Looking to Curb Your Retirement Savings? That’s a Bad Idea

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By Brian O’Connell

Americans are doing what they can to deal with skyrocketing inflation.

According to a new survey from New York Life, U.S. adults say they’re cutting back on dining out, and are pushing back big-ticket items like vacations, buying a car, or buying a home. That’s understandable, as consumer prices are up 8.5% on a year-to-year basis through April 2022.

Americans are also curbing their emergency fund contributions, partly to keep focusing on long-term retirement savings, which haven’t hit the chopping block — yet. According to New York Life, monthly household savings contributions are falling by $243 (and $289 by millennials), yet 72% of respondents still expect to retire at their desired age.

Keep the Retirement Train Rolling

With so many Americans whittling away at the household budget, should retirement plan contributions be on the chopping block next?

No way, say investment experts.

“Lost good habits take a long time to recreate,” said Paul Tyler, chief marketing officer at Nassau Financial Group in Hartford, Conn. “It’s much better to learn how to live on less now than live with regret later.”

According to Tyler, when you stop contributing to a retirement fund, you lose a valuable money-growing tool — compound interest.

“Depending on the growth rate of your savings in the future, the compound effect – both positive and negative – can be eye-popping over a twenty-year period,” he said. “So even with the occasional downturns, putting money in a 401(k) or an annuity could prove to the best hedge yet against inflation.”

Other money managers say that retirement funding should be deemed as a major household financial priority, just like food, mortgage payments, and health insurance.

“It’s a big concern when I hear people tell me that they should cut back or reduce their retirement contributions,” said Ashley W. Folkes, director of growth at BridgeWorth Wealth Management. “I like to talk to clients about their financial priorities, very similar to a hierarchy of needs pyramid, as funding retirement is very much foundational to their futures.”

Unless you can’t put food on the table and gas in the tank to get to work, Folkes advises looking at the budget to find other ways to reduce costs.

“Cutting our back on retirement contributions may feel like the easier, softer way to reduce cost, but it can be detrimental,” he said. “It’s very similar to trying to time the market. We don’t know how long inflation will stay at these levels.”

“You’re not only missing out on putting money into a bucket to fund your future, you’re also missing out on buying funds when they are cheap,” he added.

If You Have to Cut Retirement Savings, Try This Approach

Preston P. Forman, a certified financial planner with Seasons of Advice Wealth Management in New York, said he has yet to see clients reduce retirement contributions. But if you have to cut long-term savings, take a short-term mindset.

“For most of this century inflation has been an afterthought but I expect some people will trim their 401(k) contribution,” he said. “After the pandemic, no one is in the mood to deprive themselves of anything.”

Forman advises clients to reduce, not eliminate, retirement contributions if necessary and then reevaluate in three months.

“By then often the storm has passed, and it’s a lot easier to increase a contribution from 10-to-12 percent than from 0-to-12 percent,” he said. “The funny thing is that many clients who were going to cut their contributions never get around to doing it. And that’s a good thing, ultimately.”

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersLooking to Curb Your Retirement Savings? That’s a Bad Idea
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Why Advisors Shouldn’t Dismiss Index-Linked Annuities

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Sales of protection-focused annuity products were higher in the fourth quarter of 2021 than the combined total of accumulation and income-focused annuities, according to data from the Secure Retirement Institute.

In fact, the sales of registered index-linked annuities (RILAs) have led the protection annuity charge with sales more than doubling from $4.3 billion in the second quarter of 2020 to $8.9 billion by the end of 2021.

What’s driving the appeal of protection products offered within an annuity wrapper? Why would any investor want a complex financial product that promises protection at the expense of significant upside? And why choose an annuity when similar products exist as ETFs?

In a new white paper written for the Retirement Income Institute, fellow American College Professor Wade Pfau and I take a deeper dive into a collection of financial products that offer varying loss protection and compare them to outcomes from a traditional investment portfolio.

How should advisors think about protected annuities?

First, they shouldn’t dismiss them as an inefficient gimmick. In a series of detailed articles written while he was head of retirement research at Morningstar, David Blanchett lays out the complex economics that underlie the potential benefits of financial products that use a combination of fixed income investments, equities, and financial options to create a customized distribution of outcomes.

Why might a retiree prefer an option-controlled retirement investment to a traditional long-only portfolio of stocks and bonds?

According to Nobel laureates Robert Merton and Myron Scholes, financial options can be used to construct investments that “can be used by investors to produce patterns of returns which are not reproducible by any simple strategy of combining stocks with bonds.” A retiree may prefer this altered distribution of possible returns to a conventional portfolio.

Limiting Risk

Consider a 60-year-old baby boomer who is five years away from retirement. The market has performed well over the last decade, and they have $500,000 invested today in the S&P 500 and $500,000 in bonds to fund the lifestyle they hope to lead.

The distribution of bond returns over the next five years is relatively narrow. The distribution of the overall portfolio is wider and depends primarily on five-year stock returns.

If we run a Monte Carlo analysis on the S&P 500, we can see how much their future wealth can vary by the time they retire at age 65. At the 10th percentile, they will have $410,000. At the 1st percentile, stocks will fall to $265,000. A lucky retiree at the 90th percentile will have over $1 million.

In five years, they should be able to withdraw about $22,000 from the portion of their portfolio invested in bonds (of course this is a simplification and ignores the potential risk of bonds, which can be significant as we’ve discovered recently).

If the retiree gets lucky and achieves the 90th percentile of returns, they’ll be able to withdraw $47,200 from their stocks based on the 4% rule. If they get unlucky at the 10th percentile, they’ll only be able to withdraw $16,400.

Is the retiree willing to accept the downside risk of spending $38,400 each year in order to achieve the potential upside of $69,200 if they get lucky? At lower percentiles the potential downside and upside become even more extreme (as low as $32,600 at the 1st percentile). Is this a risk the client is willing to accept?

An alternative is to give up some of the upside to cut off some (or all) of the downside risk. In a low interest rate environment, products with floors offer less upside potential and more closely resemble fixed income investments.

