Page 23 - Investment Advisor February/March 2023

A look at six trends affecting the key

sources of retirement income, including
Social Security and annuities.

By John Manganaro

fter decades of prioritizing asset accumulation and its challenges, the
financial planning industry is now laser-focused on retirement income,
A according to many of the top financial planning professionals.
They generally agree that grappling with the “decumulation challenge” will
require all of an advisors’ skills and experience in 2023 and beyond. Being highly
skilled at retirement income planning will also be necessary for advisors’ continued
success from a business perspective, they warn, as clients who lack such support can
be expected to vote with their feet.
“Retirement, like life, is fundamentally uncertain,” David Blanchett, PGIM
DC Solutions managing director and head of retirement research, observes. “Not
only do we not know how long we’re going to live, we also don’t know things like
future market returns, future inflation, or even when we are going to retire. These
uncertainties make retirement planning one of the most difficult tasks for any
financial planner and their client to accomplish.”
The shift in focus from accumulation to spending is driven in no small part by
demographics — with 10,000 baby boomers retiring every day — but the aging of the
U.S. population is just one factor. Equally important, notes David Lau, founder and
CEO of DPL Financial Partners, is the simple fact that fewer and fewer Americans
expect to rely on guaranteed income provided by an employer pension.
The income planning effort is now something that the vast majority of individual
Americans must deal with, and thus they are increasingly turning to financial
planning professionals for support. For the typical American, structuring sustainable
retirement income will involve coordinating Social Security, workplace savings in
defined contribution plans, private savings accounts and potentially other income
sources, such as annuities, inheritance or the sale of a business.
As Lau, Blanchett and others agree, the 4% rule doesn’t fully cut it anymore,
and there is no silver bullet in the effort to “solve retirement income.” Instead,
advisors will have to help their clients utilize the full scope of the financial services
marketplace, while keeping on top of the latest trends impacting Social Security.
Getting clients’ retirement income plans right is not going to be easy, experts
agree, but it will ensure clients enjoy the stable and secure retirement they envision.

FEBRUARY/MARCH 2023 INVESTMENT ADVISOR 21