Two long-term factors will help make 2013 a boon year for retirement planners, according to
“From my perspective the retirement outlook is very, very positive,” he said. “And that’s not just in 2013; that’s well beyond that.”
Retirement planning will be especially important because many households remain unprepared, according to Castineiras. Because of a savings rate as low as 3.3% and longer lifespans, some 50% of households are at risk for not being able to maintain their lifestyle in retirement, he said.
“The need for retirement is not going to go away,” he said.
Adding to a need for additional planning, defined benefit plans are on their way out. According to Castineiras, only 16% of U.S. employers are offering a defined benefit plan.
“There not sustainable. They’re unaffordable. They’re unpredictable, and they’re coming off the balance sheets,” he said.
The best source for retirement income should still be the work force, but from modified retirement plans supported advisors in their design and purchase, Castineiras believed. Due diligence from fiduciaries as well as fee structures could make a hybrid of defined benefit plans and defined contribution plans an attractive option, he said: “You can’t get a better outcome than you can, in my opinion, outside the workforce.”
He expected that advisors would become responsible for client accounts as “fiduciaries in support of the plan sponsor,” he said. “In order to win in this market place, you have to have expertise in a few areas: asset management risk management, plan administration and employee engagement models.”
In addition, social security will play a bigger role than many expect. According to Castineiras, over 70% of those over 65 rely on social security benefits, and that dependence will ensure that it does not get cut significantly.
“You can’t just vaporize that,” Castineiras said.
Secondly, new engagement methods for these plans will become important. As seen with the Pension Protection Act, auto enrollment and other features are taking on an even greater role going forward, he explained.
“The pension protection act initiated the autos and provided a safe harbor for plan sponsors: auto enrolment, auto escalation, auto investment strategy; auto income” he said. “People can’t run out of money.”
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