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Plan sponsors are increasingly focused on helping defined contribution (DC) participants not only get to, but get through, retirement.
When it comes to accumulation, advice around investing and saving is relatively generalized, with target-date funds serving as the most common default investment and plans with automatic enrollment relying on a single default savings rate for the entire plan. This perspective carries over into some retirement income solutions, such as managed payout funds, or the retirement income vintage of a target-date series, where there is a single allocation and assumed spending level for all invested participants of any age.
We think personalization becomes increasingly important as someone moves through the lifecycle, especially in retirement. Providing personalized advice around optimal portfolio risk levels and spending (i.e., portfolio withdrawal) amounts can notably improve expected retirement outcomes for participants. This is not intended to suggest that DC plans should necessarily stop offering commonly used retirement income solutions, such as Stable Value or some type of multi-asset retirement strategy (e.g., the retirement income vintage in a target-date series). Rather, DC plan sponsors should consider making a suite of options available to participants, allowing individuals to personalize their retirement journey based on their unique situation and preferences, if or when they wish to engage.
PGIM DCS - 5234570
