The use of automatic features like auto enrollment, auto escalation, and professionally managed investments in DC plans such as 401(k) and 403(b) has undeniably increased participation and savings rates, benefiting millions of workers. However, there’s a downside in that these features may have unintentionally discouraged participants from actively engaging in the decumulation phase of retirement planning.
Within the retirement industry, despite the success of automatic features, there’s a debate about how to handle retirement income. Should it be part of the retirement plan, automatically enrolled, and guaranteed? The industry tends to answer in the affirmative due to the effectiveness of automatic features, but this approach also raises questions about annuities and cost considerations.
The crux of the matter lies in the intersection of wealth management and retirement planning. While retirement plan advisors are expanding into wealth management, wealth advisors are recognizing the potential of working with retirement plans.
The challenge is how to transition participants away from over-reliance on auto features, parallel to getting individuals to adopt healthier habits, and engage them in essential financial planning as they approach retirement.
You can read more about this in Fred Barstein’s Wealth Management article titled, “Are Auto Features the ‘Ozempic’ of 401(k) Plans?”
