While there has not been widespread adoption of retirement income products by plan sponsors, the need remains — for many reasons. Ultimately the question will not be whether these products will be offered, but which ones. Advisors need to understand the issues involved in helping clients evaluate the various options.
A practicing plan advisor provides a comprehensive review of the issues and the types of retirement income products now offered, along with their pros and cons:
• Do participants want or need them? This can vary based on the demographics of the plan, including age, income and account balances; and the availability of a DB plan.
• Should participants be offered in-plan or at-retirement products?
• Should the products be guaranteed?
Just as with other types of investments, sponsors need to follow a documented prudent process that evaluates fees and returns. This process is similar to evaluating TDFs. At-retirement options carry less fiduciary responsibility but offer fewer opportunities for awareness and education during the accumulation phase. In-plan issues are led by restrictions on portability. And guarantees may seem attractive, but maybe not so much in a low-interest environment.
Plan sponsors tend to like being part of a herd, so peer acceptance is attractive — some plans are going so far as to offer retirement income products as their QDIAs.
Whether advisors use retirement income products for their clients or not, they should have a documented process to evaluate the options even if in the end they decide to wait.
