The Retirement Income Gap

A BlackRock and EBRI analysis (from Think Advisor, July 9th) suggests that older retirees are further from being retirement ready than their younger counterparts… go figure.

Ironically, since most benefit plan investors (really speculators) at all ages are market value focused instead of income focused, this observation will likely be the same ten years from now.

… and this is so easy to fix, if plan participants are forced to start thinking “income” from the get-go. Retirement readiness is a planning issue that “target date funds” and most other 401k product shopping menus are just not equipped to deal with.

Plan advisors, fiduciaries, and plan sponsors need to make sure they have “serious income production options” in the benefit plans they are advising.

What if you could liquidate your “all time high market value with nearly zero programmed income” benefit plan balances and trade them in for a 5% or so compound income machine that is convertible, security for security, at retirement? You can. And, at retirement, you’ll actually be able to increase the income production significantly with a few simple tweaks….

Here’s where the 401k industry and DOL focus on expense ratios make no sense at all. Income Closed End Funds pay in excess of 6%, and have for years. Nearly all of them (the hundreds that I’m familiar with) continued their payments without a hiccup throughout the financial crisis and continue to do so now…

The 6% is AFTER EXPENSES. The best from Vanguard Target Funds is maybe 1.5%; Stable Value Funds are in the 2% area, again, maybe….

Isn’t it our fiduciary responsibility to focus on the income purpose of benefit programs? Isn’t it our responsibility to educate plan sponsors and participants enough so that they understand that it is the income that pays the bills… not the market value, and not the three year total return.

Isn’t our responsibility to school the DOL…. that performance of a retirement income program should be measured in terms of income production… and that market value and expense ratios are not the predominate considerations? Well maybe not that one.

There is only one product I know of that has the proper income focus — and with a reasonable expense ratio. For more information, contact a qualified 3(38) fiduciary at either QBOX Fiduciary Solutions or Expand Financial.