Harnessing technology for a personalized retirement income strategy

​At retirement, 401(k) plan participants typically are on their own to manage retirement income and develop a sustainable withdrawal strategy. But change is on the horizon with the development of in-plan personalized retirement income solutions powered by technology. Recent legislative changes and technological advancements are evolving the 401(k) from a savings vehicle to a retirement income plan. 

“Retirement income solutions have the power to elevate defined contribution plans from a pure accumulation focus to a dynamic tool for maintaining a standard of living over the long term,” said NextCapital CEO John Patterson. “At NextCapital, we’ve developed a managed account solution that allows an investor to visualize a personalized portfolio withdrawal strategy that will regularly update to reflect changes in the markets. Partnering with financial services firms, we’re going a step further to enable participants to explore how purchasing an annuity for a portion of their savings might translate to a paycheck in retirement. Investors could then take action directly from the platform.”

The demand for stable retirement income is robust. Nearly 96% of plan sponsors surveyed by BlackRock in 2021 said they feel responsible for supporting participants in managing their retirement income, and 90% of participants indicated interest in products designed to create an income stream in retirement.

Researchers believe that the number of plan sponsors using managed accounts will continue to grow as more of them focus on providing retirement income solutions for their participants, according to Cerulli Associates’ U.S. Retirement Markets 2021 report.