2026 U.S. Retirement Market Outlook

Building more resilient defined contribution investments

Shifts in the investment landscape—including fiscal expansion in the U.S., stubborn inflation, and uncertain monetary policy—are compelling asset allocators to reimagine diversification and build more robust total portfolio solutions that can meet the varied needs of retirement investors across a range of market environments.

Since they were designated as QDIAs by the DOL nearly two decades ago, target date strategies have evolved well beyond their foundational diversification frameworks. These solutions began as dynamic portfolios that adjust stock and bond allocations based on participants’ evolving risk tolerances as they save for retirement. Today, many target date solutions have matured to employ a more sophisticated approach to diversification that incorporates sub‑asset classes and alternative investment strategies, such as exposure to nontraditional bonds and
private assets.

Rethinking diversification in fixed income

After a decade of near-zero interest rates, bond yields now sit at elevated levels relative to much of the post-global financial crisis period, prompting DC plan sponsors and their consultants and advisors to sharpen their focus on participants’ fixed income exposure (Figure 1).

This heightened attention was evident in our T. Rowe Price 2025 Defined Contribution Consultant Study where:

• Nearly three-quarters (73%) of the largest DC-focused consultant and advisor firms identified “a greater focus on fixed income diversification opportunities” as a primary driver influencing their evaluation of fixed income investments across target date strategies, managed accounts, and multi‑manager custom fixed income options. This was a 25-percentage-point increase from 48% in 2021.¹⁵
  
  
• Among plan sponsors, 60% asserted that fixed income oversight requires more time and attention than in prior years,¹⁶ compared to less than half (48%) in 2021—before the simultaneous downturn in both equity and fixed income markets in 2022.¹⁷

Openness to private markets

The potential for private assets to be included in DC plans, primarily through custom or off-the-shelf target date solutions, was a key theme throughout 2025. We expect the discussion to continue, with new solutions coming to market in 2026 and beyond. Private assets include a range of investment strategies such as private credit, private equity, and private infrastructure.

Notably, DC consultants appear increasingly open to the inclusion of private credit as a building block in target date solutions. This is another example of the industry’s increased focus on building fixed income allocations that are more durable across varying interest rate environments. Our research shows that this evolution reflects both consultant sentiment and participant concerns. 

• Results from our 2025 DC Consultant Study show growing interest in private credit for DC plans. Expectations for incorporating private credit into DC plan solutions rose from an average rating of 1.7 in 2024 to 2.1 in 2025, based on a four-point scale where four represents highest likelihood for incorporation into DC plans over the next 12–24 months. While still relatively neutral, this increase indicates greater openness among consultants to include private credit as a building block in professionally managed, multi-asset portfolios.¹⁸
  
  
• Meanwhile, 49% of U.S. retirement savers express significant worry about inflation, and 33% cite interest rates as very concerning, outweighing concerns about unemployment and stock market performance.¹⁹ Building more durable and diversified fixed income allocations can support participants by providing a less volatile investment experience that is more aligned with participant expectations for fixed income investments.

Emerging innovation in capital preservation

Today’s unique investment environment is also creating significant opportunities for innovation within fixed income, particularly in capital preservation activity. The 2025 DC Consultant Study reveals that consultants and advisors anticipate increased interest in reviewing and revisiting existing capital preservation strategies relative to prior years, with 94% of respondent firms citing the current interest rate environment as a catalyst for change.²⁰

Most notably, consultants and advisors are increasingly exploring ways to transition stable value general account/insurance company products to pooled funds for higher crediting rates or to facilitate smoother recordkeeper transitions.²¹ Some plans with separate account stable value funds are also seeking creative ways to boost crediting rates and compete with money market yields, such as adding allocations to equities, high yield, or private credit. We are having more discussions with consultants and advisors on ways they could incorporate stable value into custom target date funds and retirement income offerings.

Not necessarily active, but not passive either

A shifting interest rate environment and heightened equity market volatility are also catalysts to reconsider the value of active management. The traditional paradigm of “active versus passive” is increasingly outdated as plan sponsors and their consultants and advisors look for opportunities to offer participants some of the benefits of active management at fee levels that reflect the DC industry’s fee sensitivities.

An in-between category, featuring strategies that seek a market-plus return with market‑like risk, could be an emerging DC plan investment trend. These strategies aim to deliver net returns above the index at lower cost than traditional active management—both characteristics that align with plan sponsors’ goals to improve participant retirement outcomes while focusing on value for cost.

