It’s hardly news that younger generations like to (over)share, particularly on Insta, TikTok, and other social media apps, which can lead to questionable outcomes with long-term consequences.
Yet, with health and finances, this propensity to divulge personal information could work in their favor, especially with personalized retirement outcomes, a critical concept with which the industry still struggles.
The move towards customization in the retirement plan space is ongoing, with the Defined Contribution Institutional Investment Association (DCIIA) noting that the number of plans using custom target-date funds (cTDFs) and the assets invested in them continue to grow.
However, personalization rather than customization is increasingly seen as key to successful retirement saving strategies.
Cerulli Associates recently said any momentum behind personalized retirement outcomes may come from younger generations, who are more willing to share personal data regarding “health and balance sheet information.”
It’s no surprise that, compared to other generations, Gen Z is the most willing to share—45% of Gen Z survey respondents say they are “very comfortable” sharing their current and/or projected spending with their 401(k) providers.
The cohort is also willing to share data on their smoking status (73%), retirement savings/account balances (51%), nonretirement savings/account balances (37%), and expected retirement age (66%).
“Including more layers of personal data such as health status, life expectancy, growth objectives, and future withdrawal needs should aid in the development of a robust model that produces more desirable allocations for participants,” Cerulli Senior Analyst Idin Eftekhari said. “As life events transpire, updating personal data allows for timely shifts in asset allocation that can better prepare participants for retirement.”
Target-date fund managers are beginning to prioritize advancement in customization to their target-date suites. Ten percent of managers currently offer customization to 401(k) participants, and another 40% could begin to include customization in the next year, with 30% saying it is “somewhat likely,” and another 10% saying it is “highly likely.”
“Overall, the collection of granular personal data allows recordkeepers to learn more about plan participants and will be valuable when coordinating with asset managers about future product offerings,” Eftekhari concluded. “Ultimately, recordkeepers benefit from increased product offerings, which enable them to be more attractive to plan sponsors when showcasing their capabilities.”
