A white paper recently published by BNY Mellon focuses the attention of the retirement industry on the massive outflow of assets that will begin soon as the first cohort of baby boomers in the U.S. reaches age 70½, the age at which Required Minimum Distribution (RMD) requirements take effect under U.S. retirement and tax regulations.
A brief review of the number of individuals involved, the extent of the assets involved, and the end result of the RMD requirements indicates why this is such an urgent topic for the retirement industry.
How will the retirement industry manage this enormous outflow of assets? That's the question BNY Mellon is asking the industry to consider. And to consider it now — while there's still time to prepare for the huge increase in outflows that will begin when baby boomers begin reaching age 70 in large numbers.
"We have a great deal of experience supporting insurance companies that face similar challenges managing the distribution dynamics associated with payments to life insurance policy beneficiaries — in fact, helping clients manage their retained asset programs is a service offering that's experiencing significant growth. These same concepts could be applied to any firm managing retirement assets," said white paper author Ed Shane, managing director and head of sales and relationship management, Insurance & Electronic Receivables Payment Services for BNY Mellon's Treasury Services business.
Shane noted that life insurance beneficiaries often elect to have their insurance payments deposited in interest-bearing accounts with many of the payment features of a conventional checking account. "Our research indicates that many of the retirees who will be receiving RMDs have concerns about payments they expect to make for particular purposes like health care. We believe it's time for the retirement industry to begin thinking about these kinds of offerings as part of strategies for managing the massive RMD-related asset outflows that will be taking place over the next five years."
The dialogue with the retirement industry will continue later this spring with an educational Webinar and series of follow-on messages.