However, unlike the intermediate-term fixed income investments that constitute the bulk of an insurance company’s general account portfolio, products such as fixed indexed annuities (FIAs) won’t fall in value if interest rates spike.

In practical terms, the distribution of FIA outcomes in a low interest rate environment over five years ranges from 0% at the 1st percentile to 7% at the median to about 12% at the 95th percentile.

Growth is similar to expected growth on safe bonds but without the potential downside of term and credit risk. It should be noted that any attempt to position 0% floor products as “upside with no downside” is disingenuous since the upside is lower at the 95th percentile than a bond fund.

Purchasing a RILA with a -10% floor allows an investor to increase the potential upside to 19% at the 90th percentile. The upside is limited to the call options budget available to capture modest growth after the insurance company invests in bonds to guarantee returning 90% of principal.  A -10% floor allows a bigger options budget than a 0% floor.

Buffered RILAs

RILAs with a buffer allow an investor to accept a greater range of potential upside and downside outcomes. Buffered annuities are an interesting concept because they seem to be tailor-made for loss-averse investors. Why? The insurance company protects against the first 10% of losses, preventing small losses that often result in a big emotional response. However, investors are on the hook for losses beyond -10%.

For example, a -10% buffer would turn the -37% return from the S&P in 2008 into a -27% return. Big negative returns are far less common than small negative returns with a bell-shaped return distribution. Investors are completely protected against most losses and buffered against large ones.

Of course, there is a cost. The insurance company needs to employ an options strategy to provide the buffer. This will limit the upside potential of a RILA distribution. For example, at the 90th percentile a buffered annuity will have a 31% return over five years and taxable stocks will have an 87% return.

At the fifth percentile, a buffered RILA has a -8% return and stocks a -26% return. At any return below the 25th percentile, the buffered annuity provides a higher return than stocks and the difference increases toward the tail, resulting in significant downside protection.

Another Option

Another interesting protection annuity that performed well in our analyses is a variable annuity with a so-called guaranteed minimum accumulation benefit (GMAB).

The product used in our analysis offers a true five-year floor of -10%, resulting in a lower extreme downside than a buffered annuity. GMABs also provide more modest protection than RILAs against smaller downside outcomes with a -10% return at the 10th percentile and a 1% return at the 25th percentile.

The upside of a GMAB, however, was far higher than a buffered annuity with a 53% return at the 90th percentile and a 66% return at the 95th percentile.

For an investor who wants to get rid of any possibility that they will have to cut back significantly on spending if they get unlucky with their stock investments over the next five years while giving up only the more extreme upside outcomes if they get unlucky might find the GMAB product more attractive than an unprotected stock investment.

Deferring Gains

An additional advantage of holding nonqualified assets in products that use financial options to tailor an investment portfolio in an annuity wrapper is the ability to defer short-term gains until after a worker has retired.

This is particularly valuable when a worker is in a significantly lower tax bracket after retirement. Of course, gains could be further deferred if the annuity is turned into lifetime income using an immediate annuity that benefits from the exclusion ratio where only a portion of each payment is subject to income taxes.

The insurance companies who manage these products provide value by managing option trading on behalf of the advisor and providing guarantees that insulate a client from volatility swings that could increase option prices.

Option-protected portfolio strategies aren’t new, but the outcomes they produce appear to be increasingly popular among investors nearing retirement.

This shouldn’t be surprising since many retirees base their decisions about when to retire on the lifestyle they can generate from the investments they hold today. A negative return shock can result in a delayed retirement, or an unacceptable drop in lifestyle that could have been eliminated by cutting off some upside.

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersWhy Advisors Shouldn’t Dismiss Index-Linked Annuities
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Reverse Mortgages and Estate Planning

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Your home may be your most valuable asset and represent the largest portion of your estate. A reverse mortgage can help you hang onto that asset, by letting you tap into your accumulated home equity without having to sell the home. Still, the money you receive from the reverse mortgage will also have to be repaid after you die, reducing the value of your estate, possibly substantially. Here is what you need to know about reverse mortgages and estate planning.


  • If you have a reverse mortgage on your home, it will have to be paid off after you die, reducing the home’s value to your heirs.
  • The rules are different for spouses who inherit homes with reverse mortgages than for other heirs.
  • A reverse mortgage could allow you to supplement your retirement income without drawing down other assets in your estate.

What Happens to Your Reverse Mortgage After You Die?

When you leave a home with a reverse mortgage to someone, you’re also leaving them with responsibility for the mortgage. What they’ll need to do next depends on their relationship to you.

If Your Heir Is Your Spouse

Spouses who inherit a home with a reverse mortgage fall into three groups. Which group your spouse is in will determine whether they have a right to stay in the home and possibly continue to receive benefits from the reverse mortgage.

  • Co-borrowing spouse – A co-borrowing spouse is listed as such on the original loan documents. Any co-borrower (they don’t have to be your spouse) can stay in the home and continue to receive money from the reverse mortgage.
  • Eligible non-borrowing spouse – Spouses who didn’t qualify to be co-borrowers (typically because they were under age 62 when the loan was issued) can be listed on the mortgage as eligible non-borrowing spouses. If they meet certain other requirements, they can also remain in the home, but they won’t receive additional money from the reverse mortgage.
  • Ineligible non-borrowing spouse – Such spouses don’t meet the requirements for one of the first two categories. They must buy the home themselves if they wish to remain in it. They can also sell it.1

In the case of co-borrowing or eligible non-borrowing spouses, the home and reverse mortgage become part of their estate when they die.

