The retirement industry is constantly introducing new ideas that promise to improve participant outcomes. Some eventually become standard practice. Others generate considerable excitement among providers but little enthusiasm from employers or participants.
A recent sponsored article from MFS examined three of today's hottest retirement plan topics:
Retirement income solutions
Private market investments
Personalized managed account solutions using actively managed target-date funds
While the article presents thoughtful arguments for each, I believe plan sponsors should separate genuine participant needs from industry marketing.
1. Retirement Income: Good Idea, But Is It Solving the Right Problem?
There is no question that retirees need dependable income. The disappearance of traditional pensions has left many employees wondering how to convert a lifetime of savings into a reliable paycheck.
The article correctly notes that in-plan annuity adoption remains extremely low despite years of promotion by the retirement industry. According to the article, only 8.9% of plans offer an in-plan annuity, only 6% of advisors recommend them, and only 22% of advisors view retirement income as a top concern.
The article attributes this primarily to litigation concerns and the negative perception surrounding the word "annuity."
That explanation feels incomplete.
In my experience, annuities absolutely have a place. I recommend them for certain individual clients when the higher expenses purchase something of genuine value, such as:
guaranteed lifetime income
enhanced death benefits
long-term care riders
living benefit guarantees
Those benefits can justify the additional cost.
Inside a qualified retirement plan, however, many in-plan retirement income products offer fewer of these features while still increasing complexity and expense.
The question for fiduciaries should never be:
"How do we get participants to use annuities?"
Instead it should be:
"Does this product improve participant outcomes enough to justify its additional cost, complexity, and fiduciary oversight?"
That is a much higher standard.
One observation also caught my attention. Several citations supporting retirement income come from Ted Godbout. Ted is an excellent retirement journalist, but repeatedly citing one author creates the appearance of reinforcing a single narrative rather than presenting a broad cross-section of independent research. That does not invalidate the conclusions, but it should encourage readers to evaluate the evidence carefully.
2. Private Markets: Follow the Incentives
This section contains what I believe is the strongest quotation in the entire article.
Jerry Schlichter asks:
"Who's pushing for private market investments in 401(k) plans?"
His answer is equally direct:
"Not AARP... It's private equity managers who want to tap into $6 trillion in 401(k) plans."
Whether one agrees with Mr. Schlichter or not, fiduciaries should always ask an important question whenever a new investment trend emerges:
Who benefits if this product becomes widely adopted?
Private equity, private credit, infrastructure, and other private assets certainly have a role in institutional investing.
But defined contribution plans are not endowments.
Participants generally need:
daily liquidity
transparent pricing
understandable investments
low costs
Private market investments often move in the opposite direction by introducing:
higher fees
valuation complexity
illiquidity
reduced transparency
Perhaps the most revealing statistic in the article is that only 6% of plan sponsors consider private assets "very" or "extremely" important to participant outcomes, while 73% say they are "not very" or "not at all" important.
That suggests industry enthusiasm currently exceeds sponsor demand.
3. Managed Accounts and Active Target-Date Funds
The article concludes by highlighting MFS's actively managed Lifetime Funds as part of a personalized managed account solution.
Here again, I think sponsors should distinguish between two separate ideas.
Personalized advice can absolutely add value.
Using participant-specific information to improve savings rates, withdrawal strategies, asset allocation, and behavioral coaching has decades of research supporting it.
But that does not automatically mean the optimal solution is a managed account built around one firm's proprietary actively managed target-date funds.
This is where healthy skepticism serves fiduciaries well.
Whenever an investment manager recommends a solution that ultimately directs assets into its own products, sponsors should ask:
Would this recommendation be the same if another firm's funds were used?
What evidence demonstrates better participant outcomes after fees?
Is this recommendation driven by participant benefit or product distribution?
Those are appropriate fiduciary questions.
The Parting Glass
The irony is that the article's own research supports a much simpler conclusion.
Plan sponsors consistently ranked the following as more important than retirement income products or private investments:
increasing participation
encouraging higher savings rates
prudent diversification
keeping participants invested
providing personalized financial advice
In fact, sponsors valued personalized advice roughly twice as highly as retirement income solutions and more than ten times as highly as private market investments.
After advising retirement plans for decades, I have found that successful plans usually do not succeed because they own the newest investment product.
They succeed because they execute the fundamentals exceptionally well.
Before adding complexity, plan fiduciaries should first ask whether participants are already saving enough, diversified appropriately, paying reasonable fees, and receiving quality guidance. If those fundamentals are not in place, adding sophisticated products is unlikely to solve the underlying problem.
Innovation has an important role in retirement plans. But innovation should solve participant problems—not simply create new products for providers to sell.