Skip to content

    Exploring In-Plan Retirement Income Solutions

    July 30, 2024
     

    To help prevent potential retirement delays, consider retirement income solutions to boost participants’ confidence in their future financial security. 

    Both employers and employees have a growing interest in in-plan retirement income solutions. With 66% of participants concerned about creating an income stream in retirement, this shows a signification interest in retirement planning tools that can convert savings into lifetime income.1

    Offering in-plan retirement income solutions is one way to help participants plan for financial stability in retirement in order to retire on time. Why focus on in-plan retirement income solutions, and why now? Here’s what you need to know.

    The growing need for retirement income

    With the decline of pension plans and the rise of DC plans like 401(k)s, the responsibility to create retirement security has shifted from employers to employees. However, for many participants, saving is a challenge. If they manage to save enough for retirement, participants aren’t confident in converting their assets to a steady stream of retirement income they won’t outlive. Eighty-seven (87%) of participants expressed a desire for an in-plan retirement income solution to help them achieve their goals.1 Moreover, today’s workforce is aging, requiring solutions that help provide a sustainable retirement income for as long as they live.

    In an effort to boost retirement income success, there is an opportunity to support participants with income planning for the decumulation stage. Education is critical to improving retirement readiness: participants need to understand how retirement income solutions work and how to use them appropriately. Employers can leverage plan features like in-plan retirement income solutions to make their retirement benefits more competitive, increase employee engagement, and retain valuable talent. Few organizations currently offer this option, making it an opportunity to stand out as an employer of choice.

    Plan design plays a pivotal role

    Thoughtful plan design can significantly impact participants’ retirement income. Features such as default deferral rates, employer matching contributions, and professionally managed investment solutions all play a pivotal role:

    • Default deferral rates often steer participant contributions. Many plans automatically enroll employees at the deferral rate of 3% of their salary, but most employees choose to “set it and forget it” and never increase their contributions beyond that amount. Plans with higher default deferral rate and auto-escalation, where contributions are increased at set intervals until a preset maximum is reached, promote saving more over time.  This approach potentially boosts their retirement income.
    • Matching contributions can substantially boost participants’ retirement savings. Encourage participants to contribute at least enough to receive the full employer match and maximize this benefit.
    • Professionally managed investment solutions alleviate the burden of establishing a personal asset allocation strategy, constructing a portfolio of equities and fixed income, and then monitoring and updating it on an ongoing basis. The most common 401(k) default investment solutions are target date funds and managed accounts.

    In-plan income considerations

    Several retirement income solutions and investment strategies are designed to provide consistent, stable income for retirees. Some common approaches include:

    • Target date funds (TDFs) with in-plan guaranteed income: An in-plan solution is designed to deliver automatic guaranteed retirement income. TDFs may be appropriate as a Qualified Default Investment Alternative (QDIA).
    • Managed accounts: These solutions offer professional investment selection and management with the potential for growth and income. Managed accounts provide efficient opportunities that can be customized for specific investor circumstances and allocated to guaranteed income solutions at an appropriate age.
    • Fixed income: Securities such as bonds offer a steady income stream with potentially competitive yields, liquidity, and flexibility.

    Participant withdrawal strategies

    Plan designs that allow flexible distribution strategies can help improve financial stability as participants transition from the accumulation to the withdrawal stage. These include systematic withdrawals that create an automated income stream, technology-driven withdrawal solutions that adapt retirement income based on retirees’ needs and preferences, and guaranteed income solutions.

    “Employees want guidance on retirement income planning, and in-plan income solutions present an opportunity to boost engagement, enhance retention, and improve overall retirement readiness,” said Matt Wolniewicz, President of Income America, an in-plan income solution provider.

    For your next steps, consider reviewing your current plan design through a retirement income lens and consult with a financial advisor to explore in-plan solutions and investment options that may fit your plan’s demographics and objectives.

     

    1Voice of the American Worker 2024. Franklin Templeton. 2024.

     
    ©401(k) Marketing, LLC. All rights reserved.
     
    © 1993-2024, Allworth Financial. All rights reserved.

      Privacy Policy   |    Disclosures   |    Cookie Preferences   |    Do Not Sell or Share My Personal Information

       

      Advisory services offered through Allworth Financial, a Registered Investment Advisor | Disclosures | Privacy Policy

      Securities offered through AW Securities, a Registered Broker/Dealer, member FINRA/SIPC. Check the background of this firm on FINRA's BrokerCheck.

      HMRN Insurance Agency, LLC license #0D34087

      1Barron’s 2024 Top 100 RIA Firms. Barron's© magazine is a trademark of Dow Jones L.P. The ranking of independent advisory companies is based on assets managed by the firms, growth, technology spending, succession planning, and other metrics.

       2 Retention Rate Source: Allworth Internal Data, FY 2022

      3 The NBRI Circle of Excellence Award is bestowed upon NBRI clients meeting one or both of the following criteria: Total Company score at or above the 75th percentile of the NBRI ClearPath Benchmarking Database and/or improvement of five (5) or more benchmarking percentiles in Total Company score over the previous survey. 

      4 As of 7/1/2024, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $22.5 billion in total assets under management and administration. 

      5 InvestmentNews 2020 and 2021 Best Places to Work for Financial Advisers. The ranking reflects survey responses and scores completed by both employers and employees. Employers report their organization’s workplace policies, practices, and demographics. Employees complete a survey designed to measure the employee experience. 

      6  2021 Value of an Advisor Study / Russel Investments

      7 Ranked 9th Top Wealth Managers By Growth in Assets in the U.S. from RIA Channel, 2022. RIA Database and RIA Channel are registered trademarks owned by Labworks, LLC.

      8 USA Today Best Financial Advisory Firms 2024. The ranking is based on the growth of the companies’ assets under management (AUM) over the short and long term and the number of recommendations they received from clients and peers.

      9 NBRI Best in Class Ethics 2023. The Best in Class level is bestowed upon clients performing at or above 90 percentile of the NBRI ClearPath Benchmarking Database.

      ✢ Scott Hanson, Investment Advisor 2005, 25 most influential people in the financial services industry. The ranking reflects 25 people who Investment Advisor magazine believes have had or will have the greatest influence on the financial services industry.

      ✼Pat McClain, InvestmentNews 2014, Invest in Others Community Service Award, presented to an advisor who has made an outstanding impact on a community through managerial contributions to a non-profit organization.

      †Financial Times, FT 300 Top Registered Investment Advisers, June 2019. The ranking reflects six areas of consideration including the company's years in existence, industry certifications of key employees, AUM, asset growth, SEC compliance record and online accessibility and calculates a numeric score for each company. 

      Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER™, CFP® (with plaque design) and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

      Important Information

      The information presented is for educational purposes only and is not intended to be a comprehensive analysis of the topics discussed. It should not be interpreted as personalized investment advice or relied upon as such.

      Allworth Financial, LP (“Allworth”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of the information presented. While efforts are made to ensure the information’s accuracy, it is subject to change without notice. Allworth conducts a reasonable inquiry to determine that information provided by third party sources is reasonable, but cannot guarantee its accuracy or completeness. Opinions expressed are also subject to change without notice and should not be construed as investment advice.

      The information is not intended to convey any implicit or explicit guarantee or sense of assurance that, if followed, any investment strategies referenced will produce a positive or desired outcome. All investments involve risk, including the potential loss of principal. There can be no assurance that any investment strategy or decision will achieve its intended objectives or result in a positive return. It is important to carefully consider your investment goals, risk tolerance, and seek professional advice before making any investment decisions.