Web Content Viewer

The Next Evolution of Defined Contribution Plans

Key Takeaways

A major challenge for workers is generating a sustainable amount of lifetime income in retirement.
The SECURE Act mandates that DC plans provide plan participants with projections of future retirement income.
The next generation of DC plans has the potential to help workers meet their retirement income challenges.

One of today’s greatest financial wellness challenges for workers is generating an adequate and sustainable amount of lifetime income in retirement. Defined contribution plans primarily focus on helping participants accumulate retirement savings, not converting those savings into a steady stream of lifetime income. This can leave workers vulnerable to a wide array of risks once managed by defined benefit plans including longevity risk, market risk, inflation risk, interest rate risk, and conversion risk.

In two new white papers, From Saving to Income: The Next Evolution of Defined Contribution Plans PDF opens in a new window and America’s Workers Need a Next-Generation DC Plan More Than Ever PDF opens in a new window, we look at today’s defined contribution plans such as 401(k)s, and how they are likely to evolve.

The first generation of 401(k) plans relied on employees to voluntarily enroll in them, determine the amount they would like to save, and choose their own investments, usually from an extensive menu of choices.
Version 2.0 of DC plans demonstrated that incorporating defaults into plans, such as automatic enrollment and default investment options, is effective in getting workers to save and invest.
With DC plan version 3.0, plan sponsors will evolve their plans to have participants focus on a retirement outcome, namely helping participants reach their individual retirement income goal. Accordingly, plan sponsors will add personalization to their plan design toolkit.

It’s clear today that DC plans, for all their successes, still fall short of helping participants with preserving assets in their pre-retirement years and generating lifetime income once they’ve stopped working. The economic fallout from the COVID-19 pandemic will likely compound these challenges. Policymakers in Washington have already indicated their support for a third evolution in DC Plans with the overwhelming passage of the SECURE Act into law. Among other things, the act mandates that DC plans provide plan participants with individualized projections of how much retirement income their DC account balances will generate in the future.

By embracing new technologies, customization opportunities, and risk-mitigation solutions, DC plans have the potential to help workers meet their retirement income challenges.

To learn more, read:

America’s Workers Need a Next-Generation DC Plan More Than Ever PDF opens in a new window

From Saving to Income: The Next Evolution of Defined Contribution Plans PDF opens in a new window or view the From Saving to Income: Defined Contribution Plans are Evolving PDF opens in a new windowinfographic.

Web Content Viewer

Actions

Web Content Viewer

Actions

Assurance IQ, LLC a wholly-owned subsidiary of Prudential Financial, Inc. matches buyers with products such as life and health insurance and auto insurance, enabling them to make purchases online or through an agent. Neither Prudential Financial, Inc. nor Assurance IQ offers, underwrites, or administers health plans or health insurance policies.

LINK by Prudential is an umbrella marketing name for Prudential Customer Solutions LLC (“PCS”), Prudential Annuities Distributors, Inc. and various subsidiaries of The Prudential Insurance Company of America. Investment advisory products and services of LINK by Prudential are made available through PCS, an SEC registered investment adviser. PCS is not a licensed insurance agency or broker. Prudential LINK and LINK by Prudential occasionally may be referred to as LINK.

Where LINK by Prudential is made available in connection with certain Financial Wellness products, access is made available through Prudential Workplace Solutions Group Services (“PWSGS”). PWSGS provides access to a number of Financial Wellness products, services, seminars and tools offered by PWSGS, its affiliates or third parties. PWSGS is a subsidiary of Prudential Financial, Inc. PWSGS is not a licensed insurance company, does not provide insurance products or services and does not provide financial, investment or other advice. Individuals should consult appropriate professionals when making financial, investment and tax decisions.

The LINK by Prudential free consultation provides an overview of your financial life and proposes solutions for you to consider. You will not receive a written financial plan and/or investment recommendations.

The content on this website is being provided for informational purposes only and is not intended to be tax or legal advice by PCS, its affiliates or their financial professionals. Please consult with your tax and legal advisors regarding your personal circumstances.

In providing this information, neither PCS nor any of its affiliates or financial professionals is acting as your ERISA fiduciary.

Investing in securities involves risk, and there is always the potential of losing money. Asset allocation and rebalancing do not ensure a profit or guarantee against loss.

You should consider the features of the contract and/or the underlying portfolios’ investment objectives, policies, management, risks, charges and expenses carefully before investing. This and other important information is contained in the prospectus. Please read the prospectus carefully before investing or sending money.

Not Insured by FDIC or any Federal Government Agency | May Lose Value | Not a Deposit of or Guaranteed by the Bank or any Bank Affiliate.

All references to income certainty and guarantees, including optional benefits, are backed by the claims-paying ability of the issuing company and do not apply to the underlying investment options.

Prudential LINK financial representatives currently offer a more limited range of insurance and annuity products (“insurance products”) compared to the range of insurance products offered through other Prudential distribution channels.

For additional important information about the products, services and companies associated with LINK, please click here.* Opens in new window

This website is for U.S. persons Opens in new window and may not be approved in all states. Information contained on this site does not and is not intended to constitute an advertisement, solicitation, or offer for sale in any jurisdiction outside the United States, where such use would be prohibited or otherwise regulated.

Prudential, the Prudential logo, the Rock Symbol, Bring Your Challenges, Prudential LINK and LINK by Prudential are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

"Prudential Advisors" is a brand name of The Prudential Insurance Company of America and its subsidiaries.

Prudential Financial, Inc. of the United States is not affiliated in any manner with Prudential, plc, incorporated in the United Kingdom, or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom

Template: 1000797-00005-00

Web Content Viewer

The Next Evolution of Defined Contribution Plans

Key Takeaways

Read More

Web Content Viewer

Trending

Roadmap to Financial Security

Best Practices to Help Employers to Navigate the “New Normal”

Web Content Viewer