Plan sponsors face a pivotal shift in retirement plan needs. Discover the possible solutions for in-plan retirement income. Learn how they can help transform traditional retirement savings plans to support participants’ long-term financial security.
Retirement plans are no longer just about saving. A fundamental shift in how we think about 401(k) plans looks to be taking shape. Working with employers, I’ve witnessed firsthand how retirement plans have been evolving. While these plans were originally created to supplement traditional pension plans, they’ve become the primary retirement vehicle for most American workers.
With my background as an actuary, I’ve been analyzing demographic trends nearly my entire career and what I’m seeing now is unprecedented. By 2030, all baby boomers will be 65 or older, and Generation X—the first 401(k) generation—will begin reaching retirement age.
I’m beginning to see a new generation of possible solutions for in-plan retirement income emerging in the market. These often build upon familiar investment structures while adding innovative income-focused features. Here are some promising approaches:
- Target Date Funds (TDFs) with Lifetime Income. These combine traditional TDF glide paths with a built-in feature to provide lifetime income. The intent is to provide a seamless transition from accumulation to decumulation, with income that can either start automatically at the noted retirement age or be initiated by the participant at a point after retirement age.
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Managed Account Services. Such services offer personalized investment advice and retirement income strategies. They can be particularly effective because they consider individual factors like other assets, Social Security timing, and Medicare planning.
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Hybrid QDIAs. This innovative approach combines traditional TDFs during working years with a transition to a managed account service as retirement approaches. It provides age-applicable investment strategies while increasing personalization at predetermined age milestones as retirement nears.
When consulting with employers exploring possible solutions to in-plan retirement income, I typically suggest this thoughtful approach:
Assess your current plan
- Review participant demographics and plan usage patterns
- Evaluate investment offerings for retiree income needs
- Check distribution flexibility
- Consider your stance on asset retention
- Audit education and tools
Consider building a foundation with education and advice
If the time isn’t quite right to implement a new in-plan investment product or service, meaningful action can still be possible to help employees.
- Offer financial education: Webinars, workshops, articles, and calculators can help employees understand retirement income planning, Social Security, budgeting, and more.
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Provide advice services: One-on-one conversations and a managed account service can offer personalized support that helps employees feel more confident about their future.
Explore in-plan income investments
Today’s modern investment structures are generally designed to fit seamlessly into the plan’s existing framework. The SECURE Act and SECURE 2.0 have provided helpful guidance around these solutions, including fiduciary safe harbors for selecting lifetime income providers and increased portability provisions.
A benefit of these investments is that such solutions allow employees to stay in the plan and shift from saving to spending—without losing the support of trusted plan services.
Update policies and prepare for implementation
If you move forward with an in-plan income solution:
- Review your investment policy statement (IPS), if applicable
- Communicate clearly with employees
- Offer age-specific education touchpoints
- Stay up to date on compliance
In my conversations with employers and industry colleagues, I’m encouraged to see innovative solutions emerging in this space. The shift to include income-focused options within retirement plans isn’t just a trend, it appears to reflect an evolution to help meet the changing needs of today’s workforce. With strong plan design and the right solutions, it’s possible to help make retirement income a reality for employees.
What’s next?
Work with a retirement service provider who understands and has the expertise to consult on options that seek to deliver the desired results for both employers and employees. If you’re looking for help implementing possible solutions for in-plan retirement income, reach out to your Principal® representative. They’ll consult on creating a tailored retirement plan that aligns with workforce needs for both savings and retirement income.