Our 2025 plan sponsor research found:

• About 8 in 10 (82%) U.S. DC plan sponsors support the use of active management to hedge against downside [risk] due to heightened market volatility, and three‑quarters (76%) express a “belief that active management adds value.”²²
  
  
• Conversely, in terms of support for passive management, 84% of U.S. DC plan sponsors say, “limiting cost is the most important consideration,” and 78% point to passive to mitigate against benchmark deviation.

Investment strategies that limit tracking error while offering opportunities for excess returns can be appealing for DC plans. These solutions can bridge the gap between active and passive approaches by delivering the sophisticated balance of performance potential and cost efficiency that modern retirement plans demand.

Combining the benefits of active and passive management is also reflected in the growing category of blend target date solutions, which allocate to both active and passive building blocks. In the 2025 DC Consultant Study, we asked consultants and advisors to rate various statements on a four-point scale, where 1 = do not support and 4 = strongly support. The statement “target date solutions constructed with both active and passive strategies” received an average rating of 3.8 in 2025, up from 3.5 in 2021, highlighting growing demand for blend target date solutions.

Smarter tech, more personalized solutions, less financial stress

As more participants approach retirement, many are looking for personalized financial help. Advances in technology that include secure platform integration, data analytics, and automation are making it possible to deliver tailored products and services more efficiently and cost‑effectively to those participants who would benefit from additional support.

We expect tech-enabled, scalable advice to become a reality for broad participant populations. This shift will expand access to quality financial guidance for all participants, including populations that have typically been underserved due to cost barriers.

The challenge: Competing financial priorities

In today’s uncertain environment, employees navigate complex financial lives as they juggle priorities that directly impact their ability to save effectively for retirement.

According to our recent annual survey of plan participants, retirement savings remains the top priority, but it’s not the only one. Individual circumstances and goals also vary significantly, and participants are also highly focused on nonretirement financial objectives (Figure 4).

These competing priorities are not trivial, and they can create significant barriers to effective retirement saving. External factors like inflation, rising education costs, and delayed major life decisions (e.g., homeownership and starting families) further complicate the picture.

The result is widespread financial stress. In our 2025 Global Retirement Savers Study, a majority of participants reported high to moderate stress levels across all financial planning categories:

• 63.1% stressed by budgeting
  
  
• 62.1% stressed by retirement savings
  
  
• 58.7% stressed by nonretirement savings
  
  
• 57.7% stressed by health care planning

As employers increasingly provide access to benefits that can help to address these varied challenges, individuals can benefit from holistic financial guidance that considers unique personal scenarios and goals to maximize value. With such complexity, financial advice is not a nice‑to-have, it is essential.

Meeting rising demand for guidance

With a workforce that spans six generations, we are witnessing changes in relationships between employers and employees. In particular, young employees entering the workforce today have different expectations of their employers and the benefits offered than previous generations did. Demand for guidance is rising, and employers who address this need can improve employee satisfaction by helping to reduce employee financial stress and enhancing their overall financial wellness.

Our research shows that the workplace remains the primary source for accessing educational tools and financial guidance across the board. One-on-one consultations with a financial advisor ranks as the most helpful learning format for retirement planning, with 43% across age groups rating them “very helpful.” Notably, several studies have found that people who work with financial advisors typically report higher retirement confidence than those who do not.

Online courses and videos rank second at 30%, but with a clear generational split: 36% of workers under age 34 favor these digital resources compared with 21% of those age 50 and older. These results underscore the critical importance of offering a flexible spectrum of solutions, both in person and digital, that can adapt to both changing participant needs and generational preferences.

Opportunity for personalization as participants age 

Defaults like auto-enrollment and target date QDIAs have meaningfully improved retirement outcomes. Given technology advances, we now have the opportunity, particularly for participants approaching or in retirement who are more likely to have complex financial lives, to introduce personalization.

Our research indicates that more plans are offering managed accounts as an opt-in investment option alongside a target‑date strategy as the default, providing personalization for participants who may benefit from additional guidance. For example, major life events—marriage, divorce, parenthood, job transitions, health issues, etc—can significantly impact long‑term savings.

Data from our recordkeeping system show that as participants age, they become more actively involved with their retirement savings. Participants are more likely to increase their contributions and adjust asset allocations as they get older. This uptick in savings activity likely reflects higher discretionary income during peak earning years or reduced financial obligations, while portfolio adjustments may indicate increased risk tolerance gained through experience or greater awareness of potential retirement gaps.

To better understand these allocation adjustments, our research examined how participants modify their portfolios as they age. Between 2019 and 2024, we tracked how participants across three age groups actively changed their equity allocations. We found that older participants are more likely to adjust their allocations compared with younger cohorts (Figure 5). