs, and they also provide, unlike traditional fixed annuities, access to the market and the upside potential," Ades said.

She suggested offering seminars and one-on-one analysis to make sure participants are well-educated about the decisions they will have to make, and to help coach them through what can be a difficult process.

Kieckhefer seemed to summarize the feelings of all of the panelists when he noted that 90% of participants are totally unprepared to do their own financial planning. From helping them enroll in a plan, to calculating how much they will need to defer, to preparing for retirement during their final years leading up it, and deciding what their distribution rate will be, he said, "Anything that you can give them that's on autopilot would be well appreciated."

- Sara Kelly