Personalization in Retirement Plans Is Paramount

Individuals are increasingly looking for more tailored investment solutions, so it makes sense for plan fiduciaries to consider a more personalized approach, according to John Kutz, National Retirement Plan Strategist. He says personalization may be the ticket to better retirement outcomes.

For many US workers, the single largest asset they own—aside from their home—is their workplace retirement savings plan. We believe retirement plan solutions thus far have not enabled for a high level of personalization, but they should—both in the asset accumulation phase and in decumulation once one decides to retire. Plan sponsors need to start looking at participants as individuals (and often as part of a household)—not just as a certain homogenized demographic. Participants’ goals and needs within retirement are not always determined by their age. Today, through new technology and employer and participant regulations, personalized solutions are available to plan participants.

  • Key factoids about the need for personalization:
    • A recent PLANSPONSOR survey showed only 36% of plan sponsors agree that employees will achieve retirement goals by age 65.1
    • According to Franklin Templeton’s Voice of the American Worker Survey, 77% of workers indicated that a more personalized 401k investment option will encourage broader participant plan participation and contributions.2
    • Participants in their 50s and 60s hold some 63% of retirement plan assets.3 These individuals are likely to be more interested in income solutions that align with their individual demographics.
    • While most target-date funds (TDFs) tend to be held by the expected age group, data suggests that 77% of assets in a 2065 TDF are outside the intended age group4—so they are using the incorrect vintage.