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The combination of historically high inflation and fluctuating interest rates threatens to erode the income-generating strategies for retirees that have prevailed for the last two decades. But for employee benefits plan sponsors that manage direct contribution plans for members, new strategies are emerging that address and adapt to the changing economic landscape.

A report by the Defined Contribution Institutional Investment Association (DCIIA) discusses the history of defined contribution plans, focusing on income-generating, rather than asset-building, strategies. During the recent and prolonged era of low interest rates and predictable low inflation rates, several strategies emerged that plan sponsors and members favored: fixed income annuities, bond laddering, and systematic withdrawals. Now, the white paper authors suggest, plan sponsors may want to consider another option trio that are more suited to the current economic/investment environment.

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