ING survey points to greater focus on income planning

Survey respondents split evenly in respect to the importance of different strategies for retirement savings. The top two include growing savings (19 percent) and automatically converting savings into a lifetime guarantee stream of income. The latter strategy, the study notes, is most important among those with children under age 18 in the household (24 percent vs. 16 percent); and those who do not work with a financial advisor (20 percent vs. 12 percent) compared to all respondents.

In reference to the study’s finding that Americans are willing to trade current for future income, Linton noted that retirement income planning should accommodate basic needs and “household shocks” (such as emergency healthcare expenses), as well as “wants” (the desired lifestyle in retirement) and “wishes” (planned legacy gifts to people and causes).

He added that to successfully serve the U.S’ “graying population”—the leading edge of baby boomers turned age 65 in 2011, and an estimated 10,000 boomers are crossing the retirement age threshold daily—advisor must become proficient in both wealth accumulation and income distribution needs. They must also become skilled at developing comprehensive, holistic financial plans (of wealth accumulation and retirement income are but two components) based on a “solid, repeatable” process.

Employer-sponsored plans

Rick Mason, president of corporate markets at ING U.S. retirement, observed that the industry’s growing focus on income distribution planning is extending into the workplace. He said that about 12 percent of employers now offer a guaranteed income solution as part of their mutual fund line-up.

“This percentage is expected to more than double in the next year—a clear indication that plan sponsors recognize the benefits of these solutions,” he said. “The growth has been largely driven by small employers, for whom advisors can help articulate benefits and review details of solutions. But interest also is high at large, Fortune 500 companies.”

He noted that more than half of ING’s survey respondents “like the idea” of auto plan features like target-date funds: mutual funds that automatically reset the asset mix (stocks, bonds and cash equivalents) in a portfolio according to a selected time frame appropriate for an investor.

Investors, he added, also want plan flexibility and control: More than eight in 10 (83 percent of respondents) want to be able to access plan savings to meet emergency needs.

Underpinning the new in-plan 401(k) options is the need to address both market risk and longevity risk. More than 75 percent of plan participants, said Mason, are concerned about their long-term retirement security after having left the workforce.

By investing in an in-plan, indexed annuity income option, he said, plan participants can grow retirement savings in tandem with market gains while also securing a guaranteed income benefit for life.

“Companies will be increasingly involved in promoting the retirement readiness of workforces, as employers themselves stand to benefit,” Mason said in closing. “Those who defer retirement because a lack of readiness drive up benefit costs for employers and slow the entry of new, younger people into the labor force.”