PLANADVISER -May/June 2022 - 22

modern investment menu / cover story
" It can be intimidating at the start, but, for
many people, it's a relief when they've put
together a plan for their expenses in retirement. "
(48%). Aggregators prefer managed accounts as a retirement
income solution (60%), but are also likely to recommend, by
50% for each, in-plan annuities-deferred or immediate or
qualified lifetime annuity contracts-or target-date funds
with embedded guarantees.
A PERSONALIZED PROCESS
People making decisions about their decumulation phase
have a critical need for personalized guidance, because
individual circumstances differ so much as people approach
retirement, says Michael Esselman, vice president of investments
for OneDigital Retirement + Wealth in Atlanta. " How
do we as an industry address the personalization that these
participants need? " he says. " Managed accounts fit that
need for product personalization. "
The decumulation phase is more of a continuum rather
than a one-time cliff, says Lorianne Pannozzo, senior vice
president, workplace personalized planning and advice at
Fidelity Investments in Boston. " A managed account is a
personalized, integrated investment and financial planning
solution. And, when you think about decumulation, that's
the time when some of a person's factors may change more
than they have in the past, " she notes. " That information
changes over time, so every year, the managed account[-
the portfolio and planning guidance-]could adjust based
on how a person's facts and circumstances have changed. "
For pre-retirees in a managed account, the retirementplanning
process usually starts with thinking through
their retirement vision. " Before participants can solve for
their finances in retirement, they need to understand what
they're going to do in retirement, " Delaney says.
" Where does that person want to live? How does that
person want to spend his or her time? Does that person
want to work part time in retirement? What does that
person want to prioritize financially: spending down the
full account balance, or leaving money to his or her kids?
A retirement-income solution won't work unless it also
includes helping people understand what issues they [need
to address], " she says.
Managed account services are not just about an investment
portfolio or withdrawal rate for participants nearing
retirement, says Kelly O'Donnell, executive president and
head of workplace at Edelman Financial Engines in Boston.
" This is an emotional process, and it goes beyond when
someone should take money out of the 401(k) account, " she
says. Managed account services can help pre-retirees map
out their expenses in retirement. " For many people, there
are a lot of considerations such as medical expenses that
they haven't taken into account, " O'Donnell says. " It can
be intimidating at the start, but, for many people, it's a
relief when they've put together a plan for their expenses
in retirement. We have tools and calculators and guidance,
and the ability to talk to our advisers, to help them do that. "
GuidedChoice is another resource with tools and staff to
help walk pre-retirees through the numbers and come up
with a workable budget, says Sherrie Grabot, founder and
CEO of the managed account provider, in San Diego. " We
determine what monthly income the participant needs in
retirement: That's the base, the foundation, of the decisionmaking
after that, " she says.
Pre-retirees can work with GuidedChoice's online tools,
or talk to a GuidedChoice staff member by phone, about
issues such as how their budget outlook would be affected
by decisions such as spending less on recreational pursuits
or working part time during the early retirement years.
" There are different variables they can model to get to a
place where they feel comfortable, " Grabot says.
As a participant nears retirement, planning starts
becoming more about an income strategy, Pannozzo says.
" So people need to start to think in a more detailed way
about their expenses, such as their necessary vs. discretionary
expenses. " A central part of Fidelity's decumulation
guidance is " retirement sustainability, " she says. " It's
a question of, do you have enough income to cover your
expenses in retirement? "
The other core issue for Fidelity is considering what
someone's guaranteed vs. nonguaranteed sources of
income will be. " We do believe that a portion of a retiree's
essential monthly expenses should be covered by more
predictable income sources, and that could be from Social
Security, the person's pension benefit or a guaranteedincome
product, " she says.
After a pre-retiree decides on a retirement budget, a
managed account service can help with determining which
income sources to tap, and when. Edelman Financial Engines
can advise a participant on the optimal timing to start taking
Social Security, for example. " Retirement-income planning is
most important for those people who need to make the most
of what they have, " O'Donnell says. " If someone has a high
net worth, planning for retirement will be more about tax
issues and estate planning. " For those with far less saved, she
says, having enough income to feel confident that they can
pay their living expenses is the most important issue.
Once a pre-retiree has a retirement vision, a budget and a
clear sense of specific income needs, " then comes the retirement-income
solution, " Delaney says. " Then a managed
account program can say, 'Would you like to guarantee a
piece of that income?' "
22 | planadviser.com May-June 2022
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PLANADVISER -May/June 2022

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