I usually wouldn’t comment on an advertorial, but “Converting Retirement Savings to Retirement Income” by Randy Myers, in the Special Advertising Section, Wealth Management (Wall Street Journal, September 18, 2012) caught my attention.
Having unveiled our Saving2Income planning method and launched the Savings2Income.com website on that same day, we clearly support effective ways to convert retirement savings into retirement income.
However, that’s about all we agree with.
Here’s where the Saving2Income (S2I) planning method differs from the approach outlined in the advertorial:
- Converting savings to income is not about financial products but rather about a process or a planning method.
- Under the S2I planning method, all retirement savings, including Personal Retirement Savings held outside a 401(k), IRA, and Social Security, must be accounted for and integrated into the solution.
- A key part of the process is deferring and controlling taxes, particularly since through product selection and planning it’s under the control of the advisor and client.
- Similarly, lowering fees and loads on the retirement savings are absolutely critical in the process. This is not mentioned in the advertorial.
- Guaranteed income can best be provided by fixed payout annuities built up in stages over time, rather than through a lump sum purchase. By selecting from among a wide variety of fixed payout annuities and the life insurance companies that offer them, the client can have access to commutation values (the present value of future benefits). Also, there are a wide variety of options to protect the beneficiary in case of early death of the retiree.
- Any solution must complete itself by what we call a “no worry age”, rather than depending on the active management for life by the advisor and client. And yes, the advisor could retire or pre-decease the client who might not have full capacity at that point.
Having invented the original Living Benefit Guarantee design for Variable Annuities in 1995, I should take pride in the prominent mention of the successor designs in this advertorial. However, there is no magic bullet with these designs, and the inherent complexity and costs often defeat their value in a plan for retirement Income. And transparency and flexibility have to be part of any plan.
We agree there’s a need for a Savings to Income approach. We just don’t agree that the advertorial actually lives up to its title.