Data & Research April 17, 2025

Plan Sponsors Remain Focused on Workforce Retirement Benefits

Repositioning defined contribution plans as income programs could be the best path forward, according to a recent MetLife study.

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Despite an ever-changing macroeconomic environment, plan sponsors remain dedicated to offering workforce retirement benefits in the long term. According to MetLife’s 2025 Enduring Retirement Model Study, 82% of plan sponsors say they cannot foresee a time when their company would discontinue retirement benefits.

With the shift from defined benefit to defined contribution plans, plan sponsors have been shifting retirement decisionmaking onto their plan participants. Plan sponsor respondents to the MetLife survey reported that the most important choices a plan sponsor can make to help defined contribution plan participants save for retirement are offering matching contributions (62%), making participant education available and accessible (45%), offering automatic features (42%), convincing employees of the benefits of saving early (40%) and providing access to financial advisers for customized advice/guidance (39%).

How Sponsors Help Safeguard Participant Savings

MetLife survey respondents said the most important choices a plan sponsor can make to help DC plan participants protect their retirement savings in retirement are offering retirement income solutions that provide guaranteed income for life (80%), providing “off-boarding,” or retirement transition education and tools (76%) and providing a capital preservation option, such as stable value funds, to protect their savings (72%).

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Should DC Plans Be Repositioned to Retirement Income Programs?

With a recognition that retirees do best when receiving a steady stream of income, more than half of plan sponsors (56%) said they think they should consider repositioning their DC plans as retirement income programs. Only 15% disagreed, and the remaining respondents were unsure (29%).

The reasoning behind this possible new positioning is that 93% of plan sponsors recognized that retirees need a source of guaranteed income they cannot outlive, and 92% of plan sponsors said the decline of traditional defined benefit plans has resulted in greater reliance on defined contribution plans to provide retirement income. Of plan sponsors surveyed, 85% said they feel that increasing life expectancy is negatively impacting workers’ retirement security.

Sponsors Plan to Offer Guaranteed Retirement Income

“We are already seeing plan sponsors taking steps in the right direction when it comes to offering retirement income solutions,” said Melissa Moore, MetLife’s senior vice president of annuities. “Two-thirds of companies already offer, or are expecting to offer, guaranteed retirement income in the next five years. This includes 35% of companies that report that their DC plan currently has an option that enables plan participants to convert some or all their money into guaranteed lifetime income in retirement.

What to Know About Adding Income to a Plan Lineup

How the regulatory landscape dictates the selection of a retirement income solution—and how advisers can frame the discussion with clients—can be found here.

The Markets April 17, 2025

Investors’ Bad Behavior Led to Sharp Underperformance in 2024

Equity fund investors missed the S&P 500 by a massive 848 basis points, while fixed-income investors underperformed by 232 basis points.

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Despite another roaring bull market, average equity investors were tripped up by their own bad behavior in 2024, which caused them to underperform the S&P 500 by a whopping 848 basis points, according to market research firm Dalbar Inc.’s annual “Quantitative Analysis of Investor Behavior Report.”

“Whether through late re-entries, poor rebalancing, or tactical moves that missed rallies, the end result was the same: more effort, less return,” the Dalbar report stated. “Even in a favorable market, behavioral missteps continued to erode real returns.”

The 848-basis-point gap is the fourth-largest underperformance among equity investors since Dalbar began tracking investor behavior trends in 1985. The only years with larger gaps were 1995, 1997 and 2021. It also extended average equity investors’ losing streak to 15 consecutive years of underperforming the S&P; 2009 was the last time they beat the index.

While the S&P 500 soared again last year to the tune of 25.02%, the average equity fund investor’s gain was just 16.54%. While that is nothing to sneeze at, the wide chasm indicates that the average investor missed out on a wave that could have boosted their 2024 gains by more than 50% had they matched the S&P, according to the report: “Many investors either got spooked by the headlines or tried to optimize themselves into underperformance.”

According to the Dalbar report, withdrawals from equity funds occurred in every quarter, with the largest outflows during the third quarter, just before a major rally.

“This behavior has been a persistent feature of investor activity and contributed to lower realized returns for many in 2024,” the report stated. According to the report, “investor behavior is not simply buying and selling at the wrong time. It is the psychological traps, triggers, and misconceptions that cause investors to act irrationally. That irrationality leads to buying and selling the wrong time.”

The report cited nine types of behavior that “plague” investors, often correlating with their personal experiences and unique personalities:

  • Loss aversion: expecting to find high returns with low risk;
  • Narrow framing: making decisions without considering all implications;
  • Mental accounting: taking undue risk in one area and avoiding ration risk in another;
  • Diversification: seeking to reduce risk, but simply using different sources;
  • Anchoring: relating to familiar experiences even when inappropriate;
  • Media response: the tendency to react to news without reasonable examination;
  • Regret: treating errors of commission more seriously than errors of omission;
  • Herding: copying the behavior of others, even in the face of unfavorable outcomes; and
  • Optimism: the belief that good things happen to them, while bad things happen to other people.
Fixed-income investors also underperformed in 2024, losing 1.07% for the year, compared with the Bloomberg U.S. Aggregate Bond Index’s 1.25% gain. Dalbar reported that even though fixed-income investments declined, investor contributions to bond funds increased in 2024.

According to Dalbar, the report used data from the Investment Company Institute, Standard & Poor’s, Bloomberg and Barclays indices, as well as proprietary sources, to compare mutual fund investor returns to a set of benchmarks. From the beginning of 1985 through 2024, the study has used mutual fund sales, redemptions and exchanges each month to gauge investor behavior.

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