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Edition

Redefining the Goal of Retirement Planning

Background and Context 

In recent years increased attention has been paid to the concepts of financial literacy and wellness, and retirement preparedness and security.   The Society of Actuaries (SOA) has, in each of the past five years, compiled a collection of essays that address a variety of issues including:

  • Diverse risks encountered in retirement;
  • Developments in financial wellness;
  • Perspectives and potential solutions to the problem of ensuring retirement preparedness and innovations for securing future retirements;
  • The role that family structure and dynamics can have on financial and retirement security; and
  • New developments in tools, products and/or strategies that address retirement risks.

An important role of financial advisors is to help their clients identify expected needs and expenses in retirement and sources of income, and develop retirement planning, savings and investment strategies to provide sufficient retirement income for individuals to maintain their desired standard of living. Yet, adequate retirement income can be understood and defined in a number of ways.

Given the mission of the SOA’s Aging and Retirement Strategic Research Program to further public understanding of important retirement issues, its Committee on Post Retirement Needs and Risk is partnering with the Retirement Income Institute (https://www.allianceforlifetimeincome.org/feature/retirement-income-institute/), a project of the Alliance for Lifetime Income to explore ideas and thoughts on identifying current and alternative means of achieving and measuring retirement income adequacy. In issuing this call for essays, the organizations aim to gather perspectives, opinions and data on how to advance the state of effective retirement planning to assist individuals, actuaries, financial advisors, employers and other stakeholders.

Adequacy can be examined on a societal basis or an individual basis. As a point of reference, respondents to this Call for Essays are encouraged to review the SOA report  “Retirement Adequacy in the United States: Should We Be Concerned?” which identifies relevant literature available on historical measures of retirement adequacy.  The report also discusses the different methods employed and identifies important distinctions in the assumptions used in various models and includes areas for future study which respondents may wish to review. Respondents may also find it helpful to review other recently completed work including the 2013 SOA study “Measures of Retirement Benefit Adequacy: Which, Why, for Whom, and How Much?” which focused on measuring retirement benefit adequacy in light of both expected and unexpected expenses in retirement and linking the measurement to the needs and objectives of different stakeholder groups.

For potential essay topics, the following are examples of questions and issues that may be considered. These examples are not intended to be the only issues that fall under the scope of this call for essays and respondents are free to consider others that are relevant to this year’s theme.   Respondents can select a single topic or a combination of topics.

Implications for Individuals:

  • In light of today’s societal, economic and environmental dynamics, what should be an appropriate retirement goal or measure of retirement adequacy?
  • Does an occurrence such as COVID-19 influence thinking about adequacy? How could and should retirement adequacy planning include the possibility of such an occurrence?
  • What parties are measuring adequacy? Related to this, it is important to consider not only what is meant by adequacy, but for whom it is measured.
  • Should measures vary by parameters such as age, gender, generation, previous income level, geographic location, demographics, family situation, debt load and/or work histories? What may be other appropriate parameters?
  • What role should different decumulation strategies play in modelling adequacy?
  • Should wealth accumulation goals, personal inheritance or charitable objectives be part of adequacy discussions?
  • What are the different ways to measure adequacy and what are they suitable for? When would “minimum needs” measured based on individual objectives be helpful? What would be included in a “minimum needs” analysis? For the purposes of defining standards, what types of scenarios should be modelled and for which socio-economic situations?
  • Should “adequacy” focus on a regular income amount, a lump sum, or both?
  • Is an adequacy standard that is less than replacing pre-retirement income reasonable, and if so, what should the standard be?
  • What ages for the start of retirement should be assumed when defining adequacy standards?
  • It has been noted in several studies that disability is not adequately considered in many measurements. What should be included in adequacy standards to reflect disability?
  • What risks should be considered in adequacy standards? In particular, how should longevity risk, morbidity risk, market risk, and sequence-of-return risk be included in adequacy standards?
  • How important are lifetime guarantees when adequacy is considered and how should they be factored in? How should sources of protected lifetime retirement income, like pensions, annuities, and Social Security, be accounted for in adequacy standards and models?
  • How should the amount of guaranteed income needed be determined and secured?
  • How important is long-term care when adequacy is considered and how should it be factored in?
  • How should housing be considered, if at all?
  • Should adequacy measures include the potential impact of inflation? What may be the impact of persistently ow interest rates?

