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Cerulli: 401(k) Outflows Will Accelerate

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The aging of the baby boomers already is starting to squeeze retirement plan providers.

Researchers at Cerulli Associates, Boston, have presented that conclusion in a new review of the 401(k) market.

Defined contribution plans now hold about $3.8 trillion of the United States’ $13 trillion in retirement assets, but because of economic fluctuations and the fact that the oldest boomers are starting to retire, defined contribution plans probably will lose about $300 billion more in cash this year than they will attract, the Cerulli researchers predict.

The net flow of cash out of defined contribution plans may start to worsen by about 15% per year each year, the researchers estimate.

Traditional players in the defined contribution market are facing fierce competition from payroll services companies for the remaining plan business, and they are facing fierce competition from the big securities brokerage firms in efforts to hold on to defined contribution plan assets that are rolling over into individual retirement accounts, the researchers report.

But the financial professionals who work directly with employers are in a strong position, and there seem to be opportunities for growth for companies going after defined contribution plans with about $6 million to $10 million in assets, the researchers write.


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