The Institutional Retirement Income Council (IRIC), a non-profit think tank for the retirement income industry, issued its forecast of coming trends in the retirement industry for plan sponsors, providers, and advisors to look out for in 2024.
As the number of traditional pension plans reduce, the IRIC anticipates more plan sponsors and industry stakeholders evaluating and adopting retirement income solutions and de-accumulation strategies for defined contribution (DC) plans, in an effort to increase retirement readiness and security.
“…We might be at the tipping point when it comes to the adoption of retirement income solutions within a DC plan. Traditional pension plans, which provide a guaranteed income stream in retirement, have become less common in the private sector,” said Michelle Richter-Gordon, executive director of IRIC. “With the rise of DC plans such as 401(k)s, the responsibility for retirement savings and investment decisions has shifted from employers to employees. As a result, there’s an increasing recognition of the need to help participants convert their accumulated savings into a reliable income stream during retirement.”
More employers and clients have expressed interest in lifetime income products, as pension plans and defined benefit (DB) plans continued to diminish in the workplace. However, recent introductions of DB-like workplace plans, including IBM’s shocking move to replace its 401(k) match with an employer-paid “Retirement Benefit Account” contribution, may signal a shift towards similar plans.
IRIC 2024 trends to watch
According to the IRIC, along with a rise in income solutions, other forecasts include:
- An increased focus on retirement readiness, as plan sponsors are becoming more concerned about how prepared their employees are with retirement.
- Market Innovation, including the growth of both guaranteed and non-guaranteed solutions and other investment options designed to provide a predictable income stream in retirement.
- Growing participant demand, as participants are expressing interest in solutions that provide more certainty about their financial future in retirement.
- Customized investment solutions, including target-date funds and managed accounts that not only take into account individual employee circumstances and risk tolerance, but also their retirement goals and retirement income needs.
- Further consideration of automatic features, such as incorporating these features in investment menus that include a retirement income component.
- Increased employee education and communication. Research shows that plan participants are looking for help from their employer when it comes to saving and planning for retirement.
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