Analysis from the 2024 MFS Global Retirement Survey was released recently, identifying “MFS Key Themes for 2025” that plan sponsors, retirement advisors and participants should focus on in the coming year.
Among them are the impact of the election on markets, the risk of a “no landing” scenario and the challenges and opportunities for the global economy. “Considering these changing dynamics, sponsors and participants should revisit their asset allocations and consider any changes that could better help them attain their objectives,” the introduction to MFS’ “Retirement Outlook 2025” states.
But for the second year in a row, the research found plan sponsors’ top priority over the year has been reviewing SECURE 2.0 and adopting relevant provisions. Eighty-two percent of survey respondents listed this as one of their top three areas of focus.
“Although SECURE 2.0 passed at the end of 2022, there are certain provisions that had staggered effective dates,” Jeri Savage, Retirement Lead Strategist at MFS, told 401(k) Specialist. “Also, the retirement legislation was expansive, which required plan sponsors to work through a number of provisions and decide which ones, and when, to implement in their own plans. We continue to see plan sponsors look at optional provisions around providing student loan matching and creating opportunities for participants to build emergency savings.”
It remains to be seen if student loan matching and emergency savings provisions grow in both plan sponsor adoption and participant uptake. A recent survey by Alight Solutions indicates that only 5% of employers currently offer the student loan 401(k) matching benefit authorized by SECURE 2.0, and to date there seems to be minimal interest among employers in implementing the $2,500 emergency savings option.
Savage noted that various other provisions of SECURE 2.0 will continue to be phased in in 2025, most notably increased contribution limits for those aged 60 to 63, adding a layer of administrative complexity for plans.
“There were also changes that will require catch-up contributions for participants with compensation exceeding $145,000 to be made on a Roth basis, although the IRS provided a two-year administration transition period through December 31, 2025, to give sponsors time to comply with the new rules,” Savage said. “Other SECURE 2.0 provisions to be aware of for 2025 include mandatory automatic enrollment of new plans, an expansion of part-time work eligibility and a few additional distribution options that provide greater flexibility to participants in taking distributions in certain circumstances.”
Beyond the SECURE 2.0 provisions, other top areas of focus identified by plan sponsors included “evaluating the investment lineup holistically” (57%) and “focusing on operational issues” (43%). “Establishing or refining plan’s ESG philosophy” garnered top-three areas of focus votes from only 5% of respondents.
Risk of a ‘no landing’ scenario
As noted in MFS’ recent “6 Key Themes for 2025,” a soft landing for the U.S. economy has been the consensus expectation over the past year. However, a new economic path has emerged—a “no-landing” scenario where economic growth re-accelerates without a notable downturn.
“We do see some risk of a “no-landing” scenario arising in the U.S., which is one where there is never any meaningful slowdown of economic growth or market performance,” Savage said. “If that scenario were to take hold, we think there is a possibility that inflation could resurface as a major macro risk, with broad implications for the policy outlook of the U.S. Federal Reserve. While a no-landing outcome would mean that the U.S. has moved to a higher growth trajectory, it would also imply that market rates may stay higher for longer, which would impact both consumers and businesses with higher borrowing costs and cost of capital.”
This scenario seems increasingly likely as the Trump administration, largely seen as pro-growth, lays out its economic plans. This re-acceleration in growth could potentially cause the economy to overheat, triggering a resurgence in inflation and compelling the Fed to resume rate hikes.
Easing of retirement regulatory efforts
Speaking of Trump, Savage and “Retirement Outlook 2025” co-author Jonathan Barry, Managing Director at MFS, write that the outcome of last November’s presidential election will shape the regulatory and legislative environment for retirement plans heading into 2025.
“With the Republicans controlling both the executive and the legislative branches, there will likely be a shift toward easing regulatory efforts around retirement security and fiduciary responsibilities,” the report states. “We expect to see additional legislative efforts around ESG, such as a likely reversion back to the prior rule and to alternative assets, such as a more accommodative stance on the inclusion of private and digital assets in DC plans.”
Reasons for optimism
The 2024 MFS Global Retirement Survey probed participant and retiree opinions on a variety of topics and found that while participants are concerned about their retirement prospects, there is a lot they can learn from retirees, providing reasons to be optimistic about the future.
The research found that only 36% of participants are “very/extremely confident” in their ability to retire at the age they want to; however, retirees have a higher level of confidence that their assets will last through retirement, with 52% being “very/extremely confident.”
These results may in part reflect participants underestimating the importance of Social Security. Over 40% of pre-retirees think that less than 25% of their retirement income will come from Social Security, but current retirees indicate over 40% of their monthly income comes from Social Security.
The MFS analysis of the survey also saw a disconnect between participants’ retirement expectations and actual retiree experiences around retirement age. As shown in Exhibit 2, most participants would like to gradually transition into retirement, but retirees tend to come to a “hard stop” where they stop working for pay, often for reasons beyond their control, such as health issues, layoffs or meeting family needs.
In a tight job market with talent at a premium, MFS said employers may want to consider policies that could keep some of these older participants in the workforce longer. “In our MFS 2024 DC Plan Sponsor Survey, sponsors tell us that only 22% currently have programs in place that allow employees to have a more gradual transition into retirement, with an additional 19% considering such programs,” the Retirement Outlook 2025 states.
Despite low participant confidence, the research shows encouraging signs that participants are taking steps to better prepare for retirement.
For example, more than half of participants (51%) started saving early, and 36% are using a financial advisor to prepare for retirement. Survey results consistently highlight that participants receive retirement advice from a variety of sources but would also utilize advice offered by their retirement plan sponsors.
“This data should compel sponsors to think about the potential impact low retirement confidence may have on their workforce,” the report said. “Sponsors may want to consider how education on retirement and investment issues, along with policies and programs that allow for more retirement flexibility, could help improve overall employee confidence, which could help improve morale and productivity.”
Read the complete Retirement Outlook 2025 here.
SEE ALSO:
• Student Loan Matching in Retirement Plans: Tips for Advisors and Clients
• Doll Rings in New Year with 2025 Predictions
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
