Even for seasoned experts, finding the best retirement income product to help maximize participants' success – and encourage their involvement in the first place – can be a difficult prospect.
The Institutional Retirement Income Council, a non-profit think-tank supporting the retirement industry, has come up with a new brief that aims to help plan sponsors get a better overview of the options available and a way of evaluating what's best for their employees.
Their brief, "Retirement Income Products: Which One is Right for Your Plan?", provides an overall framework that can help employers sift through the major types of retirement income products available in the marketplace – and examine their individual merits.
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As providers continue to build their inventory of institutionally priced retirement income products, the choices mount. Do sponsor want add-ons that can be offered as an option within an employer-sponsored plan, or do they want tools that work best during rollovers? Is it important (and attractive) for participants to find income guarantees, or are plans featuring managed payouts and managed drawdown funds a better sell?
According to the IRIC, there are three fundamental questions plan sponsors need to consider as they weigh their options in an increasingly busy market:
- Do plan participants want or need a retirement income product?
- What is the best way to offer a product – as an option at point or retirement or as an investment option inside the plan?
- How important is it to offer a product with income guarantees?
"As 401(k) plans have evolved from a supplemental retirement or capital accumulation plan to the sole retirement vehicle offered by most employers, plan sponsors and participants are increasingly focused on how to make accumulated money last a lifetime," said John Pickett, senior vice president and financial advisor at CAPTRUST, also an IRIC advisor who authored the issue brief.
"For most plan participants, the transition from work to retirement is one of the greatest challenges they will face," he adds. "After spending decades earning a paycheck to provide for living expenses, newly-minted retirees are suddenly expected to know what to do to convert a lump sum of amassed savings into a monthly income stream that won't run dry."
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