Solutions for Retirement Income: How prepared is your advisor?

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Solutions for Retirement Income: How prepared is your advisor?

A robust 69% of advisors say they frequently encounter clients needing assistance with retirement planning, per a survey by Spectrem Group. Considering the graying of the Baby Boomers and the fact that, on average, 38% of clients plan to retire within the next 10 years, retirement income solutions are only going to grow in importance in the coming years.

Understanding what your options are is important. Making sure you and your advisor investigate and decide on the best choice or choices for your unique needs is important.

Annuities

An annuity is a contract typically sold by an insurance company that provides fixed or variable payments to an annuitant, either immediately or at a future date. Annuities can be constructed to cover two lives (significant others) or structured as joint and survivor. You can set them up to guarantee payments for a specific number of years (such as 20 years for example). However, annuities have received bad press due to some higher costs and commissions.

Systematic Withdrawal Plan

Systematic withdrawal allows retirees to receive distributions from their retirement accounts like an IRA, while letting their money continue to grow with a tax advantage.

“Laddered” Certificates of Deposit and Structured Bond Portfolios

Both of these strategies utilize a “book” or series of bonds or CDs that mature at different times, providing continuous income: one year, three year, five year, seven year and 10 year for example. As the investments mature, you could choose to use the money as income or reinvest.

These approaches not only represent different ways of providing retirement income but also represent different institutions that might be selected to manage the nest-egg. Systematic withdrawal plans are a feature of mutual funds; annuities are offered by insurance companies; certificates of deposit by banks; and broker and financial planners are typically used in setting up a structured bond portfolio.

Not all advisors may be familiar with all of these products and a majority of advisors report that they are interested in receiving additional help in order to better service their clients with retirement income planning. Because they are looking for more help and more training, there are certain solutions that may be missing from the arsenal of some advisors. For example, 50% of those surveyed do not have specialized investments for those seeking retirement income.

As the number of clients who are seeking these services increases, the pressure on advisors and providers to offer what may be hybrid products will increase. The search for the correct product for wealthy investors will continue until the void is filled. In this case, if what your advisor is offering for retirement income solutions doesn’t meet your needs, make sure you voice your concerns. It’s time for the market to react to what investors are needing from their retirement plans.