“It’s a huge topic that needs to be addressed,” Chris Roper said from the floor of the Wealth@wor(k) conference in Las Vegas last week. Retirement income and a lack of comprehension by most of the public was that topic, the Partner and Plan Success Consultant with Kansas-based Qualified Plan Advisors explained.
“People don’t really understand what they’re saving,” he argued. “I heard from multiple advisors here at the conference that someone might have $50,000 or $75,000 saved. If they make $50,000 a year, they think they’re rich. They don’t understand how this lump sum of money, their nest egg, turns into retirement income.”
Much of the confusion stems from a general lack of understanding of the markets and the fear of making a retirement income decision.
“Most Americans don’t have enough money to hire a financial advisor and get personalized advice,” Roper added. “To have it in the workplace would be fantastic, but the problem we see now is that if you have your money in a plan with a lifetime income option included, and you leave that company, what happens to your money? There’s no portability.”
That lack of access to personalized advice and a failure to understand portability stifle innovation in the retirement incomes space, but it’s getting better, thanks to high-profile legislation.
“With the SECURE Act, there are some really interesting plays out there about how people are saving. They’re thinking outside the box. Income America 5ForLife is a portable product and simple to understand, and speaking as an advisor, it’s a multimanager approach. You have all the great money managers and multiple people involved in the product. From the participant, advisor, and plan sponsor standpoint, it’s starting to check those boxes to really take off and help people.”
Much is written about the “A-word” (annuity) and the adverse reaction it invokes from consumers. While the annuitization concept rates high, the term’s negative connotation prevents widespread adoption.
“The annuity word just has a bad rap, no matter what,” Roper conceded. “It is an annuity, but if you really think about where we started at the beginning with the concept of retirement, it was pensions. This is lifetime income, just like Social Security. When you have a conversation with people, they get it.”
Upfront communication is the answer, he concluded.
“The message itself, especially for Income America, is really simple. It’s 5%. You’re guaranteed a watermark, your money will not decrease, and you’re guaranteed 5%. They made it as simple as possible so even advisors could understand it.”
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.
