As noted by Pacific Life’s Reed Lloyd in a recent conversation with ThinkAdvisor, it is a basic fact of life in the U.S. today that traditional defined benefit pension plans are in decline.
Data from the Social Security Administration — and many other sources — backs up the statement. The SSA’s data, for example, shows the number of DB pension plans peaked around the mid-1980s, with some 175,000 DB plans being offered at that time. By the early 2000s, the number of DB pension plans had fallen to 48,000 total plans, and the number as of 2019 stood shy of 47,000 plans.
“Fewer and fewer employers today are offering DB plans, while the popularity of defined contribution style plans has increased dramatically,” Lloyd, who is an assistant vice president in the retirement strategies group at Pacific Life, said. “As a society and as an industry, we need to be cognizant of this fact and work to ensure people can secure a stable, guaranteed income into the future.”
Lloyd’s comments came during a ThinkAdvisor webinar that also featured Jamie Hopkins, managing partner of wealth solutions at Carson Group; Carolyn McClanahan, founder of Life Planning Partners Inc.; and Wade Pfau, principal and director at McLean Asset Management and RISA LLC. The group discussed and debated the “Future of Retirement,” with a particular focus on retirement income issues.
Despite their diverse industry roles and responsibilities, the panel fully agreed that the systemic shift in the U.S. retirement system — away from pensions and toward defined contribution plans — is one key trend that is upending traditional thinking about retirement income planning.
But they also pointed to other trends pertaining to Social Security claiming behavior, annuity product development and behavioral finance research that are having just as much of an impact on the future of retirement as the decline of pensions.
Here are five more important ways in which retirement planning is evolving for financial advisors and their clients, according to the panelists.