The Institutional Retirement Income Council (IRIC), the non-profit think tank for the retirement income community, is out with its annual forecast of retirement industry trends to watch in 2025. IRIC anticipates a growing wave of innovation and adoption of retirement income solutions for DC plans, reflecting the increased interest of plan sponsors, providers, and participants in in-plan retirement income solutions.
“Next year will be the acceleration of plan sponsor adoption for in-plan retirement income options,” said Kevin Crain, executive director of IRIC. “With traditional pensions becoming increasingly rare, ensuring retirement income security is a shared responsibility of employees and employers. 2024 was when in-plan retirement income offerings continued to evolve regarding product creation and DC plan recordkeepers’ implementation.
“Plan sponsors evolved financial wellness programs. Automatic solutions advanced with increased plan adoption and more aggressive plan design, which resulted in greater success for participant savings. Also, industry studies throughout the year reported on participant and plan sponsor agreement that in-plan retirement options are desired.”
Here are IRIC’s key 2025 retirement industry trends.
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No. 1: Retirement income solutions at the forefront
Plan sponsors will increase their focus on evaluating and selecting retirement income solutions within 401(k) plans. This broadens the plan sponsor’s responsibility to ensuring participants can achieve long-term retirement security. DC investment and insurance providers have accelerated product design of in-plan retirement income offerings such as hybrid Target Date funds, hybrid Managed Accounts, annuity marketplaces, and systematic withdrawal programs. The in-plan retirement income product inventory is extensive. Giving the plan sponsor a range of solutions to evaluate and select for their plan.
The retirement services industry will help educate and motivate plan sponsors about retirement income options by publishing more in-depth plan and participant utilization studies.
“Terms such as "retirement income," "guaranteed income," and "lifetime income" are frequently used interchangeably, though they hold distinct meanings…,” said Crain. “Plan sponsors and participants must understand these differences in order to make informed decisions that secure financial stability in retirement.”
Retirement income “includes Social Security, pensions, withdrawals from retirement accounts … and any other retirement investments or savings earmarked for retirement,” said Crain, while guaranteed income, such as annuities, are not subject to market fluctuations. “Lifetime income solutions ensure that retirees do not outlive their savings, providing financial security throughout their retirement years,” he said.
No. 2: Innovative product development
The industry consortium will continue, in 2025, to design new retirement income solutions and improve how to utilize the solutions. Customized in-plan retirement income options, including hybrid target-date funds and managed accounts, will continue to gain momentum. These solutions integrate participants’ unique circumstances, risk profiles, and retirement goals to create more personalized income strategies. The retirement income component of the hybrid investment will offer flexible approaches—either an annuity retirement income offering or a retirement paycheck systematic withdrawal option.
Integrated retirement income planning combining the DC and Social Security retirement income pillars will create a creative product design that “bridges” DC plan income decisions with Social Security election decisions.
No. 3: Enhanced participant engagement and demand
Employees are strongly interested in solutions that provide easy-to-understand, reliable, predictable income streams. This growing demand will drive the retirement services industry and plan sponsors to enhance retirement income planning tools and personalize retirement income projections for DC plans and other retirement income pillars. AI tools will engage participants in a more interactive planning experience, which will better educate participants about retirement income, increasing their comfort in utilizing the in-plan retirement income options.
No. 4: Expansion of 401(k) plan auto-features
In-plan automatic solutions will continue to increase the impact of 401(k) plan accumulation. The acceleration of adopting new plans (particularly in the small business segment) will expand the utilization of auto-enrollment and auto-increase solutions. Auto-enroll and auto-increase drives significantly higher plan participation and savings. It is not expected in 2025 that automatic solutions will broaden to retirement income in-plan options. Hybrid investments with embedded income solutions need more broad-based plan adoption before being considered Qualified Default Investment Alternatives (QDIAs).
No. 5: Enhanced financial wellness programs
Employers bear greater responsibility for helping employees be better prepared for retirement. Employers will continue to enhance their financial wellness programs to include robust pre-retiree education and planning programs. Financial wellness will consist of personalized planning tools for retirement income projections (including integrating non-DC plan retirement income sources); education about Social Security and Medicare program offerings and decision elections; budgeting and tax planning for post-retirement life and opportunities to accumulate additional retirement savings before retirement. The pre-retiree programs will be offered to employees at earlier ages (age 50+), so the employee has significant time to plan and act before retirement.
Related: Retirement preparedness: Would income projections affect employee saving behavior?
“IRIC’s analysis underscores a collective effort to transition DC plans from supplemental savings vehicles to comprehensive programs that provide proper retirement security,” said Crain. “By addressing the dual needs of accumulation and de-accumulation, plan sponsors and industry leaders are fostering a more robust and equitable retirement system.”
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Lynn Cavanaugh
Lynn Varacalli Cavanaugh is Senior Editor, Retirement at BenefitsPRO. Prior, she was editor-in-chief of the What's New in Benefits & Compensation newsletter. She has worked for major firms in the employee benefits space, Vanguard and Willis Towers Watson, as well as top media companies, including Condé Nast and American Media.
