Two 401(k) giants are teaming up. Retirement behemoth MassMutual announced on Tuesday that it joining with Envestnet Retirement Solutions to provide 401(k) managed accounts to participants.
RetireSmart Ready Managed Path Managed Accounts will be actively managed by Envestnet on an ongoing basis “to ensure that the investments remain appropriate for the participant’s objectives,” according to the companies. RetireSmart is designed to help participants who need investment guidance and who may not want to actively manage their retirement investments on their own. The managed account investment strategies are built from investment options already available through a plan sponsor’s retirement savings plan.
Employers that sponsor retirement plans administered by MassMutual will be able to use the managed product in two ways:
- Personalized investment strategies available for selection by participants, or
- As a Qualified Deferred Investment Alternative (QDIA) available in plans that automatically enroll employees (or when participants otherwise fail to select investments).
MassMutual’s introduction of managed accounts reflects the growing popularity of asset allocation strategies such as target date funds as participants cede management of their retirement assets to investment professionals. MassMutual’s recordkeeping data shows that the percentage of assets within asset allocation strategies increased by 26.2 percent in the last five years.
“Asset allocation strategies such as managed accounts and target date funds are becoming increasingly popular as more retirement savers want professional help in managing their retirement savings,” Tina Wilson, senior vice president of product management, said in a statement. “Investment selection and asset allocation become increasingly important as savers draw closer to retirement, especially for those within 20 years of their planned retirement date. Professional management can make a significant difference, both in growing assets as well as preserving assets.”
Participants can enroll in RetireSmart Ready Managed Path online through the MassMutual RetireSMART Ready Tool after establishing a separate advisory account with ERS, according to Wilson. No other paperwork is required, she said.
The tool gathers information about each participant’s current age, target retirement age, risk tolerance, existing savings and future retirement needs, including whether or not he or she has a defined benefit plan. Retirement readiness projections – and managed account portfolio construction – are based on a participant being able to replace at least 75 percent of his or her pre-retirement income, including full Social Security benefits.