Institutional vs. retail retirement income solutions
Low-cost, institutionally priced retirement income solutions have the potential to deliver higher retirement incomes than retail options.
Consider installment payments
Some participants use installment payments to receive their retirement income on a regular basis. If payments are modest enough, they may potentially last 20 or 30 years, but there's no guarantee of that.
When installment scenarios are run with retail funds (funds a typical person may invest in when he or she rolls an account to an IRA) versus institutional funds (funds in a retirement plan), the institutional funds lasted on average two to three years longer.1 The only difference between the retail fund and the institutional fund is the amount of the fee charged to the individual versus that charged to the plan. Employer bargaining power helps to drive lower fees.
This example uses modest 4% installment payments with a cost of living adjustment (COLA).
Fees can make a big difference
Institutional pricing provides more income for all products—both guaranteed and non-guaranteed.2 Nerdwallet ran a series of scenarios using different fee levels and found that when fees are lowered by .93% over a lifetime, a participant's balance may become significantly higher.3 Some scenarios showed a difference of several hundred thousand dollars.4
In one scenario, a participant choosing an option with fees that are .93% lower may save nearly $215,000 in fees over 40 years—and, with compounding, retire nearly $533,000 richer.5
Institutional options offer value
In general, when compared to retail options, low-cost institutional retirement income solutions have the potential to increase retirement income by 10% to 20%.6 Offering in-plan, guaranteed lifetime income solutions allows your clients to help participants benefit from institutionally-priced programs—and potentially higher incomes—throughout retirement.
Together, we can help plan sponsors with the administrative and communication responsibilities of in plan retirement income solutions. Learn more about our guaranteed income options or talk to us at 855‑533‑2170, to see how we can help your clients drive positive outcomes.