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Do 401(k) Menus Suffer From a Generation Gap?

Industry Trends and Research

A new whitepaper finds that use of fixed income options in 401(k) plans has not kept pace with workplace trends.

Traditionally, fixed income investments have been used to reduce a portfolio’s overall volatility to an acceptable level without significantly reducing returns—but that objective may require reconsideration amidst today’s diverse, multi-generational workforce.

The whitepaper, authored by the research team at the American Retirement Association and sponsored by Janus Henderson Investors, points out that in the past, investment recommendations may have been more focused on achieving minimum compliance and “checking the fixed income box” rather than anticipating participant investment needs at various life stages. A multi-generational participant population has more complex needs. 

“A participant’s investment needs will vary during the accumulation stage, as a ‘term vested’ participant, and during periods of decumulation as a ‘retiree’,” explains Jack Towarnicky, researcher at the American Retirement Association and co-author of the report. “Needs may also change when a surviving spouse steps into the participant’s shoes and continues participation. Many plans also permit a non-spouse beneficiary to continue the account for a specified period.”

The whitepaper, drawing on the findings of a survey conducted jointly by the Plan Sponsor Council of America (PSCA) and the National Association of Plan Advisors (NAPA), points out that while the vast majority of financial professional respondents said that they considered diversification in their recommendations, fewer than two-thirds of investment professionals (63.4%) confirmed that “correlation with equities” was an “essential” or a “preferred” criterion in recommending fixed income options. 

Critically, particularly in view of the diversity of participant investment practices, as well as participants’ diverse needs and uses of plan assets, fewer than 25% of investment professionals consider key participant demographical aspects such tenure, salary, education level, presence of other benefits (such as a defined benefit pension plan), gender, account balance and/or ethnicity/race.  

“Today, an ever-increasing number of plan sponsors encourage participants to retain assets in the plan after separation,” comments Nevin Adams, chief content officer of the American Retirement Association and co-author of the report. “Additionally, provisions in the Setting Every Community Up for Retirement (SECURE) Act, such as an extension in the required minimum distribution age, and expansions of the safe harbors for lifetime income options may well mean that fiduciaries will—and should—be more attentive to broader consideration of fixed income alternatives in the future.”

The paper concludes that the retirement marketplace evolution, changing participant demographics, increased litigation, and a greater focus on retirement income and outcomes are all likely to prompt even greater, more lasting changes to the Core investment lineup.

A copy of the white paper and the full survey is available at