Insights: Trends, Research, Analysis, and White Papers

Is a New Age on the Horizon for 401k Participants?

The average retiree faces numerous unknowns, a slew of psychological obstacles to maneuver, and, on top of all that, math. And, as current savings and spending patterns show, retirees need help making these monumental decisions. BlackRock's Larry Fink is optimistic that the firm's newly launched BlackRock LifePath Paycheck target-date series, which includes an annuity as part of the glide path, can be the solution retirees are looking for. This Morningstar article explores how we got here with a brief, and imperfect, history of retirement-income solutions.

Source: Morningstar.com, April 2024

Report Reveals 403b Plan Sponsors Support Retirement Saving and Investing

Employers' commitment to their 403b plan participants is evident in a new report just released by the ICI. Analyzing the plan year 2020 data for large 403b plans filing Form 5500 under the ERISA, the report finds that nearly one-third of large ERISA 403b plan participants were in plans that put their employees on the path to retirement saving with automatic enrollment.

Source: Ici.org, April 2024

Why Do Some Small Businesses Offer Retirement Plans?

Numerous studies have shown that offering a retirement plan is closely related to firm size; firms with fewer than 100 employees are much less likely to offer a plan than larger firms. As a result, observers tend to dismiss small firms as a source of future growth in coverage. However, a meaningful share of small businesses do offer retirement plans. The purpose of this study is to identify the characteristics of sponsoring firms and their employees to determine which small businesses may be more likely to offer a retirement plan in the future.

Source: Bofa.com, April 2024

For Most Near-retirees, Leaving the Workforce at 65 Is a Lost Cause

The retirement landscape in the US is shifting dramatically as a significant portion of the population approaches the traditional retirement age of 65, a goal many say is increasingly out of reach, according to a new survey by Nationwide. The findings of the survey, which drew responses from around 500 advisors and roughly 2,400 investors, reflect a trend of financial insecurity and the fact that many workers must now work beyond the traditional retirement age of 65.

Source: Investmentnews.com, April 2024

Participants Prefer SECURE 2.0 PLESA Benefit Over Withdrawal Feature

A new survey by Commonwealth analyzes the impacts of SECURE 2.0 legislation on low to moderate-income employees. Commonwealth worked with five focus groups, for a total of 20 participants, to assess interest and requests for emergency expense provisions under SECURE 2.0. Under SECURE 2.0, employers can implement a PLESA feature that would allow employees to make post-tax contributions towards a rainy-day fund, which can be used during financial hardships.

Source: 401kspecialistmag.com, April 2024

401k Benefits Undervalued by Employers

Rather than turning to unlimited PTO policies or features dedicated to employee communications, a report by Guideline urges plan sponsors to look deeper within the workplace plans, and potentially the 401k. Their survey found that while employers and employees both agree that retirement benefits are valuable, some companies underestimate their value in attracting and recruiting employees.

Source: 401kspecialistmag.com, April 2024

New Wave of Annuities in TDFs: "It's Complicated"

A new wave of target-date funds featuring annuities is here, and the question of whether this combination has the potential to be the "easy button" for retirement income is explored in new research from Morningstar.

Source: 401kspecialistmag.com, April 2024

Nearly 2 in 3 Americans Worry More About Running Out of Money Than Death

Nearly two in three Americans say they worry more about running out of money than death with concerns about inflation, Social Security, and taxes contributing to the fear, according to the 2024 Annual Retirement Study from Allianz Life. The worry of running out of money has increased in recent years. In 2024, 63% say they worry more about running out of money than death, up from 57% in 2022. Gen Xers are the most likely to say this with 71% more worried about running out of money than death, compared to 64% of millennials and 53% of boomers.

Source: Allianzlife.com, April 2024

401k Balances Rise 14% in 2023, but Participation Rate Falls

Average 401k account balances at plans recordkept by T.Rowe Price increased by 14% over the past year to $115,000, according to the Baltimore-based company's annual benchmarking report on 401k plan design and participant behavior.