(Please note that this article describes the rules for Federal Housing Administration (FHA)–insured home equity conversion mortgages (HECMs) originated on or after Aug. 4, 2014; older HECMs have somewhat different rules. The Consumer Financial Protection Bureau provides both sets of rules on its website.)2

If Your Heir Is Someone Other Than Your Spouse

If you leave your home to your children or other heirs who are not your spouse, they will not be eligible to keep the reverse mortgage; instead, they must pay it off within a specified time frame. Essentially, they will have three choices:

  • Sell the home –After they pay off the mortgage, anyequity that remains is theirs to keep.
  • Buy the home –They can also pay off the reverse mortgage with their own funds if they want to keep the home.
  • Deed the home over to the lender – This way of settling the debt is known as a “deed in lieu of foreclosure.”3

Fortunately, no matter how much you owe on a HECM, your heirs won’t be stuck with a net debt. The most they’re obligated to pay is either the full loan balance or 95% of the home’s appraised value, whichever is less. The FHA insurance will cover any difference.4

Your heirs may have to take action fairly quickly. Technically, they have only 30 days from receiving a due and payable notice from the lender, although they can ask for an extension of up to a year to give them time to sell the home or arrange for financing to buy it themselves.5 Which course they are likely to follow will depend on a variety of factors, including how attached they are to the home and how much debt it carries.

One suggestion you may see online is to use some of the proceeds of the reverse mortgage to buy a life insurance policy made payable to your heirs. This could provide them with sufficient cash to purchase the home after your death. However, you may need all the money you receive from the reverse mortgage to cover your living expenses and not have any left over to buy life insurance, which can also be costly in your later years. Still, this could be an option for some people.

If You Have Other Assets

Reverse mortgages may be of greatest appeal to people who lack retirement accounts, nonretirement investment accounts, or adequate cash savings, making their home their only significant financial asset.

For example, if you know your heirs would like to inherit your home, drawing on those other assets for income could make more sense than running up a large balance on a reverse mortgage. On the other hand, if your heirs don’t have any particular attachment to the home, borrowing against it can be a way to preserve your other assets for them.

Wade Pfau, author of Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement,notes that having a reverse mortgage to draw on is one way to protect your other assets in a bear market. Rather than being forced to sell investments when prices are down to supplement your income, you can tap the reverse mortgage for income until prices rise again.6 Of course, you’ll pay a price for that flexibility in terms of the reverse mortgage’s steep up-front costs.7

A reverse mortgage might also help protect your other assets if you ever face major long-term care costs. Bear in mind, though, that the mortgage will have to be repaid if you move out of the home and into a care facility for 12 consecutive months or more, unless you have a co-borrowing or an eligible non-borrowing spouse living in it.8

How Much Can You Borrow With a Reverse Mortgage?

How much you can borrow with a reverse mortgage depends on your age (or the age of your co-borrowing or eligible non-borrowing spouse, if they’re younger than you), the equity you have in your home, and current interest rates. The current maximum for a government-insured HECM is $970,800.7

Where Can You Get a Reverse Mortgage?

To get a HECM (the most common type of reverse mortgage), you must go through a lender approved by the FHA. There is a search tool for locating lenders on the website of the FHA’s parent organization, the U.S. Department of Housing and Urban Development (HUD).9

At What Age Do Most People Get Reverse Mortgages?

While you’re eligible for a reverse mortgage at age 62, most people who get one wait until later. A Consumer Financial Protection Bureau study found that in 2019, the latest year for which data is available, the median age of reverse mortgage borrowers was 73.10

The Bottom Line

Your home may represent a significant part of your estate and having a reverse mortgage on it will affect how much of its value your heirs will receive when you die. If you have financial assets in addition to your home, supplementing your income with a reverse mortgage can help you preserve them for your estate. Because your heirs will generally be responsible for paying off the loan when you die, it’s worth discussing the situation with them well in advance.

Today’s Refinance Rates Are Better Than Ever

$400,000 for 1.93% APR for a 15-year fixed mortgage. These low rates won’t last forever. Experts agree rates will likely rise 30% over the course of this year. Skip this month’s payment if you refinance today. Calculate your new payment and see how much you could save with LendingTree.

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersReverse Mortgages and Estate Planning
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Retirement Planning Is No Laughing Matter: WealthConductor CEO

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By Jane Wollman Rusoff

Approaching the challenge of retirement income planning in a lighthearted fashion may have friendliness written all over it, but it’s unlikely to be an effective strategy, argues Sheryl O’Connor, co-founder and CEO of the technology firm WealthConductor, in an interview with ThinkAdvisor.

“Retirement income planning is a deadly serious topic,” she says. “It’s scary.”

Engaging people through “games or funny videos” is “really insulting” — “and it isn’t going to help people save more,” she maintains.

What pre-retirees want, surveys show, is a written customized plan that gives them confidence they’ll conquer their “two top concerns” in retirement: the cost of health care and outliving their money, according to O’Connor, winner of two 2021 ThinkAdvisor LUMINARIES awards in Executive Leadership.

Advisors who specialize in the retirement planning distribution stage “are going to be the ones benefiting from the largest migration of assets from the accumulation phase to the distribution phase in the history of financial services,” O’Connor says in the interview.

“This represents the biggest opportunity that advisors have seen in at least 30 years,” she notes.

WealthConductor’s prime offering is its platform IncomeConductor, which supports advisors with an income distribution strategy customized to a client’s needs and goals.

Further, it helps advisors position themselves as specialists in retirement income distribution.

The online software is available to them on a subscription basis.

IncomeConductor pivots on the strategy of “time-segmented milestones,” devised by O’Connor’s partner Philip Lubinski, a veteran certified financial planner who developed the strategy of bucketing assets, she says.

The firm’s third co-founder is Tom O’Connor, chief marketing officer.

Because client and advisor collaborate on building the IncomeConductor plan, clients “are more likely to adhere to it,” Sheryl O’Connor says.

Before launching Hartford, Connecticut-based WealthConductor in 2017, she co-founded 3D Asset Management, an RIA where she built a turnkey asset management program designed to let advisors completely outsource their back-office administration.

Earlier — from 1998 to 2004 — she was with The Hartford and MassMutual.

In the interview, she describes IncomeConductor’s distinctive features and benefits — including sending alerts to advisors that “there are opportunities to take some risk off the table” — and how it differs from other bucket strategies.

A former schoolteacher, O’Connor is taking the industry to task for not “evolving correctly.”

