Displaying items by tag: dc

A new TIAA survey finds that two-thirds of Americans believe retiring between ages 65 and 70 is no longer realistic, with only 37% confident they can retire “on time.” Financial strain is widespread—20% of respondents aren’t saving for retirement at all, and nearly a quarter expect to work longer just to cover basic expenses. 

Some are even turning to unlikely strategies, such as the 10% who see playing the lottery or buying luxury goods as potential retirement solutions. TIAA executives warn that many Americans lack both adequate savings and access to financial guidance, underscoring the need for guaranteed income products and professional advice. 

The survey shows 92% of respondents want a steady income stream beyond Social Security, yet 25% feel too uninformed to invest in annuities despite growing interest. 

Finsum: Advisor should help clients to understand supplementing Social Security with long-term income strategies is essential to ensure financial security in retirement.

Plan sponsors continue to grapple with low engagement and limited financial literacy when it comes to retirement income within defined contribution plans, according to a new DCIIA study. Many employers are hesitant to implement retirement income solutions due to competing priorities, legal risks, and a lack of internal resources or formal decumulation strategies. 

Complexity, lack of standardization, and concerns over liquidity and portability further complicate adoption. However, plan sponsors anticipate growing interest in lifetime income options through 2025 and 2026, especially as peer adoption increases. 

Safe harbor provisions from SECURE 2.0 are expected to encourage adoption by reducing perceived legal liability, and DCIIA will expand its research later this year to better understand these barriers and opportunities.

Finsum: Solutions that offer personalization, flexibility, and simplicity are most appealing, though widespread uptake may hinge on stronger education and clearer evaluation tools.

Target-date funds are designed for investors with a specific retirement date in mind, automatically adjusting their investment mix to become more conservative as that date approaches. 

These funds typically hold a variety of mutual funds rather than individual stocks or bonds, making them a diversified “fund of funds” that simplifies asset allocation. Early in an investor’s career, target-date funds emphasize growth by leaning heavily on equities, then gradually shift toward bonds to preserve capital as retirement nears. 

Each fund follows a predetermined glide path, which guides the transition from aggressive to conservative investments over time. Investors benefit from a hands-off approach, as the fund handles rebalancing and risk adjustments without the need for active management. 

Finsum: Overall, target-date funds offer a convenient, age-based solution that combines diversification, risk control, and simplicity in a single investment vehicle.

Morningstar’s latest Retirement Plan Landscape report finds that while the average cost of workplace retirement plans continues to decline, expenses still vary significantly—especially for those in smaller plans, who often pay nearly three times as much as participants in large plans. 

These cost discrepancies stem largely from economies of scale, with larger employers able to spread administrative expenses more efficiently. Despite the variation in fees, most participants across plans have access to high-quality investments, with over 94% of defined-contribution assets allocated to Morningstar Medalist-rated options. 

The report highlights that even small plans can be cost-effective, with 20% of them coming in below the median cost for medium-sized plans. However, more than $600 billion has exited workplace retirement plans annually since 2020, often due to rollovers into IRAs when employees change jobs. 

Finsum: Investors should carefully weigh whether their workplace plan offers better value through low fees and strong investment options before making such moves.

Defined contribution plans in 2025 will increasingly focus on generating sustainable retirement income as Social Security’s future remains uncertain and traditional pensions decline. 

In-plan retirement income products, such as annuities, hybrid target-date funds, and systematic withdrawal strategies, will see greater adoption, driven by regulatory clarity from the SECURE Act and SECURE 2.0. AI-powered digital tools will enhance retirement planning by offering personalized projections, dynamic withdrawal strategies, and automated guidance on Social Security and tax-efficient drawdowns. 

Employers will expand financial wellness initiatives, providing targeted pre-retirement education on income strategies, healthcare costs, and managing distributions. Recordkeepers and investment firms will integrate advanced retirement income solutions, making it easier for participants to transition from saving to spending. 

Finsum: Regulatory support is expected to continue, reinforcing the shift toward holistic, income-focused retirement planning.