{"id":863763,"date":"2026-09-28T17:32:10","date_gmt":"2026-09-28T17:32:10","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/863763\/"},"modified":"2026-09-28T17:32:10","modified_gmt":"2026-09-28T17:32:10","slug":"why-guaranteed-income-in-401k-plans-needs-a-push","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/863763\/","title":{"rendered":"Why Guaranteed Income in 401k Plans Needs a Push"},"content":{"rendered":"

Twenty years ago, some professionals in the defined contribution industry, mostly at insurance companies, started discussing the need for retirement income\u2014one professional declared, \u201cThe accumulation phase of 401(k) plans is over!\u201d<\/p>\n

We all know how that story has played out\u2014every year we hear, \u201cThis time is different.\u201d When challenged on why, no good explanation is offered. Sean Hanna, founder and CEO at 401kWire commented at the time, \u201cMost people do not have enough saved to make retirement income worthwhile.\u201d<\/p>\n

There are numerous obstacles facing embedded guaranteed income within 401(k) and 403(b) plans, but there is one big reason why it should and eventually will be included: without guaranteed income, DC plans are just savings, not retirement plans and will never replace defined benefit plans effectively. But there are simple, if not easy, ways to get widespread adoption.<\/p>\n

First the obstacles.<\/p>\n

Related:The Real Disruption Behind PEPs<\/a><\/p>\n

Significant change within DC plans only happens due to<\/a>:<\/p>\n

Regulatory\/legal requirements (maybe reactions to lawsuits)<\/p>\n

Opportunity to generate substantial revenue<\/p>\n

Unlike managed accounts or CITs, retirement income does not check any of these boxes. In fact, advisors and providers would earn less if a portion of an account within a dynamic qualified default investment alternative is allocated to guaranteed income; there would be less money for a rollover, which can generate as much as a 1% fee. Some advisors want to create a personal retirement income program for each participant, which does create revenue, but how many have enough assets to make it viable?<\/p>\n

Though Jessica Sclafani at T. Rowe Price claims that 76% of $1 billion-plus DC plan sponsors want to retain participants\u2019 assets, more than 95% of smaller plans do not. There is the nagging transferability issue when a participant or a plan moves to another record keeper, unwilling to service the guarantee. SS&C started working on that issue decades ago and still only has a handful of adopters.<\/p>\n

Most plan sponsors with less than $1 billion are clueless about guaranteed income and how it works, as are many advisors. The DC industry instinctively reacts by creating educational resources because, as Masloff said, when the only tool you have is a hammer, the whole world looks like a nail. Plan sponsors are facing the healthcare cost crisis and have too much on their plate, juggling 10 jobs, to take the time to learn about retirement income. Advisor certifications have become a joke, with little training and no experience required.<\/p>\n

Related:401(k) Real Talk Episode 209: September 23, 2026<\/a><\/p>\n

It\u2019s the proverbial chicken and egg issue. If plan sponsors are clueless, uninterested or unable to learn more, advisors may not want to waste their time and credibility advocating for it, especially given low participant adoption. Though SECURE 1.0 gave retirement income some safe harbor, widespread adoption did not follow as it did for target date funds after the 2006 Pension Protection Act.<\/p>\n

Annuities have a bad name, not helped by one advisory firm\u2019s prolific marketing campaign, \u201cI hate annuities.\u201d There are so many versions that they are hard to explain and the opposite of transparent, which can lead to abuse.<\/p>\n

DC plans are fundamentally different than DB plans because decision makers are not driven primarily by business reasons or outcomes\u2014they start with liability, cost and administrative burdens. The risk of guaranteed income for many mid-sized to large DC plans currently outweighs the benefits. Some are enlightened and want to do the right thing. Brad Arends of intellicents recalled a large manufacturing client complaining, \u201cYou did a great job helping my employees save for retirement. But you fattened the pig for annuity salespeople.\u201d<\/p>\n

So is there any hope for widespread adoption of retirement income?<\/p>\n

Some people think that the growing PEP adoption<\/a> will help as the pooled plan provider may be more knowledgeable, able to weigh and mitigate risks, making their program more competitive. Even though these group plans are growing quickly, they represent only a fraction of DC plans and assets.<\/p>\n

Related:Lines Blurring Between RPAs and Institutional Investment Consultants<\/a><\/p>\n

After 20 years, it may be true that the accumulation phase of DC plans is over, with more millionaires than ever, according to a recent Fidelity report<\/a>. The formula for creating higher account balances, developed by BeFi scholars like UCLA Professor Emeritus Shlomo Benartzi through the auto or ideal plan,<\/a> has been proven, with only a few tweaks needed here and there.<\/p>\n

Today, most retirement income is available through TDFs or managed accounts, ideally within a dynamic QDIA. With greater assets in TDFs, firms like Fidelity and BlackRock have adopted that vehicle, but managed accounts offer advisors and providers the opportunity to make additional revenue by providing advice. These investments, especially advisor-managed accounts, are more elegant and personalized, and at retirement there is the opportunity to offer customized off-platform advice to larger accounts for a reasonable fee, especially if a relationship has been formed.<\/p>\n

All of which will help, but the only thing that will result in widespread adoption of guaranteed income within DC plans is if participants are automatically enrolled within a dynamic QDIA.<\/p>\n

TDFs always made sense, but adoption was not widespread until automatic enrollment. Few opt out\u2014the same will be true with guaranteed income especially for those approaching retirement. It makes total sense and is certainly better than high-priced, low-quality retail annuities, whose sales are booming, by the way. The plan sponsor can leverage the buying power of their record keeper and TDF or managed account provider to get institutional pricing while offering a fiduciary due diligence process.<\/p>\n

Will Congress mandate guaranteed income? Unlikely. At best, they will provide safer harbors. AI will enable advisors to offer advice at scale through managed accounts, especially as data becomes more accessible. So how do we get started?<\/p>\n

It feels like the retirement income industry has been dancing in the dark for decades, burning through many talented professionals. Bruce Springsteen may have the answer coined in his brilliant song \u201cDancing in the Dark<\/a>\u201d:<\/p>\n

I ain’t nothin’ but tired
Man, I’m just tired and bored with myself
Hey there, baby, I could use just a little help<\/p>\n

You can’t start a fire
Worryin’ about your little world fallin’ apart<\/p>\n

This gun’s for hire
Even if we’re just dancin’ in the dark<\/p>\n","protected":false},"excerpt":{"rendered":"Twenty years ago, some professionals in the defined contribution industry, mostly at insurance companies, started discussing the need…\n","protected":false},"author":2,"featured_media":863764,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[39],"tags":[28,147,530],"class_list":["post-863763","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/863763","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=863763"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/863763\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/863764"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=863763"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=863763"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=863763"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}