NEPC Survey Shows “Retirement Crisis” Is Real, But Resolvable

BOSTON--(BUSINESS WIRE)--NEPC, LLC, one of the country’s largest research-driven investment consultants and OCIO providers, today published the 18th annual edition of its Defined Contribution (DC) Plan Trends and Fee Survey, which examines current plan investment trends, features, and innovations across major sectors, and how these plans have evolved over the years. Respondents to the 2023 survey include 128 clients representing $259 billion in aggregate assets and 2.6 million plan participants.

This year’s data shows that the tools needed to solve the “retirement crisis” already exist, with 86% of respondents currently offering their participants a retirement income solution — most often in the form of a Target Date Fund (TDF) paired with systematic distribution. The survey also highlights:

• An older contingency of plan participants than previously imagined, with 53% of participants over the age of 65 contributing to a TDF.
• Close to 30% of plans have less than 10 core options, and that group is growing since TDFs represent 47% of plan assets.

“Our job as retirement consultants is to maximize the solutions that work for the most people and operate around the margins,” says Emma O’Brien, a principal on NEPC’s DC team. “The data shows that, contrary to the media’s perception, we don’t need to reinvent the wheel because Target Date Funds work.”

The high demand for TDFs pushes plan sponsors to be purposeful with their offerings, leading to a decline in core options. The survey suggests that clients want to unshackle themselves from having 15-20 options as the role of a core lineup is becoming less important, freeing up the opportunity to lower fees.

“TDFs are built to support retirement income drawdown,” O’Brien says. “We’re making progress instead of adding to the noise.”

This year’s survey also revealed that fees for managed accounts have dropped more than 10% over the past year, due to an increase in lower cost providers, who are challenging established managed account providers on fees. Managed Accounts can add value for participants and aid in solving the retirement crisis when handled correctly.

“Fees have come down because we are actively pushing for lower costs,” says Bill Ryan, partner and head of NEPC’s DC team. “As a team, we have spent a lot of time educating clients on the role of managed accounts, what personalization means, and what level of personalization is right for them. All of those discussions have pointed to fees, negotiated or not, being too high.”

NEPC’s Defined Contribution (DC) Practice team will discuss the survey’s findings during a webinar on March 5, 2024. Those interested in hearing how DC consultants are advising plans to address emerging opportunities can register for the webinar here.

The 18th Annual Defined Contribution (DC) Plan Trends and Fee Survey results can be downloaded here.

About NEPC, LLC
NEPC is an independent investment consultant, private wealth advisor, and OCIO provider serving over 400 retainer clients and $1.6 trillion in total assets. Combining a proprietary research team dedicated to the long-term challenges facing investors with our unique client-centric model, NEPC builds forward-looking investment portfolios for institutional investors and ultra-high-net-worth families. To learn more about NEPC, visit nepc.com.