Shlomo Benartzi’s PensionPlus—built to create a highly personalized lifelong retirement paycheck while keeping participants in control of their assets—today launched an innovative joint service pilot with Capital Group, one of the world’s largest and most experienced asset management firms.
As a complement to the Capital Group and American Funds target date retirement series, the service is a value add for Capital Group’s target date clients and is free for retirement plan participants. It is designed to make it easy for retirement plan participants to create a customized paycheck in retirement designed to last for their entire life.
As people get older, they don’t just accumulate assets—they also accumulate differences. Some are in excellent health; others have multiple health risk factors. Some want to travel; others want to set aside money for long-term care. Some want to claim Social Security right away; others want to delay for a bigger benefit. PensionPlus is uniquely able to create a lifelong retirement paycheck that takes these differences into account, while also ensuring that participants remain in complete control of their assets.
“As an established retirement income investment manager, implementing PensionPlus through this pilot aligns to our long-term goal of expanding coverage of workplace retirement plans and delivering solutions to help create better participant outcomes,” said Brendan Mahoney, Head of Institutional Retirement Strategic Growth at Capital Group. “We look forward to implementing the service to help advisors scale their business and work with their plan sponsor clients to support participants in achieving their retirement goals.”
As of June 30, 2023, Capital Group—home of American Funds—manages more than $2.3 trillion in equity and fixed-income assets for millions of individuals and institutional investors around the world.
“After the retiree begins receiving their paycheck, we continually monitor their plan, adjusting their paycheck for inflation and nudging them to stay on track.”
Shlomo Benartzi
PensionPlus was co-founded by Benartzi in 2021. Benartzi, Professor Emeritus and co-founder of the Behavioral Decision-Making Group at UCLA Anderson School of Management and Distinguished Senior Fellow at the Wharton Behavior Change for Good Initiative, noted in a press release today that PensionPlus is a first-of-its-kind solution that incorporates a variety of behavioral insights not considered by more traditional retirement income projections. In addition to helping set a personalized retirement income plan, PensionPlus helps users stay on track with behaviorally informed digital nudges with its proprietary Nudgebot.
“PensionPlus democratizes retirement income planning for all participants,” Benartzi said. “In about 10 minutes, participants are able to create a highly customized and sustainable retirement paycheck that reflects their needs, goals and preferences. And we’re not a once and done calculator. After the retiree begins receiving their paycheck, we continually monitor their plan, adjusting their paycheck for inflation and nudging them to stay on track. Our simple goal is to give retirees the peace of mind they deserve with a paycheck they can count on.”
In January, Indianapolis-based OneAmerica became the first retirement plan provider to offer the PensionPlus retirement withdrawal strategy solution.
While research has found only one in 10 people delay claiming Social Security until age 70 in order to claim the maximum benefit, Benartzi told 401(k) Specialist recently that among people following his strategies, 60% delay claiming.
“You don’t have to claim when you retire. Most people don’t know it,” Benartzi said. Because of the high value of waiting to claim, research has found retiring workers should do everything they can to delay, including withdrawing from retirement accounts before tapping Social Security.
Social Security retirement benefits taken at age 70 are 76% higher, adjusted for inflation, than benefits taken at 62, according to 2022 research from the National Bureau of Economic Research.
That same research found all U.S. workers ages 45 to 62 would benefit from waiting until beyond age 65 to start receiving benefits, and more than 90% would benefit financially from waiting until age 70 to claim. But—like a new Schroders survey found—only about 10% of workers actually wait or plan to wait until age 70 to claim.
The NBER research found people leave a median household loss of $182,370 on the table by not waiting until age 70 to claim.
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