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March 24, 2011 at 01:28 PM
The market for retirement income products is expanding as more people look for opportunities to replace income in retirement, according to a report released Tuesday by the Financial Research Corporation.
There are two components to the growing market, according to the report. First, more people are postponing retirement, pushing the age at which they need income producing products into their 70s. Second, some products are designed to appeal to younger investors. The FRC notes that as the age spectrum widens, "the line between retirement accumulation products and retirement income products is blurring."
"Advisors looked at retirement as accumulation and distribution, but clients see it differently," Matt Schott, vice president and retirement income practice leader for FRC, told AdvisorOne. "Retirement is about income, and spreading out the need. It's like saving for college; you build assets and have a continuum of need over a number of years. Clients need to think in income terms – how much are they replacing? It's happening in fits and starts but we're seeing that mind shift."
Leslie Prescott, author of the report, said in a statement that the most successful products are those that "have been designed to provide the investor with a blend among features that they find important, such as access, control, and dependable income levels.”
"If you look at Morningstar's definition of retirement income products, they mean what we call target-date lineup funds. A lot of products are designed with no particular income management features. Many of the funds we studied are the future of retirement income products," she told AdvisorOne, adding that managed payout funds and target date funds are substitutes for or complements to annuities.
"In the insurance market, or for advisors with very conservative clients, fixed index annuities with income riders are a big area of focus for manufacturers."
