Retirement Planning Challenges? New Report Suggests Solutions

“Investment management is only half the deal; the other half is risk management,” said Anna Rappaport, principal of Anna Rappaport Consulting, Chicago, and chair of the SOA Committee on Post-Retirement Needs and Risks, which contributed to both reports.

But many people are not aware of the risk management aspect, or if they are aware, they have not taken action, she said.

This understanding prompted the report’s authors to include solutions that involve “people taking action without having to do something,” Rappaport said. Employers, for instance, can introduce automatic enrollments and automatic step-ups in deferral each years (in defined contribution plans), or structure employee benefits plans to include “savings insurance” that enable retirement plan contributions to continue if the employee becomes disabled.

Other recommendations for employers include: providing education and encouragement to employees regarding retirement savings, and offering access to products at the worksite such at long term care insurance, annuity options, etc.

The authors put several suggestions into 3 tip sheets–for consumers, employers and financial professionals (see example in box). These and the associated reports from 2007 and 2005 can be found at www.limra.com/PressRoom/PressMaterials/TenTips.aspx.

There are many implications involved with all of this, observed Sondergeld.

For instance, retirement is likely to last a long time for many people, he said. It could work out that the advisor who originally set up the retirement plan will not be there when the consumer is relying on the plan for income and can’t keep up with the details any more.

That means the plans will need to have financial staying power, he said. Financial services firms can address this by designing plans with the necessary elements (LTC insurance, income plans that will “last over time,” etc.).

Where implementing solutions is concerned, Rappaport noted that “a lot of solutions are not that easy to do.” It will require people to work across disciplines, for example, and that is a “big issue for a lot of people.”

Her worry is that a lot of people may get to retirement without much money. Most often, it is the widow who will live long and end up in trouble or on Medicaid, she added.