“It is sticking with the old way of doing things. But we have to move forward and realize that retirement is different today,” she says.

“We can’t keep using the tools and strategies that we used for our parents’ generation for [today’s] generation,” she stresses.

Speaking by phone from South Windsor, Connecticut, O’Connor says: “There’s a lot of talk in the industry about financial wellness, financial education and client engagement. Those are great goals.

“But I don’t see anybody doing them really effectively,” she says.

Here are highlights of our conversation:

THINKADVISOR: What aspect of retirement planning is most critical for advisors to focus on today?

SHERYL O’CONNOR: Because of the huge wave of baby boomers going from a working career into retirement, we’re experiencing the largest migration of assets from the accumulation phase to the distribution phase in the history of financial services.

Therefore, people are looking for advisors to provide retirement income planning services.

This presents the biggest opportunity that advisors have seen in at least 30 years.

Advisors that specialize in this area are going to be the ones benefiting from the big change of assets from accumulation to distribution.

How can they approach this in the most effective way?

Retirement income planning is a deadly serious topic: People are starting a whole new phase of their lives full of unknowns. It’s scary. So the best way to engage them isn’t through games or funny videos. That’s really insulting.

Gamification isn’t going to sustain somebody’s interest and get across what they should do. It isn’t going to help people save more.

Why is being assured of a secure retirement so challenging?

Today’s retirees have to rely almost solely on Social Security benefits and what they’ve managed to save in a 401(k) plan or an outside account, or maybe an investment in property.

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersRetirement Planning Is No Laughing Matter: WealthConductor CEO
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RIAs Sell Verbs. Agents and Brokers Sell Nouns

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I love the insurance industry. It’s not the puppy love I felt when I leapt headfirst into leading my first insurance business. It’s not the coming-of-age identity struggle I faced as my career progressed and I had to decide whether to focus my energy on operations or strategy. Now, I’m talking mature love. When you love something the way I love the insurance industry, you don’t just care about it in your spare time. You want to see it flourish into the best version of itself. Over and over again.

The insurance industry is in an awkward position. It is plagued by product commoditization, prolonged low-interest rates, regulatory mandates ill-matched with insurance distribution, nontraditional entrants effecting tax and capital arbitrage, and generalized disruption. In advising my insurance company clients about how to innovate our way out of these circumstances, I often empathize with Bill Murray’s character in Groundhog Day. Until we begin to acknowledge, and maybe even embrace, the changes, we will be stuck in an endless loop where insurance is perceived as a commodity and where distribution is expensive (which makes products expensive!). Insurance in this world remains isolated from an increasingly integrated, fintech-driven, fee-conscious, financial advisory community.

State insurance regulation governs the conduct of agents and insurance brokers. It needs to be adapted to govern RIAs as well. Insurance advisement is a premise different from insurance sales, just as there is a big difference between the consumer experience of advice versus sales of securities. While some insurance professionals already consult on or about contracts for consumers, and legally charge a fee for doing so, this model is not mainstream for insurance distribution. Insurance regulation currently occurs at the point of sale and does not contemplate ongoing advice. It should be adapted to do so. Such an adaptation would facilitate a transformation of both insurance, which means liability management, and wealth management as disciplines.

There is no direct corollary to the ’40 Act for insurance. There is no national authority that can define the meaning of the term “insurance advis(o)er.” There is no independent national source upon which financial professionals can rely for accurate annuity conduct, oversight and advice.

We are all receiving a high volume of rapidly changing regulatory guidance. It is not always clear how it applies to the nascent world of “insurance advice.” I empathize with the advisors who tell me that there is not one place they feel they can turn to for definitive guidance about what their responsibilities are for various forms of annuity transactions. To try and assist advisors who feel this way, I have compiled the table below. This is not legal advice, but I hope it gives a starting point for a broader discussion in the industry.

Michelle Richter’s Non-Lawyer Best Guess on Applicability of Various Laws to Different Types of Annuity Transactions. Feedback welcome, especially from financial regulatory lawyers!

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Ashley SaundersRIAs Sell Verbs. Agents and Brokers Sell Nouns
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The Institute of Financial Wellness Introduces Advisory Board of Nationally Noted Thought Leaders

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America’s first-of-its-kind multi-media financial education content network observes National Financial Literacy Month by expanding its platform of unbiased financial education, resources and services

MIAMIApril 20, 2022 /PRNewswire/ — In conjunction with National Financial Literacy Month in April, the Institute of Financial Wellness today announced the establishment of an advisory board comprised of nationally noted thought-leaders in the financial services, business, insurance, entertainment, health and wellness industries. These experts support IFW’s educational mission by providing valuable perspectives and advice for Americans at all stages of life.

Launched in the fall of 2021, IFW is America’s multi-media platform providing free access to all the financial information and resources people need to develop customized strategies for every stage of life. IFW’s financial services thought-leaders, digital media veterans, and financial professionals developed the first-of-a-kind platform as well as a Financial Professional Network to enable customers to implement their customized plans.

The advisory board members include:

Fabrice Braunrot, IFW Financial Services / Health & Wellness Expert
Fabrice Braunrot retired from JPMorgan Chase as a Vice-Chairman of the JPMorgan Private Bank in 2018, after a 34-year career working in LondonNew York and Chicago. Currently, he is a Director of Spiral Sun Ventures, as well as an advisor to Tensility Ventures and Genivity/HALO. Braunrot has a bachelor’s degree and a master’s degree in modern history from the University of Oxford (Oriel College).

Renee Haugerud, IFW Commodities Expert / Female & Young Women in Finance Advocate
Renée Haugerud is the Founder, Chief Investment Officer, and Managing Principal of Galtere Inc., founded in 1997. She is an investment advisor focused on top-down real asset macro themes, allocating across global asset classes. Throughout her 40-plus year investment career, Haugerud acquired expertise across all asset classes, through posts in the U.S., Canada, the U.K., SwitzerlandAustralia, and Hong Kong. She began her tenure in financial markets by trading cash commodity markets in The United States and Canada. Active in the community of women and business leaders, she advocates for numerous global education initiatives.

