Few would argue the 401(k) plan system works perfectly, and former Assistant Secretary of Labor for Employee Benefits Lisa Gomez isn’t among them.

That said, multiple rounds of legislation and near-continuous regulatory reforms over the past 10 to 15 years have improved outcomes for the typical retirement saver, Gomez told Retirement Upside. The prevalence of automatic enrollment, for example, has boosted participation rates among the growing employee population with access to a plan, and the widespread embrace of professionally managed investment options like target-date funds and managed accounts means far fewer investors carry extreme asset allocations.

Like other retirement industry veterans, she also sees room for improvement, especially when it comes to providing 401(k) plan investors with tailored advice linked to their household financial situation. That’s one reason why Gomez, who left the federal government in January 2025, is now serving as a strategic advisor to Pontera, a wealthtech firm that helps advisors manage and rebalance clients’ held-away retirement accounts. Pontera executives said her insights have been invaluable as the firm sets its strategy, establishes key relationships with regulators and navigates a well-documented public dispute with Fidelity.

Ultimately, Gomez is optimistic about the future of the 401(k) plan industry and its ability to help Americans prepare for and navigate retirement, but there’s a lot of work to be done, including by financial advisors who hope to grow their retirement plan businesses. Retirement Upside sat down with Gomez to chat about the state of the industry.

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It’s less of a question of should and more an issue of how.

Washington, DC, and asset managers alike think private market investments in employee benefits plans are the best thing since sliced bread. Financial advisors are much more skeptical, concerned about illiquidity, high costs and opacity. While there may be ways of putting private investments in 401(k)s that complement the plans, they necessitate careful engineering, small allocations and coordination across a fragmented retirement system.

“Meaningful solutions require advisors, asset managers, and recordkeepers to work together from the outset,” Hal Ratner, head of research, and Miguel Puerto, senior analysts at Morningstar said in a report. “With this collaboration, private markets can be thoughtfully integrated in ways that enhance participant outcomes.”

A Little Wiggle Room

Private assets are going to need a buffer. If an investment vehicle is going to be exposed to private equity, private credit or some other type of illiquid alternative, it requires public exposure that can support rebalancing and provide daily pricing stability, Ratner told Advisor Upside. “Your problems start to go away with that liquidity sleeve,” he said. Some types of semi-liquid funds, like the ones pretty much all of Wall Street has been partnering up on, may be a solution, he added.

Even then, private markets are unlikely to play a starring role. If they become a regular feature in defined contribution plans, allocations will probably remain small, serving as a complement rather than a core holding. “For institutions, liquidity matters less than predictability,” Ratner said. “In the DC space, there’s no specific spending schedule. You don’t know when participants will need their money, so the benefit isn’t quite the same.”

First Things First. Interestingly, Christine Benz, director of personal finance and retirement planning for Morningstar, argued that alternatives in 401(k)s are a solution in search of a problem. She called them “a distraction at best, and a payday for high-fee asset managers at worst,” in a recent blog post.

Ratner agreed, though with a caveat. “She’s right. If you wanted to order all the things that needed to be addressed in DC plans, getting private exposure is close to the bottom, if not the bottom,” he said. “But that doesn’t mean it’s not worthwhile.”

The US economy is unique in many ways, but one thing it has in common with a growing number of countries is its defined-contribution style retirement system, according to a new report published by the Global Aging Institute in collaboration with Prudential Financial.

Long gone is the dominance of defined benefit pensions, both here and in places like Australia, the Netherlands and the United Kingdom. As a result, individuals across the globe face the daunting task of retirement-income planning without the backstop of lifetime pension payments, and many lack easy access to other guaranteed income sources like annuities. The report’s conclusion? Financial advisors and other stakeholders must make it easier for retirees to turn appropriate portions of their savings into an income stream that lasts for life.

The Income Question

When countries fail to make adequate provision for lifetime income, retirement systems become less efficient and much more costly, warned Richard Jackson, co-author of the study and the president of the Global Aging Institute. It also needlessly leaves individuals at risk of outliving their savings.

There is no one-size-fits-all income strategy, Jackson said, but lifetime income options like annuities should, at a minimum, be made available in all employer pension systems or workplace retirement plans. Other options to complement annuities include:

• Systematic withdrawals.
• Bucket strategies.
• Cash-value life insurance.
• Bond/CD ladders.

Advisors who can deploy these strategies for clients could benefit. For their part, public policymakers should consider their role in facilitating decumulation planning, including by encouraging the standardization of product terms and increasing the scale of annuity purchasing pools, potentially by using longevity pooling exchanges to connect employers with providers. Likewise, the report recommends, the collective financial service industry should expand access to fiduciary advice focused on managing inflation, addressing interest-rate risk and protecting against poverty at advanced age.

One piece of low-hanging fruit would be changing the way advisors and retirement plan recordkeepers talk about savings in DC plans, shifting the vocabulary from a focus on total accumulated balances to instead translate savings into projected future lifetime income payments. This can help acclimatize savers to the idea of annuity purchases well ahead of their retirement date. A more ambitious step would entail allowing (or even requiring) future retirees to spread the purchase of lifetime income over longer periods of time in order to mitigate interest rate risk.

“The key for policymakers will be to strike a reasonable balance between protection and flexibility,” the report concludes.

Significant Potential Savings. As of the end of 2024, roughly $60 trillion in total savings was held in employer and personal pension systems in the 38 OECD countries. Based on the estimates of potential efficiency gains of full utilization of longevity pooling summarized in the report, these systems could provide the same level of retirement security for 20% less cost. In other words, longevity pooling is a $12 trillion opportunity.