Displaying items by tag: retirement

Defined contribution retirement plan advisors are increasingly prioritizing income solutions to help participants navigate the complexities of their post-work years. The latest research from Escalent’s Retirement Plan Advisor Trends™ highlights a sharp rise in advisors recommending these options, growing from 21% in 2022 to 30% in 2024, with more expected to follow. 

Despite this uptick, no single approach has emerged as the standard, underscoring the need for continued innovation. Popular strategies include income-generating bond funds, target-date funds with guaranteed income components, and systematic withdrawal programs, although high fees and portability concerns remain significant barriers. 

A separate Escalent study reveals that only 17% of plan participants feel confident in converting savings into sustainable income, particularly among Gen Xers. 

Finsum: This presents a clear opportunity for financial firms to educate advisors and develop innovative solutions that address these anxieties while tapping into a growing market.

A recent study highlights the significant impact of engagement on 401(k) savings, with active participants saving far more than those who aren't involved in their retirement planning. According to Empower's research, engaged individuals contribute 56% more to their retirement accounts, and those actively participating in their plan's resources save even higher amounts. 

These engaged savers are also more likely to fully utilize their employer's match, with 22% of them missing out compared to 48% of disengaged participants. The study also shows that those who consolidate their financial accounts or seek advice tend to save nearly twice as much as their less engaged peers. 

With fewer workers feeling confident about making investment choices, many are turning to financial professionals, which boosts their confidence in securing a comfortable retirement. Despite facing inflation and economic uncertainties, a majority of Americans remain optimistic about their long-term financial future, although short-term financial concerns have shifted their focus from retirement goals to immediate needs.

Annuities have long been seen as one of the financial world’s most perplexing instruments, puzzling both retirees and economists alike. While economic models suggest that annuities should be a cornerstone of retirement planning due to their ability to provide lifelong income and protect against outliving savings, actual adoption rates have historically been low. 

Recently, however, there has been a notable rise in annuity sales, particularly for fixed products, which offer guaranteed returns and shield investors from market volatility. This shift may stem from concerns over Social Security’s future, the allure of secure income in uncertain times, and a growing desire among retirees to balance spending confidence with preserving wealth. 

Over time, the annuity landscape has expanded into a spectrum of offerings, including fixed, variable, and hybrid products, tailored to meet varying financial goals and preferences. 

Finsum: As these products gain prominence, they demand a deeper understanding from advisors guiding clients through estate and retirement planning.

Buying or selling a financial advisory practice involves careful consideration of various deal structures, each offering unique benefits for both parties. The outright purchase is often favored for its simplicity, allowing a single payment or structured financing to complete the transfer and establish clear terms for valuation and handover. 

Another common structure, the gradual buyout, lets sellers retain majority ownership while the buyer assumes increasing responsibilities over time, fostering a smoother transition. In contrast, internal succession emphasizes long-term mentorship, preparing a junior advisor for eventual ownership through training and relationship-building with clients.

 Advisors nearing retirement often use these strategies to secure their legacy and maximize their practice’s value. For advisors or firms unsure about structuring a sale, industry specialists can assist with valuations and guide the decision-making process.

Finsum: It’s also very important to get an accurate valuation estimate of your practice regardless of which method you settle on. 

Succession planning remains a critical yet often overlooked issue in the financial advice sector, with a substantial portion of advisors nearing retirement. A recent Cerulli report highlights that nearly 40% of advisors, representing over $11 trillion in assets, plan to retire within the next decade, underscoring the urgency for succession strategies. 

Advisors without a clear plan risk devaluing the business they’ve built, while thoughtful succession planning can help protect and even enhance this value. Cetera has assisted in numerous advisor transitions and acquisitions, providing advisors with resources to prepare for both anticipated and unexpected exits. 

Proper succession planning ensures continuity, whether through expected retirement or unexpected events like disability, safeguarding both the advisor's legacy and family’s future. 

Finsum: Strategic succession plans prioritize choice, flexibility, timing, and control, helping advisors smoothly transition.