November 21, 2008

New Retirement Think Tank

Group's charter is to tackle income options and help advisors

The Institutional Retirement Income Research Council (IRIRC) has taken up the mandate of what it says is the urgent issue of evaluating decumulation strategies for retirement to help everyone in the industry make the best decisions for the coming wave of retirees. The think tank, made up of about 15 investment consulting, actuarial, financial planning, and even an academic consultant (Dr. Jeffrey Brown from University of Illinois) had its first open meeting in November and issued a Call to Action white paper. The Council, which is underwritten by Prudential Retirement, is independent, IRIRC says. Its next project is assessing the "new generation" of defined contribution retirement income options.

"We are very concerned that participants are not prepared" for figuring out how to have income throughout their retirement, says Martha Spano, co-chair of the IRIRC and west division practice leader for Watson Wyatt's investment consulting practice. Her fellow co-leader is Marty Schmidt of MAS Advisors in Pallatine, Illinois.

The Council wants to open a dialogue about how retirement income options should be incorporated into 401(k) and 403(b) plans, and to help DC plan consultants and their advisors make the best choices in their deliberations.

Many of these new-generation products, such as those with guaranteed withdrawal benefits and annuities that provide annuitants with more control over their money "are in their infancy" so the Council wants to see how they evolve, how they work, how portable they are from one recordkeeper or employer to another. The Council is hoping to soon place on its Web site (www.irirc.com) an evaluation of the available products, Spano says.

The Council will produce several planned white papers over the the next year. The final paper will be a recommendation for either in-plan solutions where participants are contributing or out-of-plan solutions where there is no fiduciary duty of the plan sponsor, she says. An example of the former is an In-Plan Guaranteed Minimum Withdrawal Benefit with stable lifetime withdrawals with an upside potential, and an example of the latter is the Out-of-Plan Non-Guaranteed Option that provides a drawdown strategy at a designated percentage.

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