401(k) Specialist Issue 2 - 2019 - 38

401(k) PRODUCT WATCH
Serious Aging Concerns Boost
Target Date Fund Potential
JOE COUGHLIN OF MIT AgeLab often calls Japan " a nursing home on an island, " whose
immigration policy is simply " no, " and now sells more adult diapers than baby diapers.
He adds that 2047 is the date when more people will be over age 60 worldwide than
those between the ages of zero and 15.
It presents a perfect marketing opportunity for target date 2045 funds and beyond,
especially, it seems, in Asia.
" Beset with a graying population and pension funding issues, Asia has seen steady
growth in target-date funds (TDFs) over the past few years, even though they remain in
their infancy, " Cerulli Associates finds in new research.
It says U.S. TDF assets soared after the Pension Protection Act was passed in 2006, and
similar developments in Asia-if they occur-could accelerate the growth of TDF assets in
the region.
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Shlomo Benartzi:
Fairness Key to Participant
Annuity Use
WHY ARE RETIREES wary of annuities,
Shlomo Benartzi rhetorically asks?
In the eyes of the consumer, it's all about
fairness, he recently wrote in The Wall
Street Journal.
Referencing LIMRA Secure Retirement Institute
data, he noted: " Americans bought
approximately 39,800 immediate lifetime
annuities in 2017, which equates to a little
more than 100 annuities a day. "
It means that only about 1 percent of
retiring Americans actually buy a lifetime
annuity.
Yet decumulation strategies could use
more think and less feel, more head than heart.
" First, don't let emotional reactions like fairness scare you away, " he advises. " If you feel
strongly about violations of fairness-say, if you always think it's unfair for the store to raise
prices after a storm-don't dismiss annuities out of hand. "
Second, " While the shared-risk model might seem unfair, annuities can provide an important
protection against longevity risk. "
Third, annuities aren't right for everyone, but when they work for a particular situation,
they should be customized to individual circumstances.
38
ISSUE 2 2019 | 401kSpecialist.com
401(k) Regs,
Fees Spark
CIT Growth
SPEAKING OF CERULLI, the firm also
finds that growth in the vehicle has been
relatively consistent, averaging 10 percent
annually since 2011.
" This robust growth is primarily attributed
to demand for lower-cost vehicle
options, " Cerulli noted. " Although the
vehicle is seemingly poised for continued
success, CIT providers must address
certain challenges to sustain the current
level of growth. "
It believes that the main advantage
that CITs offer over similar vehicles is cost
savings.
" As industry-wide fee pressure leads
to the development of low-cost vehicle
substitutes, CIT providers will need to
capitalize on other advantages, such as
their fee flexibility and speed to market
due to fewer regulatory requirements, "
James Tamposi, research analyst at
Cerulli, said in a statement.

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401(k) Specialist Issue 2 - 2019

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