Account Aggregation the ‘Missing Link’ for In-Plan Retirement Income
A new white paper released today from the Institutional Retirement Income Council (IRIC) and digital rollover solution Manifest, “One Retirement: Why Account Aggregation Is the Missing Link for In-Plan Retirement Income,” argues that the fragmented account structure of the defined contribution system hampers the adoption and effectiveness of in-plan lifetime income solutions.
With the average worker changing jobs 12 times throughout their career, many leave behind a trail of orphaned retirement accounts. Last year alone, the white paper says an estimated $1.77 trillion in assets sat scattered across roughly 28 million lost or abandoned accounts. The paper contends that the consolidation of these disparate assets is the missing structural link required to leverage in-plan solutions and drive more robust retirement outcomes.
“The industry has developed advanced income solutions, but we have not yet established the foundation those solutions need.”
IRIC Executive Director Kevin Crain
“The industry has developed advanced income solutions, but we have not yet established the foundation those solutions need,” said Kevin Crain, Executive Director of IRIC. “Account aggregation is not merely a feature—it is infrastructure. Without the ability to view a participant’s complete retirement picture, income modeling accounts for only a part of their actual wealth, making withdrawal sequences inefficient and income projections incomplete.” Crain adds that while SECURE 2.0 has expanded what is legally and commercially achievable, the next step is to ensure the infrastructure exists to turn those possibilities into reality.
The paper proposes a three-tier framework linking consolidation infrastructure to retirement income: Layer 1 (Consolidation and Visibility), Layer 2 (Optimization), and Layer 3 (Implementation). Without the visibility at scale provided by consolidation, the subsequent steps toward a secure retirement income—including income modeling, Social Security integration, tax sequencing, and product selection—cannot effectively support participants today.
“Account consolidation is the strategic engine for retirement income at scale, enabling the industry to finally deliver guaranteed income efficiently and bolster retirement outcomes for every participant,” said Anuraag Tripathi, CEO of Manifest.
Key findings
• The defined contribution system has a systemic and persistent leakage issue: for every $1 contributed to an active defined contribution plan, $8.70 exits.
• Account fragmentation leads to a behavioral penalty: participants unable to see their full retirement picture are more likely to delay income planning, underestimate their retirement readiness, and disengage from plan tools.
• Only 11% of participants complete plan-to-plan transfers independently, highlighting the challenges that technology-enabled rollover solutions can solve.
• Participants who consolidate their accounts increase retirement savings by 36% over 10 years due to lower cash-out risk, reduced fees, and higher ongoing contributions.
• Income replacement ratios, longevity modeling, withdrawal sequencing, and Social Security claiming decisions all need full asset visibility to work properly—visibility that account fragmentation often prevents.
The paper concludes that the industry has the technology, regulatory flexibility and commercial motivation to solve the problem. “What it needs now is a clear strategy and strong institutional support to make account aggregation a top priority in every retirement income discussion, because without it, the financial picture and ultimately participant outcomes are incomplete.”
The IRIC/Manifest white paper, “One Retirement: Why Account Aggregation Is the Missing Link for In-Plan Retirement Income,” is available for download at theiricouncil.com.
SEE ALSO:
• IRIC, SPARK Institute Launch Retirement Income Evaluation Tool
• Graff, Colangelo Talk ‘Closing the Loop’ in Retirement Plans with Guaranteed Income
• ‘Forgotten’ Accounts: Forget Hyperbole, Here’s a Solution
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.