Your clients' benefits strategies should support your long-term workforce plans, which should include helping employees meet their retirement goals. To do that, it's important to recognize that there are three key contributors involved in achieving a desired level of retirement income through a workplace savings plan: the plan participant (eligible employee), plan sponsor, and the investment manager.

Key contributors to an employee's retirement readiness

Key contributors to an employee's retirement readiness (Image: Fidelity)

(Image: Fidelity)

The importance of both savings and investment returns

(Image: Fidelity)

(Image: Fidelity)

Employers should consider balancing risks when choosing “to” vs. “through” glide paths

In a recent Fidelity study, we compared multiple widely adopted defined contribution plan designs with varying features to encourage enrollment and saving. We also evaluated the industry's two different types of target date funds—those with a glide path developed to reach its most conservative asset allocation at a specified retirement date (“to”) and those that will reach their most conservative point well into retirement (“through”)—in each plan design, to determine the impact of each on retirement income.

Comparing “to” vs. “through” glide paths

(Image: Fidelity)

Plan design scenarios that maximize savings and used a “through” glide path resulted in higher retirement income replacement

Our research examined three plan types: Baseline, Enhanced, and Increasing, in three market scenarios: average, poor, and lower-yielding market forecast. Although each plan design helps participants save for retirement, the ones that offered features to help participants boost their savings rates—an auto-enrollment rate, an annual increase program, and a company match—generated higher retirement income when combined with a target date fund with a “through” glide path.

Average Market Scenario Results2

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