Hope for the future: The opportunity for transformative enhancement of retirement plans

As a part of the 2020 Trends series, “Opportunity for transformative enhancement of retirement plans” offers insight and projections from thought leaders.

Article 3 of 4 summarized from “The 2020s: A decade of workplace challenges and opportunities" ebook produced by Voya Financial.

To effectively plan for the decade, Voya Financial set out to understand factors impacting the ability to achieve financial wellness and retirement readiness. We sought out thought leaders on retirement and workplace issues to provide their predictions and expectations for how the decade of the 2020s would unfold in a variety of areas pertaining to the workforce.

We’ve created a series of four blog posts outlining our key findings and learnings:

Read on for the third installment in the series: Hope for the future: The opportunity for transformative enhancement of retirement plans

The decade of the 2020s will clearly pose major challenges to those seeking to help American workers achieve financial security throughout retirement. But challenges may be balanced with advances in technology and other innovations that will yield positive results.

In the words of thought leaders:

“Retirement plan providers will grow far more sophisticated at providing real-time personalized guidance towards a better outcome. Workers will expect to be communicated with in clear, actionable alerts with language and financial targets that are unique to them and constantly learning from their behavior. Instead of feeling like a distant, institutional 'thing' a retirement plan will feel more like a companion that knows the employee and looks after them and evolves with them.”

Despite expected headwinds of economic challenges and societal turmoil, the panelists strongly suggest that we may see significant progress made in retirement plans by 2030. Survey respondents believe this progress will be supported by a combination of factors including technological advancements, legislative initiatives and greater employer commitment. Many feel these factors will play a key role in expanding access to plans and engaging more employees.

According to panelists, advancements in the use of technology will play a multi-faceted role in improving efficacy of retirement plans:

  • Allowing participants to have access to planning tools
  • Improving participant communications
  • Enhancing investment practices by automating asset allocation and rebalancing
  • Enabling access to advice—without the cost, inconvenience and logistic challenges of face-to-face contact

Technology and artificial intelligence expected to drive engagement and improve outcomes

Nearly 7-in-10 (68%) of thought leaders feel that it is very likely—or certain—that better online tools and artificial intelligence will allow participants more effective engagement with recordkeepers. And almost 7-in-10 (68%) believe financial technology and artificial intelligence will be at least very likely to greatly improve service to plan sponsors. Half (52%) believe participants will demand more financial guidance through access to advisors and other tools, including online chats.

In the words of thought leaders

“Providing customized solutions will help each participant define what is important to them in terms of a retirement lifestyle as well as providing the ‘right’ financial tools to enable them to fund that lifestyle.”

The growth of technology allows plan sponsors to more effortlessly improve the participant experience. As a result of benefits provided by mobile technology including personalized updates, nearly half (48%) of panelists believe it’s at least very likely the improved resources will improve plan outcomes.

To support these advances, 6 in 10 believe it is at least very likely that plan providers will use behavioral finance principals to increase deferral rates by an average of 2%.

 

In the words of thought leaders

“Employers will take a more proactive role in helping employees choose options that are appropriate for their circumstances. Today, there is reluctance to make strong recommendations due to legal concerns, but employers will begin to realize that the advantages of helping employees outweigh this risk (plus I predict that regulators will also increasingly recognize this and will support employer efforts along these lines)”

Along with financial wellness programs, many thought leaders see a growing commitment to addressing retirement outcomes. This translates to their belief that there will be a greater employer commitment to helping participants convert assets to income at retirement.

In the words of thought leaders

“I believe that the new lifetime income projection requirements under the SECURE Act will have a significant, positive, long-term impact on the way plan participants plan for and save for retirement as well as how they transition into retirement.”

6 in 10 panelists feel it’s at least very likely that plan sponsors will focus more on helping participants in converting their plan account balances into income. Another 57% feel that employers will be more proactive in helping retirement outcome

Access to plans and automated services expected to increase

A majority of thought leaders believe it is at least very likely that:

  • Plans will allow greater access to part-time workers with more plans allowing contributions from those that work at least 500 hours (60%).
  • Plans will increasingly use automatic deferral escalation, and in the next ten years at least three-quarters of plans will have such a feature (as predicted by 54% of thought leaders). Those responding after March 15, 2020, as the COVID crisis was more advanced, were more apt to believe that auto-escalation will very likely increase (77% of respondents).
  • There will be growth in plans allowing Roth contributions (54% of respondents).

All of these expectations have contributed to the just more than two-thirds who believe it is certain or very likely the proportion of retirement plan participants who digitally engage with their plan provider will double from 30% to a remarkable 60%. Perhaps, as a result of the evolution of plans in the next 10 years, well over half of panelists believe savings rates will be at least somewhat higher than they are today.

 

To dive deeper into The 2020s: A decade of change and challenge view the ebook or read additional articles from our series:

 

 

 

 

Source: The 2020s: A decade of workplace challenges and opportunities – Views from though leaders.  Produced by Voya Research and Insights and Greenwald Research, March, 2021

For plan sponsor/TPA, Institutional use only. Not for public distribution.

Research material is provided for general and educational purposes only.

Products and services offered through the Voya® family of companies.

Mathew Greenwald and Associates is not affiliated with the Voya® family of companies.

 


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