The market for retirement income products is expanding, according to a new report from Financial Research Corp., “Cracking the Code to Retirement Income: Key Developments and Opportunities.”
Investors of all ages are recognizing the need for retirement income, according to FRC. While people of younger ages are purchasing these products, it appears that older investors are delaying taking income withdrawals until they reach their 70s.
The result, FRC said, is an opportunity to market retirement income products to a broader age segment.
At the same time, it appears that even some retirement accumulation products are incorporating retirement income elements, FRC said.
The report details the many types of retirement income products, including managed payout funds, i.e. endowment and maturity date funds; hybrid products; seven types of guaranteed annuities; and a new category of retirement products that may not have been recognized as retirement income products in the past.
“Addressing the retirement income opportunity really requires the industry to re-think how it helps investors plan and invest during their working years,” said Matt Schott, vice president and retirement income practice leader. “Right now, some products are designed primarily to help investors accumulate retirement-focused assets up to the date of their retirement, and then use other products to draw down those assets while guarding against the feared situation of outliving them.”
Schott said that investment firms are beginning to realize that incorporating insurance components in defined contribution products is necessary to help investors prepare to have income in their non-working years. “We see opportunities for firms to begin shifting the discussion to earlier points in the retirement process,” he said.
Leslie Prescott, author of the report, added: “The products that have been successful are those that have been designed to provide the investor with a blend among features that they find important, such as access, control and dependable income levels. A common thread is to provide the investor with a sense of a stable income floor with the potential for growth in that income as the investor moves into and through retirement.”