Retirement Plans in 2025: Transformative Year Ahead

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Author

Alison Salka, Ph.D.
Principal Research Consultant
LIMRA and LOMA

December 2024

The retirement plan market is set for a transformative year in 2025, driven by regulatory updates, evolving participant expectations and innovative financial technology. For record keepers, service providers and advisors, staying ahead of these trends while navigating challenges and seizing opportunities will be the difference between success and obsolescence.

What are the industry’s key focus areas as we move into 2025?

Personalized Participant Experiences

The demand for personalization in retirement planning will continue to rise in 2025. Plan participants increasingly expect experiences tailored to their financial goals, circumstances and timelines. Financial wellness tools will play a significant role, integrating personalized savings tips, retirement income forecasts and holistic financial planning options.

Despite advancements in digital tools, however, achieving meaningful engagement remains a challenge. Participants often feel overwhelmed by complex investment choices and retirement strategies.

Artificial intelligence (AI)-driven insights will become central to creating these tailored experiences, with record keepers utilizing data analytics to provide participants with relevant recommendations based on their savings behavior, risk tolerance and spending habits.

Questions about who should be providing these services have not yet been resolved. Some record keepers have made significant investments in these areas while some advisory firms have developed their own offerings. This issue highlights the desire of both advisors and record keepers to differentiate and add value. The power of advisory firms will likely give them continued influence in these decisions as the industry moves into the future.

SECURE 2.0 Implementation Progress

With several provisions of the SECURE 2.0 Act taking effect in 2025, plan providers must also navigate the new regulatory requirements. Changes to required minimum distribution (RMD) ages may require system adjustments and enhanced communication strategies to educate participants on their updated distribution options.

Automatic enrollment and escalation mandates may also expand participation in defined contribution plans, although recent research suggests more limited impact. In any case, updating systems could be a major effort in a business with shrinking margins and several competing technology priorities.

Retirement Income Solutions

Retirement income products will continue to get attention in 2025 as the industry continues to work on educating advisors, launching products and lobbying for favorable regulation and legislation.

As a result, in-plan annuities and other guaranteed income solutions will see some increased adoption. LIMRA research finds that advisors who have become more knowledgeable about these products are more comfortable recommending them.

Figure 1. Retirement Plan Advisor Attitudes

Source: DC Professionals: Income in Workplace Retirement Plans, LIMRA 2023.

More education and comparison tools are available to advisors, sponsors and participants. Despite significant effort, though, adoption will likely continue to be modest. Sales of retirement income products require buy-in from the advisor, the plan sponsor and the participant. Each has different concerns, but each must see the value of the product.

Cybersecurity and Data Privacy Concerns

The growing reliance on digital tools, service partnerships and data analytics amplifies the need for robust cybersecurity measures. Recent high-profile data breaches for plans at Fidelity and JP Morgan are only the latest in a series of security issues. These breaches have also led to lawsuits, which is a potential financial issue, as well as a brand perception problem.

Implementing robust fraud prevention controls without overly burdening participants is a priority for record keepers. They will need to prioritize advanced security protocols to protect sensitive participant data, while advisors must ensure participants understand how their information is being used. Education around data security processes and policies to address breaches are also important.

Record keepers tend to have their strictest controls around the ability to perform sensitive transactions, especially distributions. Record keepers are building proactive reporting and analytics programs to identify red flags and suspicious activity. Some record keepers offer a protection program that reimburses participant losses if an account is breached through no fault of the participant. This is usually contingent on the participant following a specific set of actions to protect their account on an ongoing basis.

Advancing Financial Wellness

In an environment of rising inflation, volatile economic markets changing workplace dynamics, political uncertainty and more, consumers and workers alike struggle with financial, emotional and physical issues and situations that can have tremendous impacts on their quality of life, as well as their careers and work performance. LIMRA’s Wellness Index research found that workers’ financial wellness has been declining over the last two years. We also found that workers that our index characterizes as “stressed” or “distressed” are much more likely to say they have trouble focusing at work.

Figure 2. Workers indicate they “often feel distracted at work because of personal financial worries.”

Source: LIMRA Financial Wellness Research, 2024 (unpublished).

Record keepers and advisors can lead the charge in improving financial wellness by expanding benefits beyond retirement savings to include debt management, budgeting tools and emergency funds in their benefits toolbox. Offering comprehensive financial wellness solutions can deepen participant engagement and potentially boost savings rates, benefiting both providers and participants. When wellness programs are available in the workplace, satisfaction with those programs is very high.¹ In addition, fully three-quarters of workers using a wellness program at work said the benefit reduced their stress somewhat or a great deal.

Fintech and Healthtech Provider Partnerships

Strategic partnerships with fintech and healthtech firms can drive innovation in retirement planning, such as integrating emergency savings options or health savings account (HSA) management into retirement plans. These collaborations can expand product offerings and deliver a more holistic experience to participants, aligning with trends toward overall financial wellness. Expect to see more activity in this area in the coming year.

Conclusion

2025 promises to be a pivotal year for the retirement plan market, presenting both challenges and opportunities. For record keepers and advisors, success will depend on their ability to navigate regulatory changes, leverage technology and foster deeper participant engagement. By focusing on innovation, personalized experiences and holistic financial wellness, the industry can better serve plan participants and achieve growth in a rapidly evolving environment.

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