Tom Hegna, IFW Retirement Income Expert
Tom Hegna, CLU, ChFC, CASL, is an acclaimed author, speaker, and economist widely known as “THE” retirement income expert. As a former Senior Executive Officer at New York Life, retired Lieutenant Colonel, and economist, he has delivered over 5,000 seminars, helping baby boomers and seniors retire the “optimal” way. Hegna specializes in creating simple and powerful retirement solutions based on math and science – not opinions.

David Adefeso, IFW College Planning & Investment Strategy
David Adefeso is the Chief Executive Officer of the Pacific Group, a full-service investment advisory firm for new investors and experienced investors alike, and Sootchy, a mobile technology platform used to combat United States student debt. Upon graduating from Harvard Business School with a master’s degree in business administration, he worked as a Certified Public Accountant and a Wall Street Investment Banker with Wasserstein Perella & Co. and Salomon Smith Barney. After this, he founded Sootchy with the idea that all children could enjoy higher education without the crippling debt that comes with student loans.

Malik Yoba, IFW Inner City & Urban Community Development / Arts & Entertainment Advocate
The three-time NAACP Image Award Winner is probably best known for his roles as an actor in the 1993 Disney classic, Cool Runnings, and the hit Fox television series Empire and New York Undercover. As an actor, writer, director, producer, musician, activist, educator, inspirational speaker, entrepreneur, and author, Yoba tackles his quest to live a purpose-filled life and not only entertain but also educate young and old alike in communities across the world on the value of accountability, integrity, and leadership.

Joe Jordan, IFW Behavioral Finance Expert
Joe Jordan, inspirational speaker, behavioral finance expert and award-winning author, is a founder of the Insured Retirement Institute and has been featured on the cover of Life Insurance Selling magazine. He previously ran insurance sales at Paine Webber and more recently was a senior vice president at MetLife. Jordan. For three consecutive years, he has been honored by Irish America magazine as one of the “Top 50 Irish Americans on Wall Street.”

Laurie Sallarulo, IFW Student Leader of Financial Education & Entrepreneurship
CEO Junior Achievement South Florida
Elevating through the corporate ranks to CFO, Laurie developed the skills that take organizations from struggling to good to great. She transitioned to the non-profit sector as a CEO, applying her business and relationship-building experience to satisfy her passion for helping young people and rising, middle and female managers prepare to lead. She currently serves as Governor Appointed Chair of the Early Learning Coalition of Broward and is a member of the Florida Early Learning Advisory Council.

Dawn Nic, Money and Psychology Expert
Dawn Nic, CCH, CLC, an author and certified life and health coach, studied medical sciences at Harvard University and received an MDC in neuroscience and pathology. She is the founder of Whole Self Approach and the Whole Self Approach method, and has authored several self-help workbooks. She has also created TFEE (Teens for Empowering Each Other), a program to empower teens to be kind and compassionate instead of bulling one another.

Kristin Chenoweth, IFW Arts Advocate
Emmy and Tony Award-winning actress and singer Kristin Chenoweth’s career spans film, television, voiceover, and stage. In 2015, Chenoweth received a coveted star on The Hollywood Walk of Fame. Chenoweth is a graduate of Oklahoma City University with a master’s degree in opera performance.

“On National Financial Literacy Month, we are thrilled to introduce our advisory board of esteemed thought leaders as part of our mission to promote financial literacy and wellbeing,” said IFW CEO Erik Sussman. “We will continue to keep a close pulse on the changing needs and preferences of our audiences and expand our platform in response to a growing demand for our fact-based, agnostic financial education, resources and services.”

About the Institute of Financial Wellness
The Institute of Financial Wellness is America’s first multi-media financial education company providing free access to the unbiased, engaging, fact-based information Americans need to ensure their best lives. Established by professionals with decades of experience running financial services firms and media companies, the IFW seeks to serve as America’s most trusted company for financial education, resources and services. More information is available at

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401k Education Without Walls And Beyond Boundaries

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By Christopher Carosa

Finance is hard. It’s harder if you’ve never learned about it. Chances are if you’re an adult you’ve had precious little in terms of financial literacy training. In fact, the most exposure you’ve had might probably be at your regular 401k employee meeting. That likely isn’t the ideal environment to learn.

“In adult learning, we say that adults learn what they want to learn when they want to learn it,” says Jay Zigmont, Founder of Live, Learn, Plan in Water Valley, Mississippi. “The best chance we have to help adults to change is to have resources ready for them when they need them. Adults want to learn when they are going through or preparing for some transition or life event. For example, when they are starting a job there may be an opportunity for them to learn about benefits and the impact on their financial plan.”

Certainly, having new hires sit down and learn about company benefits is standard fare for the company onboarding process. But doesn’t this also represent an opportunity to think outside the box? Because a new job often suggests a major change in one’s life, the onboarding experience can be redesigned to address employee needs beyond the walls of the conference room.

Paul Tyler, CMO at Nassau Financial Group in Hartford, Connecticut, says, “We’re often guilty of creating too much art for ourselves. Unfortunately, many tools and books are written by and for the already-financially literate population. We, as an industry, need to listen harder to the real financial problems faced by those with little knowledge and large needs. And then we must rethink the tools we build that will help deliver relevant solutions for them.”

“Employers and retirement plan sponsors should provide more holistic financial education resources as opposed to content that is singular in focus on retirement planning only,” says Courtney Hale, Chief Hope Dealer at Super Money Kids Co. in Nashville, Tennessee. “It’s really difficult to adequately contribute to retirement when you are buried by student loans and paying for daycare in a city with a high cost of living. Our monthly budget impacts how much we are able to contribute to retirement. Our debt repayment plan impacts our budget which impacts how much we are able to contribute to retirement and so forth. There needs to be more emphasis on how these things can work together for a more prosperous future.”

Still, the very mechanism of delivery may be faulty.

