A Lifecycle Fund Product Offers Income for Life

"The entire industry is focusing on income generation and products like these are going to become more standard in the individual retirement space," Foley says.

The Advisor's Viewpoint

According to Prudential Retirement's 2006 Workplace Report on Retirement Planning study, 70% of workers aged between 55 and 64 would welcome an option that converts their defined contribution plan assets into a guaranteed lifetime income stream, and there is little doubt that income generation is one of the greatest concerns in the retirement finance space today. Advisors and plan sponsors expect it to be the overriding theme in the retirement finance industry this year, yet even while they expect an increasing number of new products to come out, there can never be a single product that can suit the needs of all individuals, says Gary Williams, an advisor and founder of Columbia, Maryland-based Williams Asset Management. Americans are becoming more and more conscious of the need to convert their savings into a regular paycheck to last them through their retirement, but how to actually do this will differ from person to person, and each individual will need to mix up their investment products in the ways best suited to them.

"Personally, I shy away from both immediate and deferred annuities, opting for a diversified allocation of tax-efficient dividend-/income-producing investments in the realm of mutual funds, ETFs, separately managed accounts, bonds, and CDs," Williams says. "I will typically stop reinvesting when the switch is flipped into

retirement and, instead, flow all income and dividends to a money market from which the monthly check will be sent from. The monthly check would be a flat dollar amount, increased annually for inflation."

This kind of modus operandi, of course, requires sound knowledge both on the part of advisors and their clients, of the different kinds of products that are out there. As such, nothing remains more important than education and making people understand what they want and how to get that, Foley says.

"We are seeing more education at the grassroots level, but we will need a quantum leap to really make people understand that what is important is not so much the product, but the process," he says. "We can come up with the most elegant solution in the world, but if no one feels comfortable putting their money into it because they don't understand it, it will be no good. We really believe that plan sponsors and advisors and those who make investment products need to put in place a comprehensive education plan to reach out to people over 50, who are the target audience for our kind of product."