Trending articles and research reports that were released this week provide encouraging news. Investors are finally starting to see the need to safeguard their retirement income from the risk that longevity introduces, and they’re looking for solutions to the problem.
Latest trends in the retirement income market
The ICMA Research Report quoted in Mary Beth Franklin’s article reinforces the three elements inevitably leading to poor outcomes for mass affluent investors:
- Investors’ unrealistic expectations about having income-producing assets that they can withdraw or can grow – without serious impact on their income
- Advisors’ almost universal failure to use “annuitization” as an option in a Retirement Income* plan
- Advisors finding retirement income planning time-consuming
* “Income” is defined as amounts one can receive without any other financial effect. That’s what annuities offer. Dependable, spendable income for life.
US Labor Proposals May Squeeze Complex Financial Products
While Fitch is a rating agency for life insurance companies, one would expect them to distinguish between “complex” variable and index annuity products and income annuity products, like QLAC, which the IRS favors.
It’s about time that the experts in the field help educate consumers and advisors about the differences. Case in point: my personal trainer was scared off all “annuity” products by another client who’d read the negative press about annuities. That’s not doing him a service at all.
Cass Researchers Find Wide Potential in Swiss Re Longevity Bond
It’s good to see that the financial engineers are looking for ways to insure and reinsure the longevity risk.
While many advisors implicitly suggest that retail investors “self-insure” this risk, in the long run more and more investors will see the folly of taking that risk on their own. When that happens, there will need to be institutional solutions, like longevity bonds, to spread that risk around.