The Value of Personalized Guidance in Retirement

Plan sponsors are increasingly focused on helping defined contribution (DC) participants get not only to, but through, retirement. Our latest DC Landscape Report suggests that most DC plans, though, are still in the early stages of learning about retirement income strategies and have yet to begin to evaluate, or select, a retirement income solution or product.

When it comes to accumulation, guidance around investing and saving is relatively generalized, with target-date funds being 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 participants who are the same age.

We think personalization becomes increasingly important as someone moves through the lifecycle, especially in retirement. As we demonstrate in this research, providing personalized guidance around optimal portfolio risk levels and spending (i.e., portfolio withdrawal) amounts can notably improve expected retirement outcomes for participants. Our analysis 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), but rather DC plan sponsors should consider making available to participants a suite of options they can use to personalize their retirement journey based on their unique situation and preferences if or when they wish to engage.