4 Key Retirement Industry Trends You Need to Know [2024 Update]

The retirement landscape in the U.S. is evolving rapidly. While an aging population is grappling with the possibility of outliving their savings, the average household retirement funds are falling significantly short of creating a safety net for future retirees. At the same time, the influx of tech-savvy Gen Z employees and legislation updates are changing sponsor expectations, highlighting the need for smooth digital experiences. Together, these shifts are driving the defining retirement industry trends of the moment.

We anticipate four key trends will shape the future of retirement for the next decade:

• There will be a greater emphasis on better connectivity that’ll make it easier for sponsors, plan administrators, and participants to share information in real time. 
• Automation is set to become a bigger part of operations for plan administrators, allowing them to streamline processes, reduce manual tasks, and boost overall efficiency. 
• Recordkeepers and TPAs will prioritize improving user experiences to win in an increasingly competitive market. 
• Lastly, staying on top of changing regulations will get trickier, demanding proactive strategies and innovative solutions to stay compliant and reduce risks.

In this article, we'll explore these key retirement industry trends, their drivers, and what lies ahead for retirement service providers in 2024 and beyond.  

What’s driving the shift in the retirement industry

Before diving into the top retirement trends, let's explore the key drivers behind this transformative shift:

• The looming retirement crisis in the U.S.
• Recent legislative changes
• Evolving sponsor expectations

The looming retirement crisis in the U.S.

The retirement crisis in the U.S. is starkly evident. In 2023, surveys showed that Americans feel they'll need around $1.27 million to retire comfortably. However, half of American households have no retirement savings at all. Among those who do, the savings are often insufficient, with less than $90,000 in retirement accounts on average. Over half of small to mid-sized business (SMB) employees lack access to a 401(k) plan, making it difficult to save for retirement through automatic payroll deductions. What’s more, 64% baby boomers today report moderate to high levels of stress about their retirement savings.

If not addressed soon, this crisis could result in a future in which many retirees heavily rely on government assistance programs. This strain on public resources could lead to increased taxes and budget deficits in the years to come.

Recent legislative changes

To combat the impending retirement crisis, the federal government introduced several new pieces of legislation in recent years, including the Setting Every Community Up for Retirement Enhancement (SECURE) Acts 1.0 and 2.0. Some states have augmented the SECURE Acts with state-mandated retirement plans. 

As these new laws aim to expand access to workplace retirement plans and boost individual retirement savings, they’ve introduced a host of new rules that affect plan eligibility, compliance standards, and plan designs. This is driving plan administrators to quickly adapt to the changing protocols and revamp their operations to stay compliant and profitable. 

Shifting sponsor expectations

To reduce the coverage gap, SECURE 2.0 encourages SMB employers to start new 401(k) plans by offering several incentives like tax credits and Pooled Employer Plans (PEP). Naturally, these initiatives have led to a surge in first-time SMB sponsors looking to set up retirement plans. But unlike larger enterprise organizations, they don’t have dedicated HR teams to execute these plans. As a result, SMB employers are searching for plan administrators that make sponsoring a plan as easy as possible. They are on the lookout for retirement solutions that can handle admin tasks and work seamlessly with their existing payroll tools—payroll integrations are the primary motivator for one-third of plan sponsors seeking to work with a digital recordkeeper.

In addition to painless administration, today’s sponsors have greater expectations when it comes to their 401(k) plans—they expect greater personalization in their retirement plans as well as a tailored and targeted experience for their employees throughout the life of the plan. This demand is likely to grow as tech-savvy Gen Z participants account for a larger and larger share of the workforce.

Key retirement industry trends to watch out for 

To effectively respond to the needs of the hour, plan administrators need to watch out the four major retirement industry trends we previously mentioned, which impact compliance, sponsor experience, automation, and connectivity. 

🔗👀 Read our complete guide on 4 key retirement industry trends to learn about compliance, sponsor experiences, automation, and what's coming next.