PLANSPONSOR - January - February 2024 - 2

'The Year'?
INSIGHTS
PUBLISHER: Alison Cooke Mintzer
alison.mintzer@issmediasolutions.com
CREATIVE DIRECTOR: SooJin Chun Buzelli
soojin.buzelli@issmediasolutions.com
Is 2024
T
here's been a great amount of discussion in the industry about generating retirement
income and lifetime income streams for participants-and great hope that
the Setting Every Community Up for Retirement Enhancement Act of 2019 and
SECURE 2.0 will open the door to more usage of annuities in plans and for distributions.
It's not that these options haven't been available before, but they haven't had the
support of plan sponsors. I think of it as automatic enrollment and target-date funds
before the Pension Protection Act of 2006-plans could utilize them, but many did not.
With all the discussion, product development and demand for solutions by aging participants,
I wonder whether this year we'll see any sizeable shift in adoption.
Retiring can be, mildly speaking, like winning the lottery. One suddenly has
access to a large pool of money and must determine what to do with it. I was surprised
by a USAA survey I saw last year that said, among younger adults, 18 through 34, 65%
said they would choose monthly payments if lottery winners. It also said more than
three-quarters (79%) of adult respondents considered it more important to have guaranteed
monthly income in their retirement than a particular dollar amount saved. And
this isn't the only survey to show that interest in guaranteed lifetime income is growing.
Maybe there is a shift in perception about the need for steady income-if so, it
provides a more receptive audience for discussions of income in retirement, and lifetime
income products. I make that distinction to separate " income in retirement " -
whereby I mean draw-down systems or other nonguaranteed payments from, say, a
managed account or payout fund-from " lifetime income, " meaning some sort of
annuity, which provides a guaranteed income stream.
Is now the time to finally embrace products that intertwine guarantees with traditional
investment portfolios? I see insurance providers working to design such products,
which overcome many of the traditional concerns about flexibility and accessibility,
and allow for some personalization to drive positive outcomes for a diverse range
of plan participants. Some version of these products has existed since the late 2000s.
But the demand has been inadequate to force accessibility and support for them on
platforms. There are also programs such as the Hueler Income Solutions model that
permit buying institutionally priced annuities by individual participants.
An Allianz Life study found that, last year, nearly seven in 10 people (68%) would
like more information about annuities as part of their retirement plan-an increase from
62% in 2022 and 56% in 2021. In addition, 67% said they'd consider adding an annuity
to their plan investment if one was available, up from 60% in 2022 and 59% in 2021.
At a conference I recently attended about guaranteed income and the development
of annuity products, one of the speakers said, " Not all failure is created equal. "
That comment has stuck with me as I've reflected on the value of incorporating some
sort of insured component into a retirement income plan. If a portfolio of investments
fails, and those investments have no " floor, " no guaranteed or insured component, that
investor has no safety net aside from Social Security, if said investor is collecting. By
annuitizing even a portion of savings, a degree of income will continue.
As our industry continues its discussion of the need for decumulation and how
to help provide security for retired participants, I'll watch with anticipation to see
what role lifetime income plays in retirement plans and retirement portfolios as the
year unfolds. -Alison Cooke Mintzer, Publisher
2 PLANSPONSOR.COM January - February 2024
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