PLANADVISER - July/August 2019 - 8

data points
Ready to Focus on Income?
Just under 10% of employers offer an in-plan annuity
A
n emerging theme in the retirement
plan industry has been
the need to help plan participants
convert their balance to a steady
income stream in retirement. Yet, only
half, 53.8%, of employers offer some
type of income-oriented product or
distribution service, according to the
2018 PLANSPONSOR Defined Contribution
(DC) Survey.
Among those employers trying to
tackle the challenge, the most common
approach is to permit retirees to
take systematic withdrawals (44.5%).
This requires participants to know how
much to withdraw and at what intervals,
but it could be useful for those
managing multiple sources of money.
In-plan professional managed account
services that generate monthly retirement
income are offered by 27.1% of
plan sponsors.
On the product side, in-plan managed
payout funds that generate cash
flow but lack guarantees are offered
in 10.1% of plans. In terms of annuity
options, 9.9% of plans offer in-plan
insurance products
monthly income at
that
guarantee
retirement, and
5.4% offer an out-of-plan annuity purchase/bidding
service.
Is there an appetite for these products
that help guarantee a " paycheck "
in retirement, and are advisers knowledgeable
enough about annuities to
recommend them to sponsors and
participants?
A recent survey of 200 advisers
from DPL Financial Partners, a firm
that bills itself as a commission-free
insurance network for retirement plan
and wealth management
fiduciaries,
shows quite a divergence among advisers
on this matter. Very roughly speaking,
about half of firms appear to be
plugged in to the " decumulation challenge "
and actively support their individual
clients by advising them about
spend-down strategies.
Seventy-nine percent of advisers
said " predictable income " is more
important to their retirement-focused
clients than is " asset growth. " Similarly,
70% of advisers said these clients
" value the certainty of not running out
of money " over " achieving a certain
retirement lifestyle. "
Somewhat surprisingly, only 14% of
advisers said their individual clients
strongly like or somewhat like annuities,
while more than one-quarter
(27%) said they " aren't sure " what their
clients think.
" Retirement savers are left with
inaccurate biases about annuities, "
says David Lau, founder and CEO of DPL
Financial Partners in Louisville, Kentucky.
These biases, along with individuals'
lack of knowledge, can result
in lack of adoption on plan menus.
According to the survey, only 52% of
advisers look to plan funding for their
clients' essential projected expenses
differently than they do for those individuals'
discretionary expenses. Further,
the majority of advisers reported
generating retirement income for their
clients through a bucketing strategy or
through advising them on safe withdrawal
rates.
" Eighty-four percent of advisers
are aware that annuities can generate
income more efficiently than traditional
fixed-income
investing can, "
Lau says. " If advisers could take one
action based on these survey results,
Lau says, it could be to ensure that clients
understand just how diverse the
annuity product set actually is. "
-John Manganaro
Retirement Income-Oriented Products/Services Offered in 401(k) Plans
Overall
<$5mm
Systematic withdrawal option
at retirement
In-plan insurance products that guarantee
monthly retirement income
In-plan professional managed account service
that generates monthly retirement income
In-plan managed payout funds that
generate cash flow but lack guarantees
Out-of-plan annuity purchase/
bidding service
Does not offer any type of
income-oriented product or service
Source: 2018 PLANSPONSOR Defined Contribution Survey
44.5%
9.9%
27.1%
10.1%
5.4%
46.2%
31.9%
9.1%
20.0%
9.6%
3.4%
59.2%
$5mm -
$50mm
40.4%
10.4%
25.7%
10.6%
4.4%
48.8%
>$50mm -
$200mm
50.1%
11.5%
26.5%
11.0%
6.2%
41.8%
>$200mm -
$1b
>$1b
60.4%
9.3%
37.3%
10.1%
7.4%
27.7%
71.3%
8.8%
45.4%
7.7%
13.0%
28.1%
8 | planadviser.com July-August 2019
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PLANADVISER - July/August 2019

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