We’ve Reached the Tipping Point for 401(k) Retirement Plans

Beau Adams

Retiring workers—thousands join their ranks every day. More than 4 million individuals in the U.S. will turn 65 this year, an average of more than 11,000 each day. While some may continue working beyond the traditional retirement age, there will be a significant pool of people leaving the labor force. The Bureau of Labor Statistics estimated that 80% of individuals age 65 or older were not working in 2024, and the U.S. Census Bureau projected that one in five U.S. residents will be older than 65 by 2030.

Combined, I believe this creates a historical inflection point, particularly for our industry.

Seismic Shift

For nearly 50 years, retirement plan sponsors, plan advisers, regulators and others have helped American workers save for retirement through 401(k) plans. Today, some individuals have been fortunate enough to be retirement plan participants their entire careers, setting aside money that has grown exponentially. Research shows that nearly 600,000 individuals were 401(k) millionaires at the end of June, and this number is expected to increase.

Now the scales are tipping: The industry that encouraged workers to save is staring at a wave of retirees ready to begin drawing on these accounts. As retirees shift their mindset from saving to withdrawing, this introduces significantly different questions and responsibilities for plan sponsors, providers and advisers who have spent years working toward the accumulation side of the retirement equation. Retirement income preparation, products and planning will take a more prominent place in plan sponsor and adviser activities.

Professional Responsibility

What makes this inflection point even more critical is the sheer amount of money at play. Of the $45.8 trillion in U.S. retirement assets, $13 trillion sits in defined contribution plans. (For perspective, the U.S. automotive industry is estimated to be worth about $3.6 trillion.)

That money, with extraordinary economic and social implications, places incredible fiduciary pressure on plan advisers and employers. Some plan sponsors and plan advisers will take a hands-on approach to ensure they are securing good outcomes for their participants. Others will focus on their bottom line and ensure they do not run afoul of regulatory issues.

Regardless of the approach, retirement professionals have a responsibility to ensure participants have proper retirement income-related products, tools and guidance within or adjacent to their plans. A significant portion of the population will no longer need advice on whether to enroll and how much to save; instead, it will require guidance on topics like tax strategy, guaranteed income, asset allocation, distribution and wealth transfer.

There will be a great need for professional expertise, trusted partnerships, products and tools to help rethink how to shift from accumulation to distribution. It will be crucial to find a partner who will provide seamless solutions, technology and support.

In many ways, for all of us in the retirement industry, our work is just beginning: We have an opportunity and responsibility to help millions of Americans successfully move into a well-deserved, dignified and fulfilling retirement.

The stakes are high, the opportunity great. Let’s meet the moment together.