Today, the
website Prosperity and Asset Management Consulting published a
story on the 2007 Retirement Industry Conference, noting, in particular,
the presentation that Fred Munzenmaier and I gave. The reference, by Iwan
Budhiarta, was as follows:
Our industry has a good future due to opportunities
presented by demographic changes and the looming retirement of the massive baby
boom generation, according to speakers at the recent Life Insurance Conference
and the Retirement Industry Conference, held back-to-back in Atlanta [and] jointly sponsored by LOMA,
LIMRA, the ACLI and the SOA. . . .
As
traditional pension plans fade and Social Security faces problems, our industry
can play a major role in providing retirement security for Americans, according
to speakers at the Retirement Industry Conference.
Opening the
conference were Corey Sherman and Fred Munzenmaier, managing partners of Strategic
Planning Associates, who discussed changes in the pension system and the
Social Security issue. In their view, the insurance industry can play an
important and critical role in retirement planning. Sherman discussed the rise and decline of
defined benefit plans, and said in facing the future, the traditional three-legged
stool of retirement income—Social Security, pension plans and private
savings—is shakier than ever.
Munzenmaier
discussed Social Security, and warned the longer we wait to fix the problems,
the more difficult it will be to fix them. He suggested that the solution is to
invest Social Security funds in real investments. With an eight percent return,
which is a historical capital market return, the Social Security fund
could be $8 trillion by 2040, he said. If the investments returned
another half percent, the fund could be $10 trillion.
He said his
firm’s clients earn even more on investments over longer periods of time. If
Social Security did the same, it might even enable the system to reduce taxes
or increase benefits, he suggested.
To fix the
private pension system, Munzenmaier recommends that government stop solving
non-existent problems “in the name of political correctness.” He urged
elimination of “maximum man-made complexity” of regulation. Other suggestions
include scrapping outmoded actuarial models, fixing issues with the PBGC,
helping facilitate employee contributions, and eliminating lump sum benefit
options.
Corey
Sherman, managing partner of Strategic Planning Associates, discussed how the
insurance industry can play a role in providing retirement solutions. He
discussed the growth of defined contribution plans, which have many advantages.
They accumulate funds, and are great for those who change jobs often.
However, DC
plans do not provide income for life. People heading to retirement want
assurances, and insurers seem best positioned to provide that, with portfolios
of fixed and variable annuities, Sherman
said. “You’re the ones who can take these defined contribution balances and
turn them back into what pensions were designed to do in the first
place—provide income for life,” Sherman
said.
Fred and I
very much appreciate the comments. For additional information on this
subject, you can click on the following links:
