Decumulating assets during retirement
The Retirement Subcommittee of the Senate Committee on Faculty Affairs, with guidance from the Office of Investments and Banking (OIB) and the Office of Human Resources, is considering the addition of a “retirement tier” to the University’s retirement plans.
Previous changes to University retirement plans were designed primarily to assist employees in the accumulation and investment of assets. Attention has now turned to assisting plan participants with the spending or “decumulation” of these assets during retirement. In November 2020, the subcommittee heard a presentation about this by Andrew Parks, deputy chief investment officer at OIB.
Parks noted that a majority of retirees worry that their assets may not last their lifetimes, and he identified risks retirees must manage—including longevity, liquidity, and inflation—when making investment and spending decisions. He described the retirement tier as including “a range of products, solutions, tools, and services, all of which allow a plan sponsor to broaden the plan’s goals from one wholly focused on savings to one that also accommodates and supports participants who are near, entering, or in retirement.”
Benefits of a retirement tier
The benefits of a retirement tier include keeping assets in the plan, thereby maximizing University leverage, and providing continuity for employees, Parks said.
In January, representatives of Fidelity Investments made a presentation to the subcommittee describing tools available on Fidelity’s NetBenefits website for creating, evaluating, and executing plans for drawing on retirement assets. OHR intends to send newsletters to plan participants in the coming months highlighting the resources available from Fidelity.
In March, the subcommittee will hear from Securian about its General Account and General Account Limited.
Later this spring, the subcommittee will explore available investment products geared toward decumulation, learn how peer institutions are addressing decumulation, and receive information about how retirees use the NetBenefits planning tools.
Parks fittingly described the University as being in the second inning of a nine-inning game.
—Ken Larson, UMRA member, Retirement Subcommittee of the Senate Committee on Faculty Affairs
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