NEPC’s Bill Ryan was quoted in a recent Pensions & Investments article which focuses on the ABA Retirement Fund’s investment tier for those approaching or in retirement. View the article on Pensions & Investments’ site here.
In December 2020, as the world grappled with the pandemic, the ABA Retirement Funds program — a retirement plan used by some 4,100 law firms and organizations connected with the practice of law — rolled out an investment tier designed specifically for retirees and those nearing retirement.
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The majority of plan sponsors already offer retiree-focused investments but haven’t spent the time to package and market them as a retirement tier, said Bill Ryan, a partner and head of defined contribution solutions at NEPC LLC in Chicago.
Plan sponsors haven’t gone the extra step of saying, “Of the 10 options we provide, these three are the best to use for short-term needs in retirement to draw down,” he said. “The majority are not marketing it, even though they have the parts.”
Mr. Ryan cited NEPC client data showing that 76% of plan sponsors offer stable value funds, 43% offer money market funds, and almost a third offer inflation-protection funds, three of the essential building blocks in a retirement tier.
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For some consultants, the traditional target-date fund, which is pervasive in plans, is the ultimate retirement tier, even though it isn’t marketed as such.
“We believe that the No. 1 retirement income solution is a target-date fund plus systematic distribution as the first line of defense,” Mr. Ryan said.
While the target-date fund feels like a “vanilla concept,” it is “probably the best option in retirement because some professional has built a portfolio that’s targeting a 4%, 5% or 6% rate of return in retirement,” he said. “If an individual is taking out 4% or 5%, it matches the dividend that they need to draw for an income without depleting the balance in retirement.”
For Mr. Ryan, the target-date fund is akin to Batman. “It’s the hero we need; maybe not the hero we want,” he said.
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