Source: 401kspecialistmag.com, April 2024

Americans Believe They Will Need $1.46 Million to Retire Comfortably According: Study

Americans' "magic number" for retirement is surging to an all-time high, rising much faster than the rate of inflation while swelling more than 50% since the onset of the pandemic. These are the latest top-level findings from Northwestern Mutual's 2024 Planning & Progress Study, the company's proprietary research series that explores Americans' attitudes, behaviors, and perspectives across a broad set of issues impacting their long-term financial security.

Source: Prnewswire.com, April 2024

Majority of Plan Sponsors Concerned Future Retirees Will Run Out of Money in Retirement

In 2024, more Americans are reaching the traditional retirement age of 65 in the same year than at any time in history, creating more than 4 million potential new retirees this year alone. While the U.S. faces this significant milestone, findings from a recent MetLife poll show a vast majority (91%) of plan sponsors are concerned that their future retirees will run out of money in retirement. When asked about what percentage of future retirees will run out of money in retirement, 83% of plan sponsors believe more than 1 in 4 retirees will deplete their retirement savings prematurely.

Source: Metlife.com, March 2024

ESG in 401k Plans in the Wake of Spence v. American Airlines, Inc.

Whether investment decisions for pension, 401k, and other plans covered by ERISA should be influenced by environmental, social, and governance factors has become a flashpoint, and, unlike most ERISA issues, the controversy extends into the political arena. The recent opinion of a federal district court denying a motion to dismiss claims that ESG factors were improperly applied for 401k plan investments shows that ESG can bring risk to fiduciaries, even if they are not pursuing ESG strategies.

Source: Ktslaw.com, March 2024

Action Steps an Employer Can Take to Support Gen Z in Saving

Generation Z is looking ahead and shows a healthy regard and respect for their financial future, long-term. Studies show that they have a strong interest in financial literacy, saving, and employer-provided retirement benefits. Members of Gen Z also expect to spend 30 years in retirement, according to the Transamerica Institute. At the same time, Transamerica also says that a majority -- 57% -- of the members of Gen Z they studied agree that they need to save more for retirement. So what should employers do with that information?

Source: Ntsa-net.org, March 2024

Small Business Retirement Plans: How Firms Perceive Benefits and Costs

At any given time, only about half of U.S. private sector workers are covered by an employer-sponsored retirement plan, and few workers save without one. The coverage gap, which undermines the retirement security of the nation's workers, is driven by a lack of coverage among small employers. This article presents the results of a new survey of small employers to understand why some offer retirement plans and others do not.

Source: Bc.edu, March 2024

Help Employees Guard Retirement Savings Against Market Volatility

A recent survey revealed that 86% of employees feel increasingly stressed about their finances and nearly 50% worry about not having enough saved for retirement. Workers who frequently fret about covering unexpected car or home repairs, paying off student loans or credit card debt, or saving for retirement may have their financial worries compounded by the market's current volatility. Employers can play an important role in alleviating some of that financial stress by adopting investment strategies for the organization's retirement plan and helping employees reduce the impact of market volatility on their retirement savings.

Source: Usicg.com, March 2024

Core Menus Need to Evolve

The role of the core investment menu in defined contribution plans has changed considerably over the last decade, as qualified default investment alternatives, particularly target-date funds, now capture more plan sponsor attention and participant assets than ever. This evolution requires plan sponsors and consultants to revisit key assumptions about optimal core menu design, especially as plan sponsors increasingly seek to retain participant assets during retirement, since older participants are more likely to use the core menu and invest conservatively.

Source: Planadviser.com, March 2024

How Men and Women Invest Differently, and What We Can Learn From Each Other

Studies have shown that men and women have different approaches to investing money that can impact their long-term results. This 14-page paper looks at what those differences are, how they affect a portfolio, and what investors can do to gain balance in their investment style and strategy.

Source: Arnerichmassena.com, March 2024

Millennials Redefine Retirement as "Financial Independence"

Millennials are "redefining" what retirement means, according to a new survey conducted by IRALogix. More than half believe retirement is defined not by age 65 but by "financial independence." While some Millennials said ceasing all work by age 65 is a goal they are highly focused on working toward, many said they view retirement not necessarily as a complete exit from the workforce, but rather as a "time of greater flexibility in their lives."

