Staying in-plan: More 401(k)s keep retiree assets but more products needed

investmentnews.com:

More 401(k) plan sponsors like the idea of retaining participants after retirement, which is helping drive the development of more in-plan retirement income products, data published Friday by Cerulli show.

According to a survey of RIA aggregators and institutional retirement plan consultants, well over half — 58% — of their plan sponsor clients are actively encouraging workers to stay in the 401(k) after retirement rather than rolling their savings into individual retirement accounts.

“I’m seeing much more of a willingness among plan sponsors to allow participants … to leave the money in the plan,” particularly for those with at least $50,000, said Randy Long, founder and managing principal of SageView Advisory Group. “For many clients, the fees are so competitive in the plan … that it’s a very compelling place to leave your money for retirement.”

However, many 401(k) sponsors have done little if anything to make their plans more useful for retirees.

Two-thirds of retirement plan record keepers that offer a distribution option say it’s a target-date series with an in-retirement vintage, according to Cerulli, which surveyed RIAs and record keepers in 2022. However, 95% of record keepers offer managed accounts, and half now include products with an annuitization component, with 44% using standalone annuities. Additionally, just over a third say they offer managed payout funds.

Annuities have become a much more common option in 401(k) plans following the Secure Act and guidance from the Department of Labor that clarified fiduciary duties around selecting and monitoring products and providers. But use by plans is still thin, as change in the retirement plan business is notoriously slow.

Data from the Plan Sponsor Council of