Franklin Templeton launched its Franklin Retirement Payout Fund series, which the San Mateo-based investment behemoth says “is designed to help defined contribution (DC) participants transition from savings to spending in retirement.”
The process of converting retirement savings into cash flow is complex for many plan participants, who may know and understand the expenses they face in retirement, but feel less confident about sources of income. In fact, it was found in Franklin Templeton’s 2015 Retirement Income Strategies and Expectations (RISE) survey, which polled 2,002 American adults, that 52% of people are concerned about managing retirement income to meet retirement expenses.
The retirement industry has made great strides with respect to the accumulation phase, the company notes; however, plan sponsors have previously been reluctant to actively address participant cash flow needs in retirement. The Franklin Retirement Payout Fund series is an in-plan solution designed to help address some of these critical needs.
The Franklin Retirement Payout Fund series—with current annual fund maturity dates from 2017 through 2021—is designed for participants who are nearing or in retirement, and are seeking a straightforward payout schedule to help provide a more predictable cash flow distribution from their investment account while in retirement. These funds and their payout schedule can potentially be matched against a participant’s specific expenses as they make that transition
“We pride ourselves in bringing innovative solutions to the retirement marketplace. These funds can help plan participants structure a more predicable cash flow from their account balance for future spending needs in retirement,” Drew Carrington, head of Institutional DCIO for Franklin Templeton Investments, said in a statement. “The proceeds can be used to pay for current expenses or reinvested into a subsequent fund in the series. The flexibility of this innovative approach not only seeks to make spending in retirement simpler and more straightforward, it is also adjustable, allowing participants to change their strategy as they see fit through a simple exchange or redemption.”
This product innovation continues Franklin Templeton’s efforts to provide simple, practical solutions to a changing retirement landscape—one that is increasingly oriented to helping plan participants not only save for, but successfully move on to, what’s next.
“In addition to simplifying withdrawal strategies for plan participants, the open-end mutual fund structure mitigates some of the challenges with existing in-plan retirement income solutions — namely fiduciary, recordkeeping and portability issues,” Carrington continued.
Roger Bayston, CFA, the funds’ portfolio manager with Franklin Templeton Fixed Income Group, said, “With the Franklin Retirement Payout Fund series, we can integrate the more predictable principal repayment features of individual bonds with the diversification potential of traditional fixed income funds.”
The Franklin Retirement Payout Fund series seeks capital preservation and income by investing predominantly in US dollar-denominated investment grade fixed income securities, including government and corporate debt securities, asset-backed securities and municipal securities. Such securities may be fixed or variable rate.
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With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
