Change is afoot. That's one of the themes that emerged at Pensions & Investments' East Coast Defined Contribution conference in Fort Lauderdale, Fla.
During the nearly two-day event, conversations swirled around topics ranging from demographic shifts that are changing the design of DC plans to the use of health savings accounts for retirement savings.
"We may be on the precipice of real change," Chris Daley, J.P. Morgan Asset Management's head of institutional defined contribution, said during a panel on asset retention in the decumulation phase.
Mr. Daley referred to the wave of baby boomers expected to draw down their retirement savings for the first time, an event that may shrink the size of many retirement plans and force plan sponsors to think about how to retain retiree assets.
Baby boomers are putting downward pressure on DC plans as "they withdraw more money from those plans than what is being contributed through payroll," Mr. Daley said as moderator of the panel.
Panelist Sherry Youngblood, retirement benefits program manager at DENSO International America Inc., described a shift in company thinking when it launched a lifetime income analysis tool to help retirees manage their 401(k) savings.
"We realized we needed to change our plan from a 'to retirement' to a 'through retirement' strategy," she said.
Keynote speaker Bonnie-Jean MacDonald, director of financial security research at the National Institute of Aging at Ryerson University, Toronto, also advocated for industry change as she disputed the conventional approach to determining retirement income adequacy.
"The 70% replacement rate isn't doing the job that it's supposed to do," Ms. MacDonald said. Instead, the industry should adopt the Living Standards Replacement Rate, which she and her fellow researchers developed. The LSRR takes a more holistic approach when determining how much someone will need to save for retirement, like their family situation, taxes and investment income, she said.
The LSRR evaluates how much money a retiree would need to maintain her living standards after retirement by comparing how much money she needs to support her personal consumption of goods and services, both before and after retirement.