Toward A More Certain Retirement Future

One of the most difficult financial challenges many families face is how to convert retirement assets into an income stream that lasts for a lifetime. RBI’s Financial Planning Advisors hear stories like the following.

Jerome and Nancy, a family of five, are nearing retirement after a lifetime of ministry in a small Midwestern church. Their salary has paid for their basic needs, but the budget was always very tight. Setting aside savings for retirement in the early years was minimal, but as the children graduated from college, the opportunity to save more meaningfully into their PCA Retirement Plan account was possible. As the church’s senior pastor, Jerome continued in his job until age 72, but ultimately the need to hire a younger pastor required Jerome to retire from his position. Jerome and Nancy were now faced with the huge challenge of turning their account balance at PCA Retirement & Benefits (RBI) into a lifetime of income during retirement. Fortunately, Jerome and Nancy could both count on Social Security income, but their recent experience in the financial markets in 2008 and 2009, and more recently in the coronavirus pandemic, has left them feeling vulnerable. What if they outlived their assets?

If there is a weakness in the vast majority of retirement plans offered by most organizations in the U.S., it is captured in the above illustration. Plan sponsors of 401k and 403b plans have given great attention to the savings component of a retirement plan but have provided few solutions enabling retirement plan participants to convert account balances into secure lifetime income.

Thankfully, this is not new information. Retirement experts and researchers have long been at work attempting to solve this problem. At RBI, we believe the most compelling solution is the Qualified Longevity Annuity Contract (QLAC). Think of a QLAC as a reverse life insurance policy. Normal life insurance pays your estate a benefit in the event of your death. A QLAC is designed to pay you a regular benefit in the event you live too long. This may sound odd, but it is a simple and compelling strategy that can secure a lifetime income benefit in a participant’s retirement account.

We believe the QLAC addresses the retirement concerns of ministry families. First, because of our (RBI) institutional status, a meaningful reduction in cost can be achieved. Second, a QLAC is typically purchased at or near retirement and pays a benefit when the purchaser reaches 80-85 years of age. This means the typical cost of the annuity is a fraction of the value of a plan participant’s retirement assets and grows to a secure benefit which continues for the beneficiary’s lifetime.

The RBI Board of Directors recently approved a strategy to provide PCA Retirement Plan participants with the option to purchase a QLAC. The QLAC will provide secure lifetime income in retirement. This new capability will be offered in partnership with MetLife, a highly regarded insurance company. This recommendation was the culmination of almost 5 years of continual research by the RBI staff, RBI’s Investment Consultant, and the Investment Committee.

As we continue the planning process with our insurance partner, we ask that you pray for us. This planning carries with it a great deal of responsibility which goes well beyond the walls of PCA Retirement & Benefits. We are so encouraged to be a part of a fundamental breakthrough in retirement plan design which may significantly reduce one of the greatest concerns of retirees in plans like the PCA Retirement Plan.