Advisers ready to focus on the increasingly important decumulation phase of retirement should look for increased flexibility and liquidity from income products, experts said.
With health care costs increasing and people living longer, having a plan for how to spend down assets has become a bigger concern, said Michael Kazanjian, Lincoln Financial Group's vice president for annuity and retirement plan services marketing, at the Insured Retirement Institute Marketing Summit near Washington on Thursday.
Even planning for 30-year retirements may not be enough.
"The first person who will live to be 150 years old already has been born," Mr. Kazanjian said. "I can't wait to see how insurance companies hedge against that risk."
As retirement income products continue to innovate, advisers should look for those that offer rising income potential, he said. Without such upside potential, it's like someone agreeing to accept a monthly paycheck that would never increase.
"We would never expect that to be OK," he said.
(More: The watershed moment for lifetime income)
Leveraging default investment options also can be a powerful way to steer behavior, said Mark Foley, Prudential Retirement's vice president for institutional investment solutions product development.
Programs such as automatic enrollment and automatic contribution increases have been shown to improve savings rates, Mr. Foley said.
Retirement plan investment defaults for participants that incorporate an income-paying stream could be a way to help aim retiree planning in the right direction, he added.
WITHDRAWAL INNOVATIONS
When it comes to retirement income strategies, withdrawal innovations are another option.
"We stand behind the 4% withdrawal rule, but it leaves a lot of money on the table," said Anna Dreyer,
T. Rowe Price's vice president for the asset allocation group.
(More: The right glide path for smaller accounts)
A more flexible withdrawal strategy may be one that foregoes the inflation adjustment when the market is down and supports a greater initial withdraw, Ms. Dreyer said.
Using target date funds in combination with a second-generation systematic withdrawal program is another way to implement a flexible, liquid income solution, she said.
Annuity products also were discussed at the IRI session.
Philip Pellegrino,
UBS Financial Services' executive director and head of annuities, said firms increasingly are offering investment-only variable annuities, which allow holders to defer taxes over time.
"These can be a good compliment to retirement income," he said.
