In this special episode, Ron Cohen, head of DCIO (Defined Contribution Investment Only), speaks with Jamie Greenleaf, senior vice president for OneDigital’s Retirement + Wealth. Their conversation centers around one main question: Where are the retirement income solutions in defined contribution plans today and going forward?
Jamie Greenleaf: That’s where I kind of see the industry going, bringing something to the market that’s easy to digest for an employee, easy to digest for an employer, and then the complexities can come after that employee is actually retired.
Ron Cohen: That’s Jamie Greenleaf, senior vice president with OneDigital’s Retirement + Wealth division. I’m Ron Cohen, head of DCIO (Defined Contribution Investment Only), and you’re listening to On the Trading Desk®. Today, our conversation centers on one main question: Where are the retirement income solutions in defined contribution plans today and going forward? But before we jump into our discussion, I’d like to introduce Jamie Greenleaf. She’s senior vice president with OneDigital’s Retirement + Wealth division and has spent her entire professional career helping employers design fiduciarily sound retirement programs with better outcomes for their employees. Jamie provides consulting services in all areas of plan management and oversight, including plan design, fees and services benchmarking, investment management selection and monitoring, fiduciary and regulatory compliance, investment policy design, and financial education to many Fortune 500 and publicly traded companies, nonprofit entities, and public agencies. Thanks for being here, Jamie.
Jamie: Thanks for having me. I am looking forward to the discussion.
Ron: Great. So, before we get into retirement income, let’s take a step back and why don’t you tell us what a retirement plan means to you and to your employers that you work with?
Jamie: Sure. So, as you said, I grew up in the retirement space. My mother founded our firm back in 1981 when the code was written. And she always said our job is to make sure that people are able to retire with dignity. So, that’s kind of always been my mission and motto. And that’s what I think of when I think about a retirement account is providing the ability for somebody to retire with dignity. I think my employers, ideally in a big bubble, they think that way as well, but I think there are challenges with it.
Ron: Yeah, absolutely. I love that. Retiring with dignity. I think that’s great. Let’s get into retirement income. What are the conversations like when you’re talking to your plan sponsors or the employees when you do bring up that topic?
Jamie: So back in the old days, going back a few years where you had only a couple of recordkeepers that were able to provide any type of income solutions on their platform, we had great conversations with our employers. The trustees traditionally were a little bit older, seasoned employees, and they thought about retirement and they thought, wow, I could have some type of income solution that would provide me with a retirement income upon termination of employment. And, so, we had great conversations with employers at that time. Today, the committees are overwhelmed by all of the things they need to do. And retirement income, it sounds super complicated and complex. And they’re thinking more of, hey, I’ve done my job. I’ve auto-enrolled people. I’ve auto-escalated them. And I’ve given them a place to accumulate assets and what they do upon termination or leave with us is up to them. And, so, the conversations have changed because of the complexity of the solutions that are being provided in the marketplace right now.
Ron: Obviously, there’s a lot of challenges with an uptick in retirement income, both at the plan level and then even at the participant level. Why do you think that’s the case?
Jamie: They’re complicated, to put it in a nutshell. That’s the reality of it. Even the plans that have the income solutions that are available to employees, we bring employees together that are close to the age of retirement. We bring them in with their spouses. We sit them down and say, when you retire, what’s that look like and how are you going to fulfill that paycheck that you no longer have? And they all kind of say, well, Social Security and we have this accumulated account in the retirement account, what do we do with that? And we start to talk about the opportunity for the income strategies that are available right now or solutions that are available right now. And, wow, we lose them right there. So, I think the same thing that the trustees are feeling where it’s way too complicated, participants are feeling the same way.
Ron: Yeah. What do you think retirement income solutions will look like in 5 or 10 years as this thing has matured? I mean, I think we all talk about retirement income right now as being kind of the first batter in the first inning, right? We’re just getting started there as an industry. What do you think it’s going to look like in 5 to 10 years?