Source: Planadviser.com, March 2024

An Easy Read on the Past and Future of 401k Plan Litigation

There is a story in Plan Adviser on the past and future of ERISA litigation over 401k plans. It's a fun and short read, neither of which is normally true of articles on this subject. That's a little tongue-in-cheek, but that phenomenon is nobody's fault. At its core, the article presents the question of whether the long and highly contentious history of this area of litigation has actually benefited participants. There are three points from the Plan Adviser article that the author touches on here.

Source: Bostonerisalaw.com, March 2024

Redefining 401k Data Collection for Racial and Gender Groups

A new study released today is shifting the way participant data is collected across the retirement planning industry. The research highlights gender and race-focused defined contribution administrative data typically found in human resource systems, with the hopes of combining it with qualitative research to better assess wellness platforms and tools for employers and participants. According to the research, data on nonwhite households remains relatively small with limited information on contributions, loans, and withdrawal and asset allocation activity.

Source: 401kspecialistmag.com, March 2024

401k World: The Litigators

The era of plan litigation began, from the plaintiffs' view, seeking to protect workers from retirement plan negligence. From the position of many plan fiduciaries and their defense attorneys, the trend has spurred a host of copy-cat complaints aiming to wring settlements from large plan sponsors and providers. Whichever side is more accurate at any given moment -- or if it's some combination of both -- one thing is certain: DC litigation remains relatively robust. This PLANADVISER In-Depth story considers 401k litigation's present and future.

Source: Planadviser.com, March 2024

Americans Want Retirement Investment Advice to Be in Their Best Interest: Survey

A new survey commissioned by the CFP Board reveals that nearly 97% of Americans agree that the financial professional who provides one-time recommendations or other one-time advice about retirement investments should be required to act in their client's best interest. This includes a recommendation to roll over funds from a workplace retirement savings program into an IRA or an annuity.

Source: Prnewswire.com, March 2024

Beware of the Dark Side of the 401k Business

Like Gotham in the Batman comics, there is an ugly underbelly to New York City. The same can be said of the retirement plan business, there is a dark side and this article will highlight some of the bad in the business that you should avoid if you are a plan sponsor.

Source: Jdsupra.com, March 2024

Demand for Increased Personalization Could Come from Younger 401k Participants

The momentum behind personalized retirement outcomes may come from younger generations. According to Cerulli, younger 401k participants have a greater willingness to share personal data regarding health and balance sheet information. Asset managers and recordkeepers should pay closer attention to younger 401k participants and engage them by offering more personalized solutions.

Source: Cerulli.com, March 2024

Retirement Savers Ended 2023 on a Positive Note

Even with other ongoing financial struggles, retirement savers ended the year on a positive note with improved market conditions and consistent contributions helping boost average account balances to their highest level in nearly two years. The good news comes from Fidelity's Q4 2023 analysis, which is based on the savings behaviors and account balances for more than 45 million IRA, 401k, and 403b retirement accounts on the firm's platform.

Source: Ntsa-net.org, March 2024

Younger 401k Participants Seek Personalization Features

Younger participants enrolled in employer-sponsored retirement plans share a greater desire for personalization, finds new research from Cerulli Associates. According to the findings, Generation Z was the most willing out of all other generations to share personal information, such as retirement savings/account balances (51%), nonretirement savings/account balances (37%), and expected retirement age (66%). Forty-five percent of Gen Z respondents added that they are "very comfortable" sharing their current and/or projected spending with 401k providers.

Source: 401kspecialistmag.com, March 2024

Saving for Retirement Can Mean Adding Some Debt Too

In today's world, workers need to save if they want to be comfortable in retirement. But there are also limits to what many people can afford. A new study finds that when U.K. workers were automatically enrolled and started contributing to a retirement savings plan, their household debt -- credit cards, bank overdrafts, and other unsecured loans -- increased. For every 32 to 38 pounds (or $40-48) in combined monthly contributions by the employer and employee, their debt rose by just over 7 pounds (about $9).

Source: Bc.edu, March 2024

A Return to Retirement Income Plans?

