As the retirement planning industry comes up on the first anniversary since the passage of SECURE 2.0, a new trends report from Escalent analyzes how plan advisors have taken advantage of the legislation.
The Retirement Plan Advisor Trends report polled 503 defined contribution (DC) plan advisors with an active book of business of at least $5 million and found that more than one-quarter of advisors consider the age increase for required minimum distributions (RMDs) to be the most exciting component of the program.
Additionally, over half are recommending or “extremely likely” to recommend Roth account catch-up contributions and employer matching. Automatic rollovers, 529 college savings account rollovers, expanded penalty-free withdrawals and in-plan emergency savings accounts also net strong traction from plan advisors.
“We have to remember that SECURE 2.0 really does have the potential to change the industry for the greater good.”
Sonia Davis, Escalent
“We did hear a lot of excitement around the required minimum distribution (RMD) afe increases—that was something that was really top of mind,” said Sonia Davis, lead report author and senior product director at Escalent, in an interview with 401(k) Specialist. “Others were quick to tout the benefits of the new catch-up provisions, the auto enrollment mandate, as well as the incentives to smaller organizations and then some of the behavioral plan design changes that will lead to participant savings.”
According to Escalent, the report was designed to help retirement plan providers and DC investment managers expand their market share by better understanding financial advisors who sell and support workplace retirement plans.
“We have to remember that SECURE 2.0 really does have the potential to change the industry for the greater good,” Davis explained. “It encourages plan advisors to view SECURE 2.0 as an opportunity to better partner with plan sponsors and really help them determine which opportunities are relevant and prudent for their organizations.”
Escalent notes how SECURE 2.0 opens communication opportunities between advisors and participants, many of the latter who may be focused on penalty-free withdrawals, along with the upcoming SECURE 2.0 provisions expanding emergency savings accounts and student loan matching. According to the research, at least four in 10 Gen Zers and Millennials expressed interest in expanded penalty-free withdrawals.
While plan advisors may be less susceptible to recommend moving money out of a retirement plan, they could consider how doing so alleviates a potential savings barrier for some participants.
“If you think about the participant mindset, what are some of the barriers to contributing a retirement plan? It’s that fear that you won’t be able to access that money if you need it, at least not without extensive fees,” adds Davis. “[SECURE 2.0] alleviates some of those barriers, but there is definitely opportunity for plan advisors to continue educating participants on what’s really in their long-term best interest.”
SEE ALSO:
- IRS Reminds Retirement Savers of RMD Deadlines, SECURE 2.0 Changes
- SECURE 2.0, Managed Accounts, and More: Top 2024 Trends
- 3 Key Fixes in New SECURE 2.0 Technical Corrections Bill
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.