Jamie: So, let’s talk about what people think about when they think about retirement. They think about Social Security benefits. And for some reason, they assume Social Security benefits are really easy. Oh, I’m going to retire at age 67 because that’s when I’m eligible for Social Security and I’m going to get paid X for the rest of my life. But the reality is Social Security benefits aren’t easy. They’re very complicated. When you retire at age 67 and you go down to the Social Security Administration, they lay out: what option do you want? How are you going to take this? Are you going to include your spouse? Do you want to wait until you’re age 72? There’s a lot of complexity to them, but an employee feels like it’s simple because they’ve been able to say, at this age, I’m going to receive this dollar for these many years. And I think that’s what we have to get to as an industry. We have to build something that is so simple for the average person to understand that they opt into it or they decide not to opt out of it. And at retirement, then there’s some type of coach that provides them with guidance as to how to utilize that account. So that’s where I kind of see the industry going, bringing something to the market that’s easy to digest for an employee, easy to digest for an employer, and then the complexities can come after that employee is actually retired.
Ron: Do you see it as something that, they’re in the QDIA (Qualified Default Investment Alternative) and that QDIA then kind of morphs into some sort of retirement income so that way that they’re already kind of, to your point, getting them to not really have to take too much action? It’s kind of almost like they automatically go into it. Is that something that you like?
Jamie: I think it’s going to have to go that way because we have trained people that this is a benefit that their employer’s providing. It’s a “check the box.” They go to the employer. They assume that they’re going to have a retirement account. They know that they’re going to have to opt out instead of opt in. They know that they’re going to be defaulted into the QDIA and they don’t have to think about it. Now, there is a small percentage of people that do think about it and want to personalize it more. But for the masses, the majority of people kind of are defaulted into the right solutions. And I think if we’re truly trying to impact the masses, it has to be a default type of situation because we’ve defaulted them their whole life. Why at age 67 or 70 are we going to turn them over with this huge sum of money and say, best of luck, go find out how to derive income from it? I think it has to be something that we default for the masses and for those that are more sophisticated and have financial planners and those types of things, they can have an additional solution.
Ron: And for the audience, QDIA stands for Qualified Default Investment Alternative. So, as you’ve been having these conversations over the years, have you seen a change in your plan sponsors in terms of wanting to retain those retiree assets in the plan or more your plan sponsors saying no, we’d rather they kind of rolled out and dealt with retirement income outside of the plan?
Jamie: I think pre-COVID, I had more employers that were engaged in the conversation around income and providing solutions at retirement for their employees and the ability for them as an employer to help them through retirement with some type of solution by maintaining the assets there. Then, the Department of Labor came out with missing participants and the fines associated with that. And we talked about that. And then they started to think, well, maybe I don’t want to keep these assets here because who knows where these employees are going to be? I think now after COVID, employers are still just trying to figure out what their priorities are and retirement income is not one of them. So, the conversations are kind of dead stares right now.
Ron: Yeah, yup.
Jamie: “I’m not sure if we should keep the assets or if we should let them go. I don’t know what a strategy is, a guaranteed income product is, buying shares is, and, quite frankly, I don’t want to think about it right now.” So, I think it’s a timing issue at this moment. And I don’t think that the industry has built something yet that is easy to understand. And I understand why. It’s not an easy puzzle to solve. But until we do that, I feel like my employers are going to continue to have those blank stares.
Ron: Yeah. We always say that we as an industry, we haven’t cracked the code just yet on figuring out how to get retirement income just right. In a perfect world, what would your retirement income look like?
Jamie: It will look similar to Social Security benefits where it would provide me with security that I was going to have something that I could maintain my lifestyle with. So, I know that when I reach that age of retirement, I am going to receive a certain percentage of my income from a replacement standpoint. So, I could put all the pieces together and know, OK, I’ve got this much covered. So, I think ideally what we’re trying to provide to employees, for the most part, and again, I’m talking about the masses. I’m not talking about the sophisticated and that percentage who have the financial planner. I think for me, I’d like something that’s really simple to understand and know, OK, I made $100,000 a year. Social Security’s replacing 10% of it. My retirement account is replacing 30% of that $100,000. And I have to figure out where I’m going to get the rest from. And I think that would be an easy way to solve for the income piece of retirement.
Ron: Yup. Makes sense. Jamie, thank you so much for being with us today and sharing your insights and your thoughts.
Jamie: Absolutely. Thanks for having me, and hopefully in a couple of years, we’ll be having a conversation with new solutions.
Ron: That sounds great.
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