Alaska debates reopening its defined benefit retirement plan to new public employees. The United Auto Workers and automakers negotiated a significant increase to individual retirement plan accounts. IBM announces a transition from matching 401k contributions to a hybrid-defined benefit plan design. These are some of the headline-making recent events that counter the narrative that the defined benefit retirement plan is dead. What is causing this shift and what lessons can stakeholders in other retirement programs learn? First and foremost, it's all about meaningful retirement income and lifetime financial security.

Source: Segalco.com, March 2024

401k World: DCIO Managers Adjust to Fee Pressures

Defined contribution investment-only asset managers have played a vital role in the retirement plan ecosystem as it has evolved. However, these fund managers have also faced myriad business challenges in recent years. Continued fee pressure and an uptick in shopping for the right funds have plan sponsors increasingly embracing collective investment trusts and passive strategies, pushing out the once DCIO-dominant actively managed mutual fund. The fourth story in this PLANADVISER In-Depth series considers how the rise of CITs and passive options has changed retirement investing.

Source: Planadviser.com, March 2024

"Exploding Market" for 401ks May Help Shrink Coverage Gap

According to research released Tuesday by payroll and small workplace plan retirement provider Paychex Inc., less than half (37.6%) of U.S. employers offer a retirement plan. While those numbers are dispiriting for many, some in the retirement industry see an opportunity to close that gap, particularly with relatively new opportunities stemming from provisions in the SECURE 2.0 Act of 2022, state mandates, pooled employer plans, and advancements in technology that can help advisers sign up more clients with small businesses.

Source: Planadviser.com, March 2024

The 2024 Game Plan for In-Plan Annuities

The long road to winning over plan sponsors and participants has been an uphill one filled with roadblocks that have kept most players on the sideline to date. With a lot of hard work and lessons learned, components for a successful annuities-within-401k plans game plan now appear to be in place. Will 2024 finally be the year in-plan annuities turn the corner and win over the workplace retirement plan market?

Source: Qualifiedplanadvisors.com, February 2024

More Than Half of U.S. Workers Are Unaware of the IRS Tax Credit for Eligible Retirement Savers

Fifty-three percent of U.S. workers are unaware of a tax credit that may help them save for retirement and lower their tax bill, according to survey findings from the nonprofit Transamerica Center for Retirement Studies. The Saver's Credit, also referred to as the Retirement Savings Contributions Credit by the IRS, is available to millions of taxpayers who are saving for retirement.

Source: Prnewswire.com, February 2024

The National Retirement Risk Index: An Update From the 2022 SCF

The release of the Federal Reserve's 2022 Survey of Consumer Finances offers an opportunity to reassess Americans' retirement preparedness as measured by the National Retirement Risk Index. The NRRI estimates the share of American households that are at risk of being unable to maintain their pre-retirement standard of living in retirement.

Source: Bc.edu, February 2024

Three Themes Shaping the U.S. Retirement Landscape

Looking into 2024, retirement income, personalization, and diversification will be the key themes for DC plan sponsors and their consultants and advisors. This 2024 U.S. Retirement Market Outlook explores why it is expected that these topics will shape the retirement landscape in the coming years and outlines the underlying factors that are creating both challenges and opportunities for the retirement industry. The paper also provides action items or next steps for plan sponsors, consultants, and advisors.

Source: Troweprice.com, February 2024

Four Phases of Retirement. The Third One Is Not Much Fun

If you're not preparing emotionally and socially -- and many boomers aren't -- retirement will be a bumpy ride. Riley Moynes, a writer and public speaker, issues this warning in the video here. But he also offers sound advice on how to smooth things out. The advice is dispensed in his descriptions of the four phases of retirement: vacation, loss, experimentation, and the reward. He arrived at these phases after interviewing dozens of retirees.

Source: Bc.edu, February 2024

Nearly Three Quarters of Higher Ed Institutions List Retirement Readiness as Top Concern

A new study on retirement plans in higher education institutions likens the past year's challenges to those during the COVID-19 pandemic and highlights how continuing economic fallouts have marred retirement planning for participants. According to Transamerica's latest Pulse survey, 71% of institutions say retirement preparedness is one of their top concerns, yet 86% cite the cost of living and inflation as their leading worry.

