Co. targets mass-affluent clients with mutual funds and immediate annuities. MassMutual says it has a solution for affluent baby boomers who fret that they'll outlive their savings. The insurance company's Retirement Management Account (RMA) advisory program combines proprietary mutual-fund portfolios and lifetime income annuity as a rollover vehicle for individual retirement accounts (IRAs) and other qualified plans into an inflation-protected income stream.

"We hope what we've done here is come up with something like a pension," says Spencer Williams, head of Boston-based MassMutual's Income Management group.

Given the sheer number of boomers out there and the fact that they'll be tipping into retirement for the better part of the next 30 years, Neal Slafsky, head of Capital Planning Group, a Ft. Lauderdale, Fla.-based registered investment advisory (RIA), thinks MassMutual may be on to something with the RMA. "On this, they're out ahead of the curve," he says.

Depending on your cutoff for the baby-boom generation -- 1960, 1963 or 1965 -- as many as one in three Americans qualify as baby boomers, and they own as much as 40% of all privately held assets in the U.S. More than half of all investable U.S. financial assets are controlled by heads of household older than 55, according to a study published this year by McKinsey & Co.

Methuselah

In addition to being numerous and moneyed, better nutrition, the higher levels of personal fitness and improved medical care have made boomers likely to live longer than any previous generation -- or at least any since the biblical flood.

In 1955 the average retirement age for Americans was 68 and average life expectancy was 72. Now the average retirement age is 62 and average life expectancy has jumped to 80. More starkly, a 65-year-old man has one chance in four of seeing his ninety-second birthday; a 65-year-old woman is as likely to get past age 94.

But, partly as a result of this prospective longevity, boomer-generation retirees face rising health costs, with per-retiree medical expenditures above and beyond Medicare ranging between $125,000 to $300,000, according to the ebri.org Employee Benefit Research Institute -- and that's not counting extended-care costs.

And though many retirees realize that rising medical expenses threaten their post-career plans -- as highlighted in a survey published by Northern Trust earlier this year -- others fail to recognize the corrosive effects of inflation on retirements that stretch out over decades.

But according to David Kittredge, a spokesman for Philadelphia-based Lincoln Financial, the effect over decades of even historically moderate annual inflation hikes means that some "retirees will need as much, if not more, than their current incomes to combat inflation and maintain their comfortable lifestyles."

In line

MassMutual's Williams says the RMA's no-fee annuity portion takes care of that by providing inflation-protected payouts and allowing for the funding premiums into a single contract through incremental purchases of annuity benefits with assets transferred from the mutual-fund portfolios.

The Retirement Income Industry Association (RIIA) is a network of asset managers, brokerages, banks, research firms, technology vendors and insurance companies, including MassMutual. Its core mission is to advance the idea that post-retirement income distribution should be as much a priority for financial institutions as pre-retirement wealth accumulation has been in recent decades.

Although the RIIA declines to comment on specific retirement-income programs as a matter of policy, it suggests that retirement products should incorporate income-stream portions with comparatively liquid investment portions that allow for continued accumulation, especially through the first eight or 10 years of retirement -- qualities that seem to be built into MassMutual's RMA.

"This is an efficient way to move into an immediate annuity," says Jerry Golden a v.p. with MassMutual's Income Management Strategies unit -- formerly Golden Retirement Resources, his own firm. "It allows for a gradual shifting from income accumulation to distribution in line with the [client's] needs."

Up market

Though designed for mass-affluent retirees, Capital Planning's Slafsky says the RMA may prove attractive to high-net-worth and even ultra high-net-worth clients.

For one thing, it's fairly straightforward. "Could you achieve the same result for a client with $30 million or more using more sophisticated approaches?" asks Slafsky. "Yes. But a lot of what you do as advisor is determined by what the client can understand and feel comfortable with."

From a planning perspective Slafsky sees the RMA as a "tool of convenience" that "allows you to allocate the rest of the wealth without having to plan for income" -- a matter of particular importance for clients eager to make the most of comparatively illiquid alternative investments.

But Slafsky doesn't think MassMutual's first-generation RMA is quite ready for prime time, not in the ultra high-net-worth segment anyway. "The investment side needs adjustment before I can say I love it." Slafsky says he would prefer to see third-party managers contributing models to the mutual-fund portfolios, not just MassMutual subsidiary OppenheimerFunds.

On that score, however, MassMutual's Williams says the RMA may include outside managers -- and perhaps stretch past the confines of pooled investments -- as it evolves.

For now the RMA is available only through MML Investors Services, MassMutual's RIA service agency affiliate. -FWR

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