Implications for Advisors and Plan Sponsors:

  • What are varying ways for advisors and plan sponsors to measure income adequacy and what factors should they consider in selecting a methodology?
  • What role should today’s employers play in helping employees understand and achieve retirement income adequacy?
  • How does an individual optimize the utilization of the assets accumulated? Which sources should they use first, etc.?
  • How do risk protection and guaranteed income fit into this discussion?
  • Does an occurrence such as COVID-19 impact how an employer should think about providing guaranteed income and risk protection for their employees?
  • What role should retirement income planning play in larger discussions about adequacy between retirement savers/investors, advisors, and plan sponsors?

Implications for Governmental Programs:

  • If potential future challenges to Social Security funding are not addressed by Congress, what types of solutions might be developed by the private sector?
  • Should Social Security’s role be modified for future retirees, potentially offering more options for post-retirement work and benefit delivery?
  • Does an occurrence such as COVID-19 impact government programs such as Social Security and Medicare as necessary to provide guaranteed income and risk protection for retirees?
  • Given the changing nature of retirement, how can government agencies better define and communicate what is needed to achieve retirement income adequacy?
  • Should there be or is there a role for public funding for long-term care needs?

Further to the above issues, this year’s call for essays is focused on helping pre-retirees and retirees better understand actions they need to take in the predominantly defined contribution system to secure their future lifetime retirement security.  Related to this, how are plan sponsors and financial advisors addressing these responsibilities for their employees and clients?

Respondents to this call for essays should not feel constrained by whether programs, systems or measures of adequacy currently exist. To the extent a concept is not feasible in the current environment/marketplace, authors are encouraged to identify what changes or information would be needed for such concepts to become viable.

Please note that essays promoting or endorsing commercial products or tools are outside the scope of this call for essay’s publication. However, there is interest in essays describing innovative features and components of current measures or tools that effectively address determining retirement needs and measures of adequacy.

In crafting essays, authors should consider the following general guidelines:

  • Case studies and examples can be helpful to demonstrate concepts but are not required.
  • Information about approaches used outside of the United States are acceptable and encouraged.
  • The focus of an essay can be on both public and private sector strategies. However, any product ideas are desired primarily for the private sector.

Stakeholder Perspectives

Essays may consider an issue from the perspective of an individual or other stakeholder (e.g., regulators, advisors, or employers) and identify the applicable considerations for each stakeholder.  For this call for essays, there is particular interest in the individual and how new measures of adequacy can help with an individual’s retirement security.

Examples of key stakeholders include the following entities:

  • Individuals and/or family members
  • Policymakers
  • Regulators
  • Employers
  • Financial advisors
  • Trade groups

Timeline

Week of May 11, 2020: Call for essays issued

June 22, 2020: Deadline for submission of essays 

July 20, 2020: Review of essays and selection for publication anticipated completion

Length and Instructions for Submission

Essays must be submitted in English with a length requirement of between 1,000 and 2,500 words. In the event that an essay exceeds 2,500 words, the essay may be declined or returned to the author with a request for further editing and resubmission. There is no requirement for formal or extensive footnoting.

Author information must be submitted with the essay and include name; credentials or designations (if appropriate); title; organization/company; e-mail address; and phone number. Please provide all author information at the beginning of the essay. 

Essays that contain any overt political statements, commercial content, and other inappropriate material will not be accepted. Articles must comply with the SOA's antitrust guidelines.

Please submit your essay via e–mail by June 22, 2020 to:

Barbara Scott, Sr. Research Administrator 
Society of Actuaries 
e–mail: bscott@soa.org

Publication and Presentation

Depending on how many essays are received and the diversity among the topic areas, a suitable format for electronic publication and dissemination will be selected.  Essays may also be presented at an SOA or Institute meeting, webcast, or other professional development event.

In addition, other venues for publication or presentation of the ideas outside of the SOA and the Institute will be considered. It is hoped that publication of the collected essays will further knowledge and stimulate discussion as well as promote future efforts in this area. As in prior years, the essays are intended to be published in a collection on the SOA website and promoted for general public interest.  Similarly, the Institute intends to post selected essays on its website and promote them to the public, particularly individuals in the retirement ecosystem. Also, as in prior years, the SOA may invite select authors to present their essays at an SOA meeting. The Institute also may extend similar invitations to present at its Retirement Income Summit in fall 2020.

Rights Granted

Please understand that by submitting an essay for consideration, the essay author(s) is granting to the Society of Actuaries and/or the Retirement Income Institute an unlimited license to print or republish their essay, with proper attribution given to the author.  The Institute would provide the author a contract providing more details about publication rights and related issues if the author’s essay is selected for posting.

Questions

Please direct any questions regarding this Call for Essays to:
Steven Siegel, Senior Research Actuary 
Society of Actuaries 
e–mail: ssiegel@soa.org