Rethinking Dynamic Defaults to Tackle Retirement Income Security

The most effective evolution for DC plan defaults is incorporating guaranteed lifetime income. While target-date funds successfully manage accumulation, they don't address participants' eventual need to convert savings into reliable income.

Managed accounts offer personalization but can be ineffective for disengaged participants. A dynamic default that blends a target-date fund with a liquid, revocable guaranteed income component offers a scalable, participant-friendly solution. This approach addresses income security for those who don't actively manage their retirement.

Plan sponsors recognize this need, with 89% favoring a QDIA that balances accumulation and income. Looking ahead, watch how plan sponsors implement these embedded income solutions, particularly how they tailor them using plan-level data without requiring individual participant action.