The retirement planning landscape is evolving rapidly, and one area gaining significant attention is the decumulation phase – how individuals manage their assets and ensure long-term income after retirement.
Nate Moody of Lebel & Harriman Retirement Advisors explains that traditionally, the industry has focused heavily on helping people save for retirement, with less emphasis on the distribution phase.
“We get people to retirement,” he says, “and then as soon as they retire, we kick them out of the plan and say good luck.” This has left many retirees struggling with questions about how much they can withdraw each year and how long their savings will last.
One major innovation addressing this issue stems from the SECURE Act 1.0, which created a safe harbor for plan sponsors to add in-plan annuities, offering several advantages.
“When people hear annuities, the hair on their neck kind of stands up,” Moody acknowledges. But the inclusion of annuities within retirement plans can provide key benefits, such as fiduciary oversight, lower fees due to institutional pricing, and improved portability. This increased scrutiny ensures that annuities are only used when in the best interest of the client.
However, Moody points out that the industry is still grappling with where these annuities should fit into the retirement plan structure. He highlights three main options being explored:
Beyond these immediate developments, Moody sees a broader shift in the retirement and wealth-management industry. Historically, wealth management has relied on an asset-gathering model, in which advisors encouraged clients to roll their 401(k) assets into an IRA and charged a one percent management fee. But this model is being disrupted.
“What you’re going to start to see is assets remaining in retirement plans throughout retirement,” he predicts, citing reasons such as lower fees due to economies of scale and the availability of more complex investment products like annuities within the plan.
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