IRI Vision 2016 roundup: 1 in 4 private sector workers has a defined benefit plan; replacing pensions a key issue

The Insured Retirement Institute (IRI) released a new research report at its “VISION: IRI Annual Meeting 2016” in Colorado Springs on Sept. 26 that found the overwhelming majority of retirees who had at least $50,000 of savings at retirement have retirement income above the national median and have relatively few concerns about their finances. The catch? A significant portion of these retirees are receiving lifetime income from traditional pension plans and annuities.

More than eight in 10 retirees are receiving some income from a pension plan, and 42% are receiving at least half of their retirement income from a pension. Conversely only 24% of current private-sector workers are covered by a defined benefit plan. IRI estimates that as many as 56 million Baby Boomers will not receive retirement income from a pension, and future retirees may need upwards of $400,000 to make up for this income shortfall.

“Replacing pensions and achieving the financial security these plans provide to retirees will be a key issue for future generations,” IRI President and CEO Cathy Weatherford said. “As Baby Boomers retire in greater numbers over the next decade, and as GenXers begin to leave the workforce, financial professionals have an historic opportunity to help Americans create their own pensions, through Social Security optimization and the use of lifetime income strategies, to help their clients attain the same security, lifestyles, confidence and positive outlooks as the participants in this study.”

The report examines the lifestyles, financial condition, experiences and expectations of Americans who have lived in retirement for several years, and who had at least $50,000 in investable assets when they retired. Overall these retirees are doing quite well, but their story carries a few cautionary tales for future generations – especially pre-retired boomers and GenXers.

More key findings from the report:

• Working with an advisor: Nearly six in 10 retirees have worked with a financial professional and 93% of them say the advice and guidance they have received has been effective.

• Lifetime income: 72% of retirees receiving income from an annuity were satisfied with their investment. This was higher than any other type of investment or retirement savings vehicle.

• The unexpected: Four in 10 retirees have experienced a major health event, such as a heart attack or stroke, and 25% have experienced a significant non-medical event, such as a major home repair.

• Relocation: 27% of retirees in the study have relocated their primary residence in retirement. Six in 10 have relocated for lifestyle reasons, while only three in 10 relocated to realize a lower cost of living.

• Long-term care considerations: The majority of retirees, 67%, believe they have less than a 25% chance of requiring long-term care services in retirement. Yet, the Department of Health and Human Services estimates that 70% of those turning 65 today will need such services. Six in 10 retirees incorrectly believe that Medicare will pay for long-term care services.

The IRI study is based on a survey of 806 Americans aged 65 to 80 who retired with at least $50,000 in investible assets and have been retired for at least five years. The survey was conducted by Greenwald & Associates. The margin of error for the study is +/- 3.7 percent. The report was released during VISION: IRI Annual Meeting 2016 in Colorado Springs, Colorado.

The entire report, “It’s All About Income,” is available here.

More news and tidbits from this week’s “VISION: IRI Annual Meeting 2016, held at The Broadmoor Resort in Colorado Springs:

• Need to “demonstrate value” a common theme

Incoming IRI Chairman Robert DeChellis, in his remarks opening the conference, noted that, “There has never been a greater need [for financial advisors] to demonstrate value than today.”

That thought was echoed by a number of other speakers throughout the first day of the two-day event.

DeChellis talked about how the organization has evolved and become more diverse since navigating away from its previous moniker as the National Association for Variable Annuities (NAVA), and how it has become a trusted resource for financial advisors to turn to for professional guidance.

In this age of emerging robo-advisors and the new landscape brought about by the DOL Fiduciary Rule (two other common themes of the conference), DeChellis stressed how important it is for advisors to “demonstrate value” at a time when their value has never been questioned more.

He closed by saying financial advisors deserve to be one of the most respected professions. “Our vision is every American has a robust, comprehensive financial plan, and that plan should be guided by a trusted financial professional.”

• New DOL training coming soon

The IRI announced at the conference that it has partnered with compliance technology company RegEd, Inc., to develop a training platform designed to help financial professionals comply with the DOL Fiduciary Rule.

The first course will provide an overview of the rule and the Best Interest Contract exemption (BICE), including an explanation of what it means to be an ERISA fiduciary under the rule. It is scheduled to be available before the end of the year, and will also cover how advisor compensation could be affected and how existing client relationships may change. The course will also tackle the new regulatory landscape for level-fee advisors, rollover recommendations and proprietary products.

“Training will be one of most critical parts of implementing the DOL’s fiduciary rule, which is the most massive regulatory change to impact the industry in decades,” said IRI President and CEO Cathy Weatherford.

Additional courses will follow the initial program, focusing on topics including BICE implementation and the responsibilities of broker-dealer and insurer home office professionals.

• Delay rule implementation not expected; lawsuits are down the road

Panelists in a breakout session titled, “Regulation: The Mother of Invention? Innovation Post DOL Fiduciary” are not expecting legal challenges to prevent the new rule from being implemented as scheduled starting next April.

But they are expecting potential class action lawsuits to incubate for a couple of years before surfacing – representing not only products and advice given, but also omitted products and advice.

“We’ve definitely got litigation in mind. We’re thinking of ways to insulate us as well as our partners from class-action liability, which is potentially huge. It’s going to take a number of years before we know if we made the right decisions,” said panelist David Rauch, COO & General Counsel, Annexus.

Rauch predicted that lawsuits probably won’t gain steam until 2019 or 2020, once the class action damages potential has grown after a couple of years under the new standard.

• IRI Leadership Award recipients announced

Nick Lane, John Brown and Beth Maziad were recognized as 2016 recipients of the IRI Leadership Award. The award honors leaders whose dedicated service and contributions to IRI have supported the organization in achieving its mission.

Lane, who is out going chairman of the IRI Board of Directors, was recently promoted to President and CEO of AXA Japan. He led the IRI’s efforts to provide constructive input to policymakers on the then-proposed DOL Fiduciary Rule, as well as IRI’s efforts to help member companies prepare to operate under the new rule.

Brown, who recently retired as VP of Government Relations for Jackson National Life Insurance Company, was a longtime leader on many of IRI’s government affairs committees and was instrumental in helping IRI expand its advocacy efforts at both state and federal levels.

Maziad, SVP of Operations for Raymond James Private Client Group Investment Products, has served on more than a dozen IRI committees and working groups over a two-decade span. Her efforts largely focus on supporting the work of IRI’s Operations and Technology community, specifically the advancement of its straight-through processing (STP) initiatives and other efforts to drive industry-wide process improvements.

About the IRI: The Insured Retirement Institute (IRI) is the leading association for the retirement income industry. IRI proudly leads a national consumer coalition of 40 organizations, and is the only association that represents the entire supply chain of insured retirement strategies. IRI members are the major insurers, asset managers, broker-dealers/distributors, and 150,000 financial professionals. As a not-for-profit organization, IRI provides an objective forum for communication and education, and advocates for the sustainable retirement solutions Americans need to help achieve a secure and dignified retirement. Learn more at