Defined Contribution Plan Design for Retirement Income

This white paper discusses the design of defined contribution (DC) plans with a focus on facilitating income replacement for participants in retirement. It outlines the challenges faced by DC plan participants in converting their retirement savings into sustainable income. The paper presents key considerations for plan sponsors regarding the inclusion of retirement income solutions in their plans, emphasizing the importance of understanding participants' needs and the potential risks associated with various withdrawal strategies. It evaluates different retirement income approaches, including systematic withdrawal plans and income annuities, and highlights the necessity of combining these strategies to mitigate longevity risk. Additionally, the paper addresses the emergence of new products in the retirement income spectrum and suggests that plan sponsors establish clear objectives for their retirement income offerings. A Retirement Income Policy Statement is recommended to guide plan design and ensure participants have access to appropriate income solutions.