Products April 26, 2018

Alight Solutions Introduces Customized Investment Product for DC Plans

In partnership with AllianceBernstein and Personal Capital, WealthSpark’s investment recommendations are based on up to 18 individualized data points cultivated through Personal Capital’s technology.

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Alight Solutions has introduced WealthSpark, a new solution that combines highly customized investment portfolios designed by AllianceBernstein (AB) with Personal Capital’s digital wealth management tools that offer greater into people’s financial picture. WealthSpark’s initiatives are to create easier means for workers to plan, save and invest smarter.

“We believe WealthSpark will be a bridge to connect people’s financial realities with their financial goals to truly help them thrive,” explains Alison Borland, executive vice president of defined contribution [DC] solutions at Alight. “Most default investment options do not recognize and appreciate the complexities of people’s individual financial situations or the competing priorities they face through the course of their lifetimes.”

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WealthSpark’s investment recommendations are based on up to 18 individualized data points cultivated through Personal Capital’s technology, including individual financial situations, investment accounts outside their retirement plan, their partner’s financial situation and obligations like paying for a child’s college or elder care. The platform also helps workers better understand and make decisions about their personal finances from everyday budgeting to managing life events like paying back student loans, saving to buy a home or planning for retirement. WealthSpark can serve as the qualified default investment alternative (QDIA) in the employer-provided savings plan.

“We have more than a decade of experience designing custom glide paths for many of the largest U.S. defined contribution plans, and are excited to partner with two leaders in their respective fields to deliver this innovative solution,” says Jennifer DeLong, head of defined contribution at AB. “The solution combines asset allocation with technology to deliver a more personal participant experience. By better understanding a participant’s individual circumstances, we can create a series of optimized glide paths to tailor outcomes to participants’ unique financial objectives.”

More information about WealthSpark can be found here.

Data and Research April 26, 2018

Increased Savings Rates and Auto Escalation Can Boost Retirement Income

Those who are contributing less than 3% to a retirement plan are on track to replace 59% of their income in retirement, whereas those who contribute 10% or more are on track to replace 128% of their income, an analysis from Empower found.

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Americans are on track to replace 64% of their income in retirement, according to a report from Empower titled, “Scoring the Progress of Retirement Savers.” This figure includes projected Social Security benefits, both defined benefit (DB) and defined contribution (DC) plan assets, personal savings, home equity and business ownership.

Asked what source will provide income for their household in the first five years of retirement, 71% said Social Security, 56% said their DC plan, 38% said personal savings, 29% said employment, and 19% said a DB plan.

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Sixty-seven percent said at least one earner has a workplace retirement plan available to them, but 33% said they are not offered a plan. Among those with a plan, they are on track to replace 79% of their income; for those without one, the figure is 45%. “Clearly, providing access to a tax-deferred retirement savings plan is one of the most important first steps any employer can take to put people on the path to future security,” Empower says.

Younger workers are on track to replace a higher percentage of their income, most likely because they have had access to a workplace retirement plan for their full career, whereas early Baby Boomers did not. Thus, Millennials are on track to replace 75% of their income; Gen X, 61%; late Boomers, 61%; and early Boomers, 55%. Men are on track to replace 71% of their income in retirement, and women, 59%.

Those who are contributing less than 3% to a retirement plan are on track to replace 59% of their income in retirement, whereas those who contribute 10% or more are on track to replace 128% of their income. Additionally, when a DC plan includes auto escalation, participants are on track to replace 107% of their income.

Among those with a retirement plan, 79% are confident they are making the most of the plan to build retirement income, up from 70% in 2016. Empower says it is important for employers to educate participants about how much income their savings is projected to supply them with.

Thirty-two percent of participants said they would increase contributions to their retirement plan if they paid down the debt they owe. Another 22% said they would increase contributions if they received a raise, 12% if they reduced their spending, 10% if they achieved the maximum employer match, and 5% if they learned what their peers are contributing.

Participants who work with a traditional or online adviser are on track to replace 116% of their income. Those working with any paid adviser, 91%, and those with no adviser, 51%.

Empower’s findings are based on a survey of 4,038 adults between the ages of 18 and 65, conducted in conjunction with NMG Consulting last December and January. The full report can be downloaded here.

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