Source: 401kspecialistmag.com, February 2024

Driving Better Insights and Outcomes -- Securely -- With Artificial Intelligence

Many recordkeepers are embracing artificial intelligence to deliver a personalized participant experience necessary to support a comprehensive retirement strategy for workers nationwide. Are you able to take advantage? While this technology is intended to provide valuable insights and optimize retirement preparedness, it also introduces fundamental concerns for plan sponsors.

Source: Napa-net.org, February 2024

401k Managed Account Users Out-Saving TDF Participants

Retirement plan participants utilizing managed accounts are out-saving non-users and participants utilizing a single target date fund, according to data from Edelman Financial Engines. During the past decade, the savings rates of EFE managed account users have consistently averaged higher than non-users.

Source: 401kspecialistmag.com, February 2024

Employees See 401k Plans as Prerequisite Instead of Perk

Access to workplace retirement plans is no longer considered a job perk to employees, but a necessity instead. A new study released today by Vestwell, which surveyed 1,200 employees nationwide on savings habits, evolving benefits, and challenges, finds that 85% of respondents expect their employer to offer retirement benefits, up from 72% last year. Additionally, 89% of survey respondents say they would be more likely to continue working for an employer that offers a retirement benefit.

Source: 401kspecialistmag.com, February 2024

Advisors and Participants Don't Agree on Retirement Readiness

While plan participants think they're ready for retirement, their advisors aren't so sure. A new Allspring Global Investments' retirement survey finds a disconnect between both parties, noting that 64% of retirees and near-retirees believe they are ready for retirement, while only 40% of advisors say their clients are. This divide is even greater when it comes to retirement themes.

Source: 401kspecialistmag.com, February 2024

How Sponsors Can Get the Most Out of DC Plan Design Changes

Building the optimal defined contribution plan design to support participant retirement readiness requires integrating flexible options to account for the consistent income stream workers will lose in retirement. Guaranteed lifetime income features -- annuity products -- are useful to sponsors, but retirement experts recommend that sponsors instead focus on Social Security optimization, automatic features, and other high-value and low-cost features to alter plan designs before moving on to annuities.

Source: Plansponsor.com, February 2024

Student Loan Payments Negatively Impact 401k Contribution Rates, Account Balances

Making student loan debt payments is harming both the average 401k employee contribution rate and account balance, finds a new report released today by the Employee Benefit Research Institute and J.P. Morgan Asset Management. Among those with incomes less than $55,000, the study found the average employee contribution rate of those making a student loan payment was 5.3% compared with 5.7% for those not making student loan payments. The difference is larger among those with incomes of $55,000 or more: 6.1% with payments vs. 7.3% without payments.

Source: 401kspecialistmag.com, February 2024

Climate-Friendly Initiative Aims to Retire Big Oil in 401ks

A new initiative is targeting the fossil fuel industry's relationship with America's 401k accounts. The Virtual March to Retire Big Oil, organized by 401k climate impact platform Sphere, looks to dismantle funds from U.S. oil, gas, and coal companies as the default investment in U.S. 401k accounts by encouraging participants to take their objections online.

Source: 401kspecialistmag.com, February 2024

Almost Half of Employees Stressed About Retirement Savings

Nearly all employees are concerned about their finances, and almost half say they're just getting by, according to new research released today by SoFi. According to SoFi's report, 48% of workers are worried they don't have enough saved in an emergency account, and 45% are stressed about their lack of funds for retirement.

Source: 401kspecialistmag.com, February 2024

SECURE 2.0's Auto Enrollment, Savers Match Will Bring Most Positive Impact

Preliminary research from the Employee Benefit Research Institute says that the SECURE 2.0 Act of 2022 will bring modest benefits for those approaching retirement but will have a larger impact on younger workers. The report also found that the automatic enrollment and saver's match provisions will have the largest positive effect on retirement security nationally.

Source: Planadviser.com, February 2024

Advisers Hardly Ever Recommend Active TDFs to Retirement Plans, Research Shows

A survey conducted by Cerulli Associates showed that only 7% of defined contribution plan advisers would recommend an actively managed target-date fund to a retirement plan client, with the consultancy advising asset managers to stress the success of active strategies when touting both blended and actively managed strategies. The survey also found that student loan matching and Roth matching contributions were the two provisions from the SECURE 2.0 Act of 2022 that advisers say they are most likely to recommend to a plan.

