Among those who knew they needed to be saving more, 25% reported that they were paying down debt, and 40% said they were saving for nonretirement priorities such as education or a home purchase. “Those competing priorities disproportionately impact minorities and women,” she said.
To close the gap, Weker suggested that the industry should look more closely at addressing barriers related to gender and race. Sclafani agreed, noting that employer interest in diversity, equity and inclusion (DEI) in recruitment, hiring, promotions, and overall operations was already starting to enter the retirement benefits space.
The conversation pivoted to how retirees and near-retirees manage decumulation—that is, how they budget their income needs, spending, and drawing down of assets. Are they financially “healthy” in retirement?
“Individualized variables need to be taken into consideration,” said Kim DeDominicis, T. Rowe Price’s target date portfolio manager. For instance, she said, some people need a set level of retirement income while others demand more flexibility. Clients must be able to understand their options and the trade-offs of choosing one path over another. To help pre-retirees maintain financial wellness, plan sponsors should provide personalized attention.
Doshier said there is growing interest among plan sponsors in qualified default investment alternatives (QDIAs), which are investment services employers can use to provide retirement account management to their employees. QDIAs must contain a mix of investments that take into account each participant’s age and expected retirement. In general, these are either target-date funds, which are structured to maximize returns by a specific date, or professionally managed accounts that typically focus on high growth stocks in the early years and more conservative securities as retirement approaches.
Another option is a “dynamic or dual QDIA,” said Sclafani, which she defined as a retirement savings vehicle that starts as an accumulation-oriented target-date fund, but then, when the participant reaches a certain age, account balance, or other threshold, can convert to a managed account to help with ongoing decumulation needs.
“When the participant retires or reaches a certain threshold,” she said, “they benefit from a managed account that provides a more customized experience than a target-date fund can.” That’s necessary, she added, because “people approaching retirement do tend to have more complex financial lives.”
The final topic was the investment landscape going forward.
“It is likely we will continue to face economic uncertainty and market instability,” said DeDominicis. This volatility can only complicate retirement decisions, she warned. Plan sponsors and retirement savers alike need to think about designing portfolios that are well positioned for economic unpredictability.
“Diversification,” she concluded, “is more crucial than ever.”