Retirement Industry Trends to Look Out for in 2025
Industry leaders expect a wave of retirement income adoption and innovation heading into 2025, finds a report released last week by the Institutional Retirement Income Council (IRIC).
The expectation comes as more employers and participants seek out guaranteed options, as a response to growing costs and diminished savings. A 2024 report by Invesco found that participants prefer in-plan retirement income features, with 54% saying they would feel better about keeping money in their employer’s plan after retiring, so long as they obtain access to a monthly payout feature.
Still, other research from Allianz Life reports that just 44% of Americans currently have a plan for how they will generate income in retirement, despite more plan sponsors implementing guaranteed income in their plans in 2024.
As the rate of traditional pensions decline in the workplace, IRIC expects rising popularity among the features.
“Next year will be the acceleration of plan sponsor adoption for in-plan retirement income options,” said Kevin Crain, executive director of IRIC. “2024 was when in-plan retirement income offerings continued to evolve regarding product creation and DC plan recordkeepers’ implementation. Plan sponsors evolved financial wellness programs. Automatic solutions advanced with increased plan adoption and more aggressive plan design, which resulted in greater success for participant savings. Also, industry studies throughout the year reported on participant and plan sponsor agreement that in-plan retirement options are desired.”
Read on for IRIC’s top retirement industry trends in the new year.
New Focus on In-Plan Retirement Income
The IRIC expects employers to increase their evaluation and selection of in-plan retirement income solutions in the defined contribution (DC) marketplace, to include hybrid target-date funds (TDFs), hybrid managed accounts, annuity marketplaces, and systematic withdrawal programs.
The organization also anticipates a surge of education with in-plan income options, including in-depth plan and participant utilization studies.
NEXT: Product Development and Increased Engagement and Demand
Product Development and Increased Engagement and Demand
The IRIC expects industry groups, including investment firms, insurance providers, plan recordkeepers, consultants, and middleware technology firms to design new retirement income solutions and improve ways to utilize the features.
Customized in-plan retirement income options, including hybrid target-date funds and managed accounts, will continue to gain momentum in 2025, the organization predicts. The group also expects hybrid investments to offer flexible approaches, whether that’s an annuity retirement income offering or a retirement paycheck systematic withdrawal option.
IRIC predicts greater integration in retirement income planning, such as combining DC and Social Security retirement income to create a product design that “bridges” DC plan income decisions with Social Security election decisions.
At the same time, the organization anticipates seeing enhanced levels of participant engagement and demand, especially for tools that use artificial intelligence (AI) capabilities.
“This growing demand will drive the retirement services industry and plan sponsors to enhance retirement income planning tools and personalize retirement income projections for DC plans and other retirement income pillars,” the IRIC writes. “The tools will include using AI to engage participants in a more interactive planning experience. Enhancing planning tools will better educate participants about retirement income, increasing their comfort in utilizing the in-plan retirement income options.”
NEXT: DC Plan Automatic Features and Greater Financial Wellness Programs
DC Plan Automatic Features and Greater Financial Wellness Programs
The acceleration of adopting new plans—especially in the small business segment—will expand the utilization of automatic enrollment and auto-increase solutions, but the IRIC does not expect to see auto-solutions within in-plan retirement income options.
Additionally, hybrid investments with embedded income solutions will need more broad-based plan adoption before being considered Qualified Default Investment Alternatives (QDIAs), the IRIC notes.
The organization also expects to see enhanced communication efforts from plan sponsors and retirement plan advisors, as more workers seek advice and guidance.
This includes pre-retiree education and planning programs. According to the IRIC, the pre-retiree module will consist of personalized planning tools for retirement income projections, including integrating non-DC plan retirement income sources; education about Social Security and Medicare program offerings and decision elections; and budgeting and tax planning for post-retirement life and opportunities to accumulate additional retirement savings before retirement. The pre-retiree programs will be offered to employees over the age of 50 to give them time to plan prior to retirement.
This list of expectations from the IRIC aims to transition DC plans from supplemental savings vehicles to programs that foster retirement security, explained Crain. “By addressing the dual needs of accumulation and de-accumulation, plan sponsors and industry leaders are fostering a more robust and equitable retirement system,” he said.
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