Source: Planadviser.com, February 2024

The Pros and Cons of Remaining in a 401k Plan After Retirement

This paper examines whether retirees would benefit from staying in their companies' 401k plans after retirement, versus rolling their savings over to an IRA. The research focused on individuals having low or moderate levels of financial literacy and concluded that many such retirees would likely find it financially rewarding to retain their assets in their 401k plans.

Source: Openjournals.libs.uga.edu, February 2024

45% of U.S. DC Plan Sponsors Considering Adding Emergency Savings Options in 2024: Survey

More than two-fifths (45 percent) of U.S.-defined contribution plan sponsors say they're considering implementing emergency savings features, according to a survey from MFS Investment Management. The survey, which polled 1,000 DC plan members and more than 140 plan sponsors, found nearly a quarter (23 percent) of plan sponsors said they'd take advantage of new rules under the Secure 2.0 Act that allow plan members to take out $1,000 from their retirement accounts once every three years with no distribution tax charge.

Source: Benefitscanada.com, January 2024

New Brief Argues for Reallocating 401k Tax Expenditures to Social Security

The latest brief by the Center for Retirement Research at Boston College looks at how taxpayer resources could be utilized more productively, and possibly reallocated to Social Security.

Source: 401kspecialistmag.com, January 2024

Auto-IRAs and More: New Retirement Planning Options Target Underserved Employees

In the ongoing transformation of retirement planning in the United States, a collaborative effort is gaining traction to make retirement security accessible to all, especially those traditionally underserved. This nationwide movement, driven by state-sponsored auto-IRAs, federal legislative proposals, and innovative private-sector initiatives, underscores a commitment to bridging the retirement savings gap for small employers and part-time basis employees. Here is some of the latest when it comes to retirement savings programs for underserved workers.

Source: Corporateinsight.com, January 2024

The Case for Using Subsidies for Retirement Plans to Fix Social Security

Tax preferences for saving in retirement plans are expensive, about $185 billion in 2020, according to Treasury estimates. Strikingly, they also seem a bad deal for taxpayers, primarily benefiting high earners while failing to significantly boost national savings. Thus, the case is strong for eliminating or reducing these preferences. The resulting increase in tax revenues could be reallocated to fixing Social Security's finances.

Source: Bc.edu, January 2024

Infographics: Workers Prefer Financial Benefits to Lifestyle Perks

Retirement plan advisers and their plan sponsor clients often work hard to create great benefit plans for employees. But is that work truly appreciated? According to findings from Morgan Stanley's most recent Investor Pulse Survey, the answer is often "yes." In a survey of over 900 people, Morgan Stanley found that most employees will pick a financial workplace benefit over a lifestyle perk such as first-class seats for a business trip or box seats to a game or show.

Source: Planadviser.com, January 2024

New Report Examines Demographic Influences on Retirement Readiness Among Americans

Fewer than one in four Americans (24%) strongly agree they are currently building or have built a large enough retirement nest egg. However, this sentiment varies dramatically across demographic segments, according to "A Compendium of Demographic Influences on Retirement Security," a comprehensive survey report released today by the nonprofit Transamerica Center for Retirement Studies in collaboration with Transamerica Institute.

Source: Prnewswire.com, December 2023

Envestnet Expects Financial Advisers to Expand Further Into 401k Plan Business

Financial advisers, not just retirement specialists, are expected to pursue the 401k plan business at greater rates in 2024 and beyond, while demand for end-to-end technology solutions and personalized services will continue to grow, according to research from Envestnet Inc.

Source: Planadviser.com, December 2023

The 401k "Check Engine Lights" for Plan Sponsors

Unfortunately, as a 401k plan sponsor, you don't have a plan check engine light or tire pressure light. But there are warnings "lights" that your 401k plan may have issues. To check these, you have to be proactive and look under the hood of your 401k plan. This article is all about the warning lights you need to check.

Source: Jdsupra.com, December 2023

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