Mid-Year Milestones
For me, summer is a season defined by reading. In my younger days, it was mandatory reading lists (Dickens was a slog...); these days, reading is a time of relaxation.
This year, I started my summer reading with an “Unfinished Love Story” by Doris Kearns Goodwin. It looks back on the life of her late husband, Dick Goodwin, who led a remarkable life as a speechwriter to JFK, LBJ, Bobby Kennedy, and others. I was especially struck by Dick Goodwin’s favorite quote which is a paraphrase of an Archimedes quote: “Give me a fulcrum, and I will move the world.”
This quote resonated as we are in a time of transformative change from the rapid rise of AI to “higher for longer” and – closest to home – the shift from DB to DC. Change can be overwhelming but also presents the opportunity to meaningfully influence future outcomes. At State Street, we are focused on leveraging our expertise in this time of change to democratize finance for retirement savers.
Access and coverage: Democratizing access to financial markets remains a preeminent issue in 2024 and going forward. With approximately 50% of US workers remaining uncovered, providing more working Americans with access to retirement savings plans is an imperative.
In March, our Retirement Public Policy Strategist Melissa Kahn spoke with Angela Antonelli, executive director of Georgetown’s Center for Retirement Initiatives, for a wide-ranging discussion about state-sponsored retirement plans. A Conversation On State-Based Retirement Programs forecast that several states would pass legislation this year, and indeed, Washington added an auto-IRA to its existing Retirement Marketplace and earlier this month, Rhode Island’s legislature approved an auto-IRA program to help the 47% of its workers that don’t have access to retirement programs through work.
Along with the launch of pilot programs in New Jersey and Delaware, this is all encouraging news from the state level. However, we remain steadfast in our advocacy for a federal solution to this challenge.
Asset class diversification: We are committed to portfolio diversification as a key component to successful outcomes, and to offering innovative solutions that address the needs of DC participants. In order to build diversified portfolios, we believe it is critical to provide retirement investors with equitable access to capital markets – including private markets. Over the past several decades, we’ve witnessed a large growth in private investing, first from other long-term investors like endowments, pensions and sovereign wealth funds, and now increasingly from private wealth and non-US DC markets. Unfortunately, this shift from public to private markets is cutting off access to the full spectrum of investments for the average US DC investor. We are hard at work developing a solution that bridges this gap and look forward to sharing more about this in future updates.
Retirement Income: Finally, an update on the critical area of retirement income, which we believe is another pillar of democratizing access to support during retirement. This spring, I had a chance to visit with clients in the UK and Ireland and recognized that the concerns I heard closely resembled those being reported by many plan sponsors and consultants in the US. We partnered with P&I to further explore how, despite representing distinct markets and plan member populations, as well as operating in different regulatory environments, these retirement plan providers arrived at strikingly similar retirement income solutions in the form of guaranteed deferred income.
Lastly, we were pleased to announce the next generation of our Income Wise solution, which aims to redefine retirement planning by integrating lifetime income features into a target date fund. With IncomeWise, participants can choose to transform a portion of their target date fund savings into a lifetime income stream by pairing a managed drawdown strategy with a qualified longevity annuity contract (QLAC) to mitigate longevity risk.
To bolster this innovative offering, we forged a partnership with Micruity, a retirement income connectivity platform, to configure a participant income modeling, education, and election tool. Micruity's tool is crafted to offer comprehensive and customizable support for participant decision making, while streamlining the operational complexities and data transfer needs among participants, plan sponsors, record keepers, asset managers, and insurance companies.*
It’s been an exciting year so far but the work isn’t over. We embrace the challenge and look forward to sharing future updates as we advance into summer.
Wishing you a great summer,
Brendan Curran
*State Street is a minority investor in Micruity.