401(k) consultants want more retirement income products with liquidity inflation protection and no additional fiduciary risk.
It’s part of the additional defined contribution services they’re looking for with plan participants, according to Pimco.
The Newport Beach-based fixed-income behemoth finds nearly two-thirds (of those surveyed said they believe plans should offer a “separate retirement income tier,” which may include retiree-focused services and products.
Consultants also said participants were in favor of monthly distributions and desired a minimum yield of 4 percent or 5 percent.
Half of the consultants surveyed recommended an income-focused multi-sector strategy given that income during retirement, rather than just the size of the portfolio, becomes relatively more important for participants.
For plan sponsors who would like to retain participants in their plans after they retire, the consultants recommend adding a retirement education tool (80 percent), allowing distribution flexibility (77 percent) and adding retiree-focused investment options (76 percent).
Like last year, consultants place investment solutions (rather than insurance products) at the top of their retirement income suggested list.
Their top three suggestions are at-retirement target-date vintage(s), cash management and income/multi-sector fixed income strategies.
Other findings include:
- Environmental, Social and Governance (ESG) strategies are recommended by almost half of consultants as an additional strategy to consider within the core lineup.
- Target-date funds continue to be the overwhelming preferred choice for the Qualified Default Investment Alternative, or QDIA.
- For plans with assets at or above $1 billion, consultants’ first recommendation is a custom target-date fund. For all other segments, the preferred target-date fund structure is an active/ passive blend.
- Consultants continue to recommend 10 options as the optimal design of the core menu: six equity, two fixed income, one capital preservation, and one inflation-protection. Stable value continues to be the top recommended capital preservation option.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of 401(k) Specialist and Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots. Experienced financial services content executive specializing in creative new media delivery. He joined the American Retirement Association in 2023 as Chief Content Officer, overseeing communications for the organization, as well as its sister organizations.
