Change happens slowly in the defined contribution world, but it does happen—eventually. No dramatic changes have occurred since auto features were heralded by the 2006 Pension Protection Act. Twenty years later, many plans are still slow to adopt them. All of which could change as plan sponsors wake up and demand changes as well as the economic realities for providers and advisors.
One of those changes is the concept of phased retirement. According to SHRM research, 7% of employers have formal programs and another 20% have informal ones while 40% of workers want it. Life expectancy has hit a new high in 2026 after the effects of COVID-19 and the opioid crisis have waned. Today, 33% of baby boomers are delaying retiring—two-thirds delay for financial reasons. Some want to maximize Social Security payments by waiting.
Not only are people living longer, but they also tend to be healthier and more active. Many do not want to lose the social connections at work yet do not want to maintain the same work schedule. More companies are open to remote workers, which makes sense for older, more experienced workers.
In collaboration with MIT’s AgeLab, Manulife John Haqncock created the Longevity Preparedness Index, which goes beyond just health and finances. The Index, based on over 1,000 interviews by MIT with individuals, lists eight domains that define how well a person is prepared for retirement, including:
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Transitioning when a loved one is lost
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New activities
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Community health and activity resources
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Re-equipping the home
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Social connections
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Caring for others or the resources need to be cared for
It’s not your parents’ retirement.
Changes in the DC industry have been mostly driven by providers and advisors, which have the loudest lobbyists with some larger employers represented by the American Benefits Council. But as smaller plan sponsors wake up going from consciously incompetent to consciously competent viewing retirement benefits as a differentiator to recruit and retain talent, they will demand more from their vendors and drive change.
Along with phased retirement, which will require effort and administrative support, plan sponsors are demanding that their advisor and/or record keeper provide financial education, tools and advice to more than the top 5% wealthy employees. Plans are waking up to the fact that providers are not fiduciaries and are likely to sell proprietary products that are not in the best interest of participants and may not even be suitable.
They are also driving down fees and demanding greater service just as provider and advisor costs are rising. Something must give which will result in the next wave of consolidation of record keepers, asset managers and advisors.
The mobile workforce is creating orphan accounts and leakage with some efforts to address it like the Auto Portability Network and the U.S. Department of Labor’s lost and found database attempting to address the problem.
401(k) and 403(b) plans are currently not retirement plans—they are just savings plans. Without automatically imbedded guaranteed income, they will fall short of replacing pension plans.
Technology, and especially AI, will help advisors and record keepers provide advice to more employees, but it takes enabled armies of financial coaches, not salespeople, who can leverage managed accounts to provide advice at scale.
There are a lot of shiny new toys out there that each have their own merits like student loans, emergency savings, PEPs and private market investments, but they take time and focus, which are in short supply by mid-size and smaller plan sponsors. Beyond fees, funds and fiduciary, advisors and providers need to adapt to the changing needs of employers and phased retirement services seems like a good one that can also help create differentiation in a mostly commoditized industry.