“Employers have the administrator of their company 401k plan provide seminars,” says Havis T. Bardouille of Bardouille Financial and host of the Tuesdays with Terrence Financial Insights Podcast in Lancaster, South Carolina. “But just because they offer them, does not mean their employees understand them fully. They can follow up with ongoing series, workshops, or resource documents. Mailers and social media campaigns are great options too for adults who are more private and may not want to attend a public gathering to alert others that they lack financial knowledge. Adults learning financial literacy need to be taught more strategically and customized for their later stages in life to take away the difficulty of the task. They need long-term tailor-made plans, but also, quick tips that are valuable and strategic, that can reveal results quickly.”

One of the most cost-effective methods for addressing the challenges of employee financial literacy training is video.

“Video gives people the most amount of information in the shortest amount of time,” says Robert Weiss, President of MultiVision Digital in New York City, who has produced over 1,000 videos over the past 11 years, many of them on the subject of money. “When busy people go to learn, they seek video first. Video tells as opposed to having them read and figure things out. Video is easy to rewatch and share versus re-read.”

In addition to offering the advantage of privacy, videos have no bounds of use. It’s been around for a while, but NetFlix et al have made ‘binge-watching’ a social norm. Is this habit about to trickle down into 401k education and financial literacy in general?

“Employees can access the videos on their own time when they’re most able to absorb the information,” says Shawn Plummer, CEO of The Annuity Expert in Atlanta, Georgia. “What’s more, many of the concepts can be hard to grasp at first, but with rewatching, closed captions, and transcripts, the information absorption becomes easier.”

Imagine what you do when you want to learn how to fix something in your house that you’ve never fixed before. You look it up on the internet and read how to do it. After going through a few articles and still not confident you know enough, you through in the towel and play a video that shows you how to do it.

This works for what ever appliance, yard tool, or stingy stain you need answers on. And it’s right there at your figure tips whenever you need it. Wouldn’t it be great to find financial solutions the same way?

“For especially dense topics, videos are a way to make personal finance content more engaging and easier to understand,” says Gabi Slemer, CEO & founder of Finasana in Fort Lauderdale, Florida. “A video library can also be tailored to individuals’ interests and needs so that they can watch only the topics that interest them and therefore are more likely to be fully engaged than during a traditional meeting.”

To be truly effective, 401k plan sponsors can’t rely on just one generic video. You need a fairly comprehensive selection to address the variety of needs out there. You never know when someone has a desire to learn something. An extensive array of short videos covering narrow topics provides an efficient way for employees to gain more satisfaction with the benefits package offered by the company.

“Online video libraries give adults time to process the information,” says Jerry Han, CMO of PrizeRebel in Los Angeles, California. “Assignments and application sessions are highly personal, and many adults don’t have the time to do them immediately. Online video libraries give them time to process the information. The e-learning experience becomes much more effective when adults can set aside a 20-minute session for learning. In-person education meetings are usually given in lecture form, not giving students the time to truly dig into the information. In-person 401k educational meetings don’t give adults preferential times for learning. That usually means adults suffer from fatigue and don’t understand difficult material when given in large doses.”

And going back to that household repair process, where you really take your time before acting, financial videos can give employees the confidence – and the time – to make those important financial decisions.

“401k videos can provide real-life applications and connect to e-learning activities,” says Stewart Dunlop, Founder of LinkBuilder in Edinburgh, Scotland. “Traditional in-person training often doesn’t go into depth. Videos allow for tangents, for moving into directions most in-person training can’t due to time constraints.”

Now that you understand the value of video, you’re probably wondering about some of the more practical aspects of the medium. For example, how long should videos be? Here, you’ll find answers from across the spectrum.

Slemer says, “3 to 5 minutes, consistent with adult learning principles. Shorter videos are better at keeping attention spans and allowing individuals to process one topic at a time and fully grasp it before moving on to the next. Ideally, a library with sequential videos that cover micro topics one at a time.”

Han, on the other hand, says, “20-minute videos are the best length. Humans generally struggle to focus after 25 minutes, so retaining optimal focus during education settings gives them the time to fully devote themselves to learning. Breaking those videos into chapters and sessions is also helpful. If adults only have a short time to learn, they can always refer back to chapters within videos to pick up where they left off.”

In the spirit of not-too-hot/not-too-cold, Plummer says, “Try to stick to the 10-15 minute mark. You’ll notice that most online courses follow this rule of thumb as well. It’s a standard across information genres.”

But Weiss provides the answer you’d expect from a film producer. He says it “depends on the content at hand.  There is no rule aside from ‘never make a video longer than it has to be.’”

The next most important question is how do you arrange the material. Even though videos can be short and focus only on one small topic, that doesn’t mean they can’t be sorted into broader categories.

“When it comes to financial literacy topics,” says Slemer, “there are three basic rules that make up overall financial planning: (1) save money, (2) avoid (or get out of) bad debt, and (3) invest for the future. Of course, each of these topics can be further broken down into greater detail to be fully explained, which is where a video series comes in!”

You’ll probably want to find the right talent for the videos you offer. That doesn’t mean you’ll be making the videos. Someone else will. You just want to know about the folks creating that content. After all, just because you can do an internet search for financial literacy videos doesn’t mean the advice and lessons offered in those videos are sound.

“The challenge right now is that the primary resource people use when they want to learn may be the Internet,” says Zigmont. “The Internet allows you to have information at your fingertips, but without context. The result for many people is that they end up trying to solve each problem with whatever is popular that day, resulting in a financial plan that is disjointed and not heading towards their goals.”

Although it’s good to have some entertainment value in these videos, don’t lose sight of their real purpose.

“Videos need to be relatable enough that users will benefit from them,” says Slemer. “However, relatability is not a substitution for education and knowledge. You should always ask questions about the creators’ background: why are they giving me financial advice, are they qualified to do so (and if so, by whom?), and why should I trust them? If you can’t answer these questions, I would strongly suggest fact-checking the information you get with more reputable sources!”

One obvious/not-so-obvious choice is people who teach for a living.

