How Advisers Can Help Plan Sponsors Navigate Demographic Shifts

Diana Schneider

Increasing longevity, combined with changes from historical behaviors across generations, is influencing how individuals think about aging and planning for retirement. Diana Schneider, Head of Institutional Solutions at MassMutual, says that as people are living longer and fewer people are having children, the proportion of people in the retirement phase of life is growing.

This is influencing the way individuals are thinking about and planning for retirement and has implications for plan sponsors, she says. Schneider explains there will be changes in the way people retire.

“For one, because people can be healthier for longer, they may work longer, phase in retirement or start a new career later in life,” she says. “But the industry also needs to be tracking the development of the ‘sandwich generation.’ Younger adults are sometimes delaying their careers or living with parents for longer, and older adults are living longer. This can put financial pressure on the middle generations.”

Schneider highlights three implications for retirement plan sponsors for which plan advisers can offer help and guidance.

“With a smaller proportion of the population of working age, there may be a scarcity of talent that we haven’t had to contend with for quite some time,” she says. “That could put pressure on employers to really have improved benefit packages to make sure they are attracting and retaining the talent they need to deliver on their objectives and that, of course, will include focusing specifically on retirement plans and benefits.”

Secondly, Schneider says, as the proportion of employees at or near retirement grows and retirement account balances expand, advisers will need to help plan sponsors identify and utilize resources for risk management and plan funding techniques.

“The third thing I would highlight is that changes in what retirement means to individuals means sponsors should think about providing retirement plan participants with access to products and services for income planning,” Schneider says. “Employees need assets to provide monthly income for the duration of retirement. The equation is more complicated now that retirement could be later, or it could be longer. They could be supporting not only themselves, but children and parents, with that retirement income, or they might have another income stream that becomes available after they retire, because they’ve started a new role or career.”

Schneider notes that these considerations have impacted the development and use of financial products and services. For defined contribution plans, products are evolving to meet the needs of different generations, and they will continue to evolve with more options for stability and income protection, she says. For defined benefit plans, sponsors are thinking about how longer lifespans will impact funding.

“We have seen many DB plan sponsors move to liability-driven-investing strategies to stabilize funding levels, but longer lifespans have emphasized the value of other de-risking strategies, such as pension risk transfers,” Schneider says.

She recommends that plan sponsors and their advisers look for long-term partners that can help them navigate the trends in retirement and anticipate the impact of generational behaviors. In addition, Schneider says, when helping plan sponsors, advisers should look for providers that are keeping up with technology.

“This is a generation of retirees that is Increasingly technologically savvy and demanding new approaches to help them manage their retirement, whether it be planning decumulation or asset allocation,” she says. “That’s something that accelerated during COVID—older adults leveraging technologies that maybe they had never used before to stay in touch with their families, get groceries delivered to the door, whatever it happened to be. I think we are seeing that wave of technological adaptation play through the retirement space as well, putting new demands on providers.”

MassMutual offers several solutions to help address asset protection and funding risk, according to Schneider.

“First, we offer stable value investments¹ within plan that can address DC plan participants’ need for growth plus asset protection,” she says. “That’s one solution that can really enhance what plan sponsors are offering and address demographic shifts.”

For DB plans, MassMutual has been in the PRT business for several decades, Schneider notes.

“That’s a solution that can be incredibly helpful for institutions that are facing larger pension liabilities and thinking about managing the longevity risk inherent in those liabilities,” she says. “If employers can transfer the longevity risk to an insurer that’s very well-equipped to accommodate it, that allows them to refocus their time, attention and resources on their core business.”

MassMutual also offers corporate- and bank-owned life insurance that “can be an efficient option to informally fund employee benefit obligations employers use to help retain key talent,” Schneider says. “In our business, often stable value and COLI products are distributed via advisers.”

“All these solutions can be helpful for employers that are looking to have benefit offerings that they can use to help retain top talent,” Schneider concludes. “The nice thing about them is they are customizable and can flex over time as the needs of plan sponsors grow and shift.” — Rebecca Moore

FOR FINANCIAL PROFESSIONALS. NOT FOR USE WITH THE PUBLIC.

¹MassMutual® Stable Value Investments is the marketing name of a Massachusetts Mutual Life Insurance Company business team. The stable value insurance contracts offered are issued by Massachusetts Mutual Life Insurance Company Springfield MA 01111-0001.

Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual) (Springfield, MA 01111) and its subsidiaries, C.M. Life Insurance Co. and MML Bay State Life Insurance Co. (Enfield, CT 06082).C.M. Life Insurance Co. and MML Bay State Life Insurance Co., are non-admitted in New York.

MM202805-312633

Sponsored by