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Simplify complex retirement and pension risk management with our tailored solutions for large organizations. 麻豆传媒 specializes in working with institutions to address their unique challenges, offering expertise in pension de-risking and strategic retirement planning for a more secure future.
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Combating Market Volatility with Guaranteed Income | September 2025
WEATHERING THE STORM:听Combating Market Volatility with Guaranteed Income Can Help Participants Secure their Retirement
Plan Sponsor Responsibilities
Among the multitude of plan sponsors responsibilities in running defined contribution plans, one of the most important decisions concerns plan design and oversight. This not only includes the incorporation of auto-features to improve savings levels, but also the decisions regarding investment manager and QDIA selection that will determine investing success. Investment options will be put to the test when markets fall dramatically, impacting participants who may decide to withdrawal assets at precisely the wrong time. It doesn鈥檛 take much of a down market to create concern among participants, so plan sponsors should consider how their investment line-up is positioned over the long-term, including access to lifetime income options, to help participants mitigate market volatility and prepare them for a secure retirement. This is especially important as more participants consider keeping their assets in the plan. According to a recent study by Greenwald Research of over 500 plan sponsors, nearly 50% of plan sponsors would prefer to retain assets in the plan,1听while 21% of the 1,000 participants surveyed suggested they would keep their assets in the plan. This increases to 59% once participants are introduced to guaranteed income options.
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Market Volatility and Participant Behavior
Market volatility is a natural aspect of investing, particularly on the downside, where it can have a substantial impact. The turbulent markets of 2001, 2008, and 2020 are prime examples of this pattern. And for workers who have spent their careers working and savings in their defined contribution plans, it can be particularly stressful鈥攅specially when accumulated account balances drop sharply during market downturns. These fluctuations can create significant anxiety, especially for individuals nearing retirement who fear they will outlive their savings and this fear is compounded by inflation, uncertain market performance, and the shrinking window to recover losses. In fact, the most recent EBRI Retirement Confidence Survey2 of workers and retirees validates these concerns:
| 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 听 | 83% of workers听are concerned that the increasing cost of living will make it harder to save as much as they want 78% of workers听believe inflation will stay high for the next 12 months 62% of retirees听believe the stock market will be increasingly volatile and unpredictable |
听听听听When markets crash, retirement account balances can fall quickly, even though history shows they often recover over time. However, the emotional and financial toll of seeing years of savings diminish in a short period of time can lead to poor decision-making, such as pulling money out of the market at the worst time. The key concern becomes: 鈥Will I outlive my money?鈥
听听听听While financial advisors often encourage clients not to panic during volatile markets, the panic isn鈥檛 just about volatility itself, it鈥檚 about when it strikes. In financial planning, this is called the Sequence of Returns Risk: the danger of suffering poor investment returns right before or early into retirement. The timing can be devastating, forcing retirees to delay or downsize long-planned goals. Unlike market risk, this isn鈥檛 something an individual can diversify away3鈥攅ach person only gets one retirement path.
听听听听Historically, traditional pensions helped pool and buffer these risks across generations. Today鈥檚 DC plans lack this collective protection, and most participants鈥攎any without access to a personal financial advisor鈥攎ust navigate this investment risk alone. In fact, just 35% of 401(k) participants receive professional investment advice.4
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What Can Plan Sponsors Do?
With this backdrop of participant鈥檚 fear of outliving their money and the lack of engagement with financial advisors, how can plan sponsors help?
听听听听Plan sponsors have an opportunity to provide participants with lifetime income solutions to help ensure they won鈥檛 outlive their savings in retirement, and also manage through volatility that can strike at any time. Plan sponsors can do this in multiple ways 鈥 they can offer a deferred income annuity (DIA) to participants who want to accumulate future income during their working years. Participants can benefit from a concept similar to dollar-cost averaging, with an option that allows them to buy future income units today and over time, typically between ages 55-70, instead of one lump sum purchase at retirement which may be in a less favorable rate environment. This creates a known lifetime income stream in retirement that won鈥檛 change, even in times of market volatility, and even after they retire.
听听听听Further, plan sponsors can also consider offering lifetime income 鈥渁t retirement鈥 through a single premium immediate annuity (SPIA) that allows participants a simple starting point to alleviate their fears of running out of money. A SPIA can provide monthly income for life to help cover essential expenses like housing, food, and healthcare, regardless of market conditions. Because a SPIA is a point in time decision鈥攊t uses current balances at retirement, say age 65, to purchase an annuity鈥攊t won鈥檛 alleviate today鈥檚 market volatility, but can be part of a broader financial plan that seeks to match future expenses with a guaranteed stream of income.
听听听听In both cases, guaranteed monthly income is generated from the annuities for a participant鈥檚 lifetime to help meet expenses in retirement. These lifetime income solutions can help reduce their reliance on the performance of their investment portfolio, helping them gain peace of mind knowing they鈥檒l have steady income no matter what happens in future down markets.
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IN CONCLUSION, including a guaranteed5 income option in the form of an annuity in a DC plan helps address the biggest retirement concerns: outliving savings, facing unexpected market downturns (especially before retirement), and ensuring consistent income for life. It allows plan participants to create a more predictable and secure retirement strategy, easing the pressure of trying to 鈥渢ime the market鈥 and offering more confidence to weather inevitable market fluctuations. For many, this can mean a more stable and worry-free retirement for years to come.
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1听2024 Greenwald Research In-Plan Insights Survey
2 EBRI and Greenwald Research 2024 Retirement Confidence Survey
3 Pfau, W. D. (2013). The lifetime sequence of returns: A retirement planning conundrum. Available at SSRN 2544637
4 Schwab鈥檚 2024 401(K) Participant Study
5 All guarantees are subject to the claims-paying ability and financial strength of the issuing insurance company
麻豆传媒 is a product provider. It is not a fiduciary and therefore does not give advice or make recommendations regarding insurance or investment products. 麻豆传媒, its affiliates, its distributors, and respective representatives do not provide any employer-sponsored qualified plan administrative services or impartial advice about investments and do not act in a fiduciary capacity for any plan.
This material is provided for informational purposes only and should not be construed as investment, tax, or legal advice.
Information is based on current laws, which are subject to change at any time. Clients should consult with their accounting or tax professionals for guidance regarding their specific financial situations.
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For institutional plan sponsor/financial consultant use only. Not for use with the public.
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