“Financial educators should make the videos,” says Dunlop. “Professors in finance understand the basics of retirement contribution law. Because most financial educators have experience in online courses (due to COVID), they can provide a solid outline. Professionals within the 401k sphere. They can answer questions regarding fees, the best financial options for 401k support, and how to create your own should you work for yourself.”

How can you be sure your video library is accessible to your employees? Are these videos better delivered on an open platform like YouTube or behind an “employees” company website?

“If you’re making your own videos for a limited audience (employees, namely), then keep them on your own platform,” says Plummer. “YouTube gives you a lot of data on your viewers, which isn’t useful information if you’re not trying to build an audience. You can keep the videos on YouTube unlisted if you need to use their platform.”

It’s generally easier to control how videos are stored on the “library shelf” if you use the company website. Already YouTube does allow for something similar to this, navigating their platform requires a certain level of internet familiarity and intuition. This isn’t something you can count on among every single employee.

“The benefit of an open platform like YouTube is that the content is widely available and accessible to everyone,” says Slemer. “The detriment, however, is that by its very nature the content ends up being viewed as a one-off and not part of a sequence, which can be harmful to overall comprehension and understanding because it then becomes difficult to conceptualize as part of a greater topic.”

Finally, it’s important to remember no single method of delivery is foolproof. They all have shortcomings, including video. The bigger question is how to overcome these shortcomings (if you can).

“When you create mass content via any delivery method (such as videos), you’re generally creating content for the lowest common denominator within your target audience,” says Slemer. “As a huge proponent of eliminating jargon and answering the ‘stupid’ questions that are on everyone’s mind, I find videos to be a huge advantage to help level the playing field. Having said that, this means that the content can be quite generalized, and people may feel that it isn’t specific enough to their situation, which can be mitigated by ancillary offerings, such as 1×1 guidance or Q&A.”

That lack of live talent is the major drawback of videos.

“Videos don’t offer immediate support,” says Han. “If you have questions, teachers can’t immediately answer them. Only 48% of people believe that e-learning is as effective as online learning, mostly because they can’t ask questions. Provide FAQ sections for every section. Assign someone with no experience to go through the video and answer their questions in a FAQ section. The more people you ask, the more in-depth your course becomes.”

Oddly enough, while the lack of a live teacher presents one problem, the lack of a live audience provides another.

“On the other end of the spectrum,” says Slemer, “it’s also incredibly easy to fall prey to the ‘curse of knowledge,’ especially when you don’t have a captive audience giving you live feedback and asking questions. The curse of knowledge is a cognitive bias that occurs when you unknowingly assume that others have the background to understand the information you are conveying (enter: ‘jargon’). You overcome this by creating a community and tailoring your videos to their needs.”

In a few years, employee 401k education meetings might be a thing of the past. In the future, it’ll be all about those weekend 401k education binge parties.

Break out the popcorn!

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley Saunders401k Education Without Walls And Beyond Boundaries
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Listening To The Best And The Brightest by Jack Sharry

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I built my career on listening. I especially enjoy good storytellers. With the pandemic making conversations harder to have, I launched a podcast, WealthTech on Deck. Then I invited the brightest leaders in our industry to share their perspectives on the confluence of technology and human advice and the epic disruption in financial advice today.

Sixty guests, 3,600 listeners, 9,600 downloads and 50 episodes later, here are some lessons this listener learned.

1. Investors want to maximize retirement income. Now. People are turning 65 at the rate of 10,000 a day, rising to 12,000 in a few years. The pandemic accelerated retirements. As advisors know well: The demand for services to maximize retirement income is white-hot.

Our industry knew this was coming for years. Still, its response was more focused on producing great products than answering every retiree’s questions: How do I secure a retirement paycheck from my multiple accounts, products, custodians and advisors? And how do I make sure that I don’t outlive my assets?

Len Reinhart, the founder of Lockwood Advisors and arguably the founder of the advisory industry, wrote a paper on this 20 years ago. He explained that investors and advisors would benefit by coordinating all assets, managing household portfolios and achieving alpha by addressing cost, risk and taxes.

“When we talk about moving from accumulation to decumulation, it really is the time for the portfolios to be working in concert with each other as an orchestra, instead of being managed in pieces,” said Rose Palazzo, former head of financial planning at Morgan Stanley, now Group Head at Envestnet|MoneyGuide.

John Thiel, former head of wealth management at Merrill Lynch, said: “We need to have a decumulation strategy that is simple, direct … consumable, and that people can execute in a relatively simple and easy way.”

Now that the number of retirements is hitting record highs, firms are spending billions in the race to build comprehensive advice platforms to achieve what Reinhart described two decades ago.

2. Defined contribution/401(k) fintechs are winning the battle for new clients. The workplace is the new financial advice lobby. Ed Murphy, CEO of Empower, and Aaron Schumm, CEO of Vestwell, are two leaders who have found fertile ground in defined contribution plans and participants.

Empower is now the No. 2 record keeper behind Fidelity. Both firms work closely with advisors and wealth management firms. Empower bought Personal Capital as it looks to capture eventual rollovers down the road.

What Empower, Vestwell and others have latched onto is the fact that individuals often develop their first investment relationship at work often through a 401(k). “Seventy-five percent of individuals, the first dollar they ever save is through the workplace,” Schumm said.

That spells “opportunity” as investors climb the salary ladder, and invest more. Both Empower and Vestwell work with firms, such as Morgan Stanley, that recognize if they earn the trust of workplace savers, they can win them over as wealth management clients.

“There are 128 million mass affluent households, and many are underserved today,” Murphy said, adding, “those customers have real needs, whether it’s retirement, college savings or emergency savings.”

3. Find your inner Ted Lasso because advisors’ hats will say, ‘Coach.’ We know how intertwined money is with hopes and dreams. Financial advisors have tended to focus on investment strategies. But clients expect much more than that today, several guests told me.

Both Frank McAleer and Steve Gresham talked to me about the disconnect between what investors want—and what advisors are equipped to give. Their biggest questions are about health care and outliving their money.

