Employee Retirement Plans

Does One Size Ever Really Fit All?

We don’t expect doctors treat all patients based solely on age. So why would we develop employee retirement plans that way? How can a target-date solution that invests everyone with the same retirement date in the same portfolio—regardless of risk capacity or retirement readiness—be successful for every employee? The simple answer: For most organizations, it can’t. Each employee has an optimal asset allocation based on that individual’s goals and unique financial situation.

Managed accounts give employees the ability to personalize their account and how it’s invested. They encourage a level of engagement that target-date funds don’t: Personalized communications can contribute to an increase in retirement income and a greater savings rate, arguably the most substantial benefit of managed accounts. According to a study we conducted1 of people using our advice and managed accounts service, on average 87% of employees increased their savings rates; the average increase of their savings rate was 28%.2

Sometimes aligning an employee’s asset allocation with the average U.S. employee makes sense, but most employees’ financial situations are more complex than that. Even details related to where an employee lives—like state taxes, housing costs, and market volatility—should affect a portfolio.


Think about your own financial situation. What information would say something about you that makes you different from the average U.S. employee? Maybe you live in a state with a higher-than-average income tax rate. Perhaps your company provides a better-than-average 401(k) match, or maybe it doesn’t match your contribution at all. By incorporating this kind of readily available information about employees, employers can apply a personalized approach to retirement planning—helping to identify a clear path for each of their employees to prepare for retirement.