Data and Research June 3, 2015

DC Participants Feel Angst Over Retirement Costs

Many retirement plan participants worry about being able to meet their expenses in retirement.
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Even with money accumulating in defined contribution (DC) accounts against the day they will stop working, many retirement plan participants are afraid they will have too little to protect them from the steep costs that come with retiring and getting older, according to a new report from Spectrem Group.

“Financial Attitudes and Concerns of Retirement Plan Participants,” the company’s latest plan participant report, examines the personal and financial factors that affect investors in defined contribution plans.

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Whether investment decisions and concerns involve the health of a spouse, getting adequate adviser help, or a low plan balance, plan participants are unique investors with specific attitudes and concerns that affect their investment behaviors.

Key findings from the report include:

  • Only half of participants believe they will have enough retirement income to live comfortably in retirement;
  • The cost of health care is the top financial concern of plan participants, who fear their retirement account balances will be depleted in retirement; and
  • Tax increases, the political environment and inflation are the top national concerns of plan participants.

The economy is a major concern for defined contribution plan participants, according to George Walper Jr., president of Spectrem Group. Walper believes more education about how participants can protect their investments in another significant downturn would be a benefit for them. “They’re also very concerned that health care costs will deplete their savings, and keep a close eye on issues that will affect their plan balances,” Walper says. 

More information about the report, including how to purchase it, is at Spectrem’s website.

Products June 3, 2015

Franklin Templeton Premieres Payout Fund Series

The five-fund lineup offers a flexible drawdown solution.
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Franklin Templeton Investments has rolled out a fund series aimed at helping new retirees draw down the savings from their defined contribution (DC) plan.

The Franklin Retirement Payout Fund series, with funds maturing annually from 2017 through 2021, provides plan participants entering retirement with a payout schedule, which they can adjust to coincide with their expenses, producing a cash flow as needed. This structure can be especially helpful for those confronted with their entire investment account and unsure how to apportion withdrawals. In fact, Franklin Templeton’s Retirement Income Strategies and Expectations (RISE) survey, conducted earlier this year, found that 52% of respondents are concerned about how they will manage their money in retirement.

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Participants may also reinvest their proceeds as new funds in the series come available.

“The flexibility of this innovative approach not only seeks to make spending in retirement simpler and more straightforward, it is also adjustable, allowing participants to change their strategy as they see fit through a simple exchange or redemption,” says Drew Carrington, head of institutional DCIO [defined contribution investment only] for Franklin Templeton.

He also notes that the funds should appeal to plan sponsors, as the open-ended mutual fund structure seeks to address fiduciary, recordkeeping and portability issues that have heretofore made in-plan retirement income solutions less attractive.

The series combines the more predictable principal repayment features of individual bonds with the diversification potential of traditional fixed-income funds, according to Roger Bayston, the funds’ portfolio manager at Franklin Templeton Fixed Income Group.

The funds invest primarily in U.S. dollar-denominated investment-grade fixed-income securities, including government and corporate debt securities, asset-backed securities and municipal securities of a fixed or variable rate. Some assets may be invested in U.S. dollar-denominated foreign securities.

Franklin Templeton Investments, a global investment manager, reports that it has more than $894 billion in assets under management as of April 30.

More information about the funds is at Franklin Templeton’s website.

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