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Ashley SaundersListening To The Best And The Brightest by Jack Sharry
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TIPS and Annuities Good Bets When Inflation Is High with Wade Pfau

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Higher inflation means advisors need to be more efficient in positioning client assets for retirement, says Wade Pfau, professor of retirement income at the American College of Financial Services and a prolific author, his most recent book being the “Retirement Planning Guidebook.” He also writes the Retirement Research blog with Bob French and Alex Murguia.

In our ongoing VIP series, Pfau noted that using reserve funds was a good way for retirees to get through this higher inflationary period. Here are his responses to our series of questions.

Inflation has jumped 7.9% over the last 12 months. How would you counsel advisors to prepare clients for either pre- or post-retirement portfolios with this threat? What are the best options now?

Higher inflation requires being more efficient with positioning assets for retirement expenses. Rather than using traditional bonds, [Treasury inflation-protected securities] will help manage high inflation, and annuities with lifetime income can provide an extra kicker beyond the bond interest alone. A well-diversified investment portfolio, over time, provides opportunity to keep pace with inflation.

The Social Security COLA, which was raised to 5.9% this year, is now lagging current inflation rates. What is the best way for advisors to help retirees to counteract the crunch they are taking to their Social Security benefits (especially if they already are collecting benefits)?

Right, the COLAs only happen once a year and so start to lag inflation throughout the year. If some reserve funds are set aside for unanticipated expenses, higher than expected inflation could be a valid use for such funds.

What is your opinion on whether the COLA index should be changed from CPI-W to CPI-Elderly? 

I think this is a relatively minor issue and not a pressing need.

Do you believe that Congress will step up and make changes to Social Security, including making the appropriate funding, in the next couple years? Why or why not?

I don’t think we can expect Congress to act on Social Security until we get closer to the deadline when action will be needed, which is still not expected to happen until the early 2030s.

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Ashley SaundersTIPS and Annuities Good Bets When Inflation Is High with Wade Pfau
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Retirement Plan Participants Need Help With Retirement Income

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By Rebecca Moore

OUTLIVING THEIR ASSETS is cited by individuals as a top fear about retirement in multiple studies throughout the years.

“Eventually people will retire and will need some help with income,” says David Will, senior financial adviser at CAPTRUST in Allentown, Pennsylvania.

From systematic withdrawals from defined contribution plans to annuities that guarantee a certain income stream in retirement, there are a range of options for plan sponsors to help participants create and manage retirement income. Will suggests that, whether considering an in-plan or out-of-plan income solution or not, plan sponsors should proactively change their plan design to allow systematic withdrawals—periodic or installment payments.

“We’re hearing more from plan sponsors about the need for and interest in retirement income solutions,” says Joel Schiffman, head of intermediary distribution at Schroders in New York City. “I think the challenge remains what direction they should go. It seems everyone’s looking but no one is sure of the right method to take.”

In-plan options are getting more attention these days both because of the Setting Every Community Up for Retirement Enhancement Act and plan sponsor preference for keeping retirees’ assets in the plan, says Michelle Richter, executive director at the Institutional Retirement Income Council, in New York City. She notes that the preference to retain retiree assets has changed from 10 years ago when most did not want to do so. When recently polled, 70% of plan sponsors indicated they do. “This is one reason plan sponsors are seeing a need to create a retirement tier in their plans,” she says.

Another impetus for retaining retiree assets and offering income solutions for them is the Department of Labor’s point of view on rollovers, according to Richter. “Its establishment of PTE 2020-02 signals it wants to prevent rollovers because participants can access less expensive solutions via the plan, and the DOL said in the last year that retention of assets in-plan is a top priority,” she says.

In-plan retirement income solutions that exist range from guaranteed minimum withdrawal benefits, or GMWBs, which is the most flexible and maintains market participation throughout the investment lifecycle, to qualified longevity annuity contracts, or QLACs, which guarantees a nominal amount of retirement income at a certain age in the future. Richter says the range of in-plan solutions are set by those two limits: a GMWB is the most liquid and offers the greatest level of market participation, and a QLAC is the least liquid and offers the lowest level of market participation.

“The challenge is trying to make sense of the alphabet soup of options,” says Richter. “Plan fiduciaries are going to need to become educated on these solutions and what their responsibilities are.”

To help plan sponsors decide which solution to offer participants, Broadridge Fi360 Solutions, Cannex, and Fiduciary Insurance Services have created a consortium that offers two prongs of activities to enable plan sponsors and advisers to become knowledgeable about the choices, says Richter, who helped to create the consortium. “Education on a monthly basis for at least a year and a half is free to plan sponsors and advisers,” she says.

The second prong is to establish objective metrics around each offering to determine which retirement income solution fits plan participant characteristics, Richter explains. “Whether a workforce has longer tenure employees or shorter tenure employees, skews older or younger, as well as their different saving attributes all matter in the process of evaluation for the appropriate retirement income solution,” she says.

“The objective of the consortium is to relay one appropriate process to evaluate which solution is best for a plan, given its attributes,” Richter adds.

As an example, Richter says one product exists that gives accumulation credits. The longer a participant is in that product, the greater the accrual experience towards the rate at which they can annuitize assets. “The product has a unique design where it is more useful for a plan sponsor that has a workforce that tends to be longer tenure,” she explains.

“Knowing the characteristics of each product will help plan sponsors understand how the product will work for its participants,” she says.

Schiffman notes that since the SECURE Act was passed, there’s been a proliferation of retirement income products, but nothing has really caught on at this point. “There is no silver bullet. I think as products come out and plan sponsors dig deeper, they’ll offer multiple options to plan participants,” he says. “Maybe they’ll offer some combination of guaranteed and not guaranteed solutions. The idea of having insurance doesn’t appeal to everyone, and guarantees sound good, but they are costly and complex.”

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The discussion is not meant to provide any legal, tax, or investment advice with respect to the purchase of an insurance product. A comprehensive evaluation of a consumer’s needs and financial situation should always occur in order to help determine if an insurance product may be appropriate for each unique situation.

Ashley SaundersRetirement Plan Participants Need Help With Retirement Income
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