Longevity and Generational Shifts Transform Retirement Plan Strategies

Increasing longevity and changing generational behaviors are reshaping retirement planning and have significant implications for retirement plan sponsors. As people live healthier for longer periods, many may choose to work beyond traditional retirement ages, phase into retirement more gradually, or even embark on new careers later in life. The so-called 'sandwich generation,' often managing financial responsibilities for both aging parents and children while also delaying their own career progress, presents additional financial planning complexities.

For retirement plan sponsors, these demographic shifts pose challenges including a tightening labor market with fewer working-age individuals. This scarcity can intensify competition for talent, making enhanced retirement benefit packages a critical tool for employee attraction and retention. Additionally, as more employees approach retirement with growing account balances, advisers must assist sponsors in managing risk and effective plan funding.

The evolving definition of retirement—encompassing later retirement ages and extended retirement durations—calls for innovative income planning solutions within retirement plans. Participants may require products that provide steady income streams to support themselves and possibly other dependents over longer periods. This complexity has driven the development of diversified financial products addressing stability and income protection, particularly in defined contribution (DC) plans.

Defined benefit (DB) plan sponsors are increasingly adopting liability-driven investing strategies and pension risk transfers to mitigate funding volatility and longevity risks. These tactics help stabilize pension obligations amid uncertain lifespan trends. MassMutual highlights the importance of long-term partnerships and technology adoption to meet the growing expectations of technologically adept retirees, a shift accelerated by the COVID-19 pandemic.

MassMutual offers solutions including stable value investments within DC plans to balance growth and asset protection, and pension risk transfer services to manage DB plan liabilities. The company also provides corporate-owned life insurance options, useful for informal funding of employee benefits aimed at talent retention. These customizable solutions help sponsors adapt to evolving workforce demographics and retirement planning needs over time.