2018 Retirement Industry Crystal Ball

By John Iekel • January 19, 2018 • 0 Comments
A new year is under way. What might it portend for the retirement industry? An organization interested in retirement security gazes into the crystal ball to divine what these 365 days may bring.

The Institutional Retirement Income Council (IRIC) has offered its take on important trends and factors that will have a significant impact on retirement plans, professionals and participants in 2018.

In-plan retirement income solutions. The IRIC believes that the ability to provide workers with a means to have regular income during retirement income “will continue to evolve this year with a goal of providing retirement plan participants with more flexibility.” The need to make their retirement savings translate into adequate income is a major issue workers must confront as they prepare for their retirement, says the IRIC, which also suggests that the decline of pensions and rise of defined contribution plans brings that into sharp relief. According to the IRIC, facilitating regular income during retirement income will be a “critical component” of financial wellness programs aimed at increasing employees’ retirement readiness, and that the aging of the population heightens the importance of distribution of retirement assets.

Decumulation strategies. If it’s important to save and to have regular infusions of revenue during retirement if possible, it’s also important to have a plan for how to withdraw and spend funds from retirement plans. The IRIC expects that strategies and means for guaranteed and nonguaranteed decumulation “are likely to have a place” this year.

New tax law and retirement savings. The IRIC expects that the Tax Cuts and Jobs Act (TCJA), enacted in the waning days of 2017, could enhance the ability to save through a 401(k), but it also expects that the retirement industry likely will need to examine the TCJA’s ramifications and its impact on retirement plans and the industry.

Fiduciary risk. The IRIC contends that fiduciary risk has dampened innovation, new retirement income products and alternative investments. It believes that “helpful guidance” from the Department of Labor (DOL) and Treasury on annuities and other such products will help in adding retirement income strategies and that legislation also may help encourage retirement income and security.

Fiduciary rule. The IRIC argues that the partial implementation of the DOL’s fiduciary rule left parts of the rule in a “limbo of delay” and that uncertainty consumes the industry. Not only that, the Securities and Exchange Commission may add its own take on fiduciary governance before DOL action on its rule is complete. “For consultants, the rule and the integration of the SEC could bring further changes to business models and a continuation of the merger activity we saw in 2017,” says the IRIC.

Market conditions and correction.
The bull market continues, but IRIC notes that a market correction could present serious challenges to plans and participants.