PSNC 2017: Retirement Security at an Inflection Point

Aging populations and work forces are placing an increased strain on the federal, public and private retirement systems, warned Joe Ready, executive vice president and director of Wells Fargo Institutional Retirement and Trust, addressing the 2017 PLANSPONSOR National Conference, in Washington, D.C.

“We all have been living for some time in a world of consumer direction, but this is finally having an impact in the retirement space,” he said.

“Now that the retirement world has shifted from a defined benefit [DB] approach to defined contribution [DC], we all have more responsibility than ever before to provide for our own retirement. It is an enormous responsibility that we have foisted onto individuals who really have little preparedness,” he said. “Anyone who is responsible for building and running plans must be tuned into the rapid pace of change, which has only increased and will only increase.”

Ready noted that, today, still only 23% of retired people draw a major portion of their income from DC plans. He shared research data suggesting that this figure will increase dramatically in the next 10 years as other sources of income fade.

“By the year 2020, it is projected that total retirement plan assets saved by individuals will be $24 trillion,” he observed. “If you dig into that, $18 trillion will be wholly self-directed assets. That’s what I am talking about when I mention ‘consumer-directed retirement.’ It is particularly informative to compare this number with the $2.8 trillion in the Social Security Trust Fund today. People are going to be mostly responsible on their own for funding their retirement.”

Ready posited that a confluence of legislation, social forces, regulation and technological development are fundamentally changing the character of the retirement planning market, adding that “the plan sponsors, advisers and providers in the room today can have a big influence on all of this, making sure change is positive rather than negative.

“Anything that improves access to workplace retirement savings plans and influences people to save more for their future—we must support this,” he urged PSNC attendees. “On the flip side, we need to protect our industry from negative aspects of tax reform. We need to continue to use our collective voice to stand up for what is right for our industry and our participants.”

Ready concluded, many of today’s retirement planning challenges can be “addressed and even solved through what I call ‘technology with a purpose.’ We need to be creating and implementing highly targeted and efficient communications and solutions that are very aggressive in helping participants get on the right track. We need to make retirement planning simpler, more targeted, timelier and more relevant for all workers.”