It's not exactly simple to provide tailored advice or information to the millions of participants in U.S. defined contribution plans. But with advancements in technology, new legislation and a retirement community striving to get people to sock more money away for their retirements, industry sources say retirement plans of the future in the U.S. will be shaped by customization.
"In accumulation, particularly the early years, a one-size target-date fund is pretty good for most people, but as you get closer to retirement and into retirement, individual circumstances and needs and wants and financial situation change," said Josh Cohen, Chicago-based head of institutional defined contribution at PGIM Inc., the investment management businesses of Prudential Financial.
Participants would benefit from learning whether they're on track to meet their particular retirement goals and hear what they need to do in order to make those goals a reality, Mr. Cohen said.
Advancements in record-keeper platform capabilities that are now able to "seamlessly pull and protect participant data" make further personalization possible for participants, according to Holly Verdeyen, Chicago-based director of defined contribution investments at Russell Investments.
"There's always been this realization that participant needs are highly personal, especially near retirement, but we just haven't had the ability to deliver that type of individualized advice to people on a mass scale, and now with the advancements in technology we're able to do that better than ever before," Ms. Verdeyen said.
Lew Minsky, Palm Beach Gardens, Fla.-based president and CEO of the Defined Contribution Institutional Investment Association, said customization will grow more prevalent in the coming years and thinks blockchain technology could play a major role. Last fall, DCIIA and the SPARK Institute, which represents retirement industry players such as record keepers, investment advisers, mutual fund companies and benefit consulting firms, held a forum on blockchain technology for the U.S. retirement system.
"We're still early days but you could definitely see an environment where, for example, there is a chain across the industry that has everybody's individual records on it and so all the information necessary for a pretty granular level of customization is available," Mr. Minsky said. "And it would just be about determining which providers within the chain needed what levels of information to be able to facilitate that customization."
And if getting people to save more and smarter is one part of the equation, getting them to save at all is the other. Recent federal and state legislation has opened the door for open multiple employer plans and state-sponsored automatic individual retirement account programs that are known as Secure Choice programs.
Industry stakeholders are confident these types of initiatives will help close the U.S. retirement savings gap. And in Washington, lawmakers are looking to build on the achievements of the Setting Every Community Up for Retirement Enhancement Act, the first retirement security package passed in more than a decade.
Rep. Richard Neal, D-Mass., chairman of the Ways and Means Committee, told Pensions & Investments after the SECURE Act passed in late December that he's working on legislation that will "essentially be the SECURE Act 2.0" and is aiming to move the Automatic Retirement Plan Act and the Retirement Plan Simplification and Enhancement Act with that package.
Mr. Neal in 2017 had introduced the Automatic Retirement Plan Act, which would require many employers to offer a 401(k) or 403(b) plan, and the Retirement Plan Simplification and Enhancement Act, which among other provisions, would exempt retirement savings below $250,000 from complicated required minimum distribution rules. He has yet to do so this Congress.