Hybrid Annuity TDFs – A New Breed of TDFs
The last 20 years have witnessed a shift from defined benefits (“DB”) to defined contributions (“DC”) plans accompanied by an increase in the number of workers covered by retirement plans. This is a result of both direct engagement with plan sponsors regarding plan design and welcome policy changes, including the Pension Protection Act, the SECURE Act, and the SECURE Act 2.0. It has shifted responsibilities in both the accumulation and decumulation phases.
a) In the accumulation phase – Guidance from policymakers and actions from plan sponsors and consultants has proven effective. Defaults have helped improve coverage and account balances. The momentum remains strong.
b) In the decumulation phase – Many industry surveys indicate that the participant’s demand for personalized retirement income guidance is high. Participants want help estimating how much to save for retirement, when to retire, and how to create a retirement income stream from their lifelong savings. The variety of income generating instruments, each with different attributes, available in the marketplace complicates this analysis. Further, only a small percentage of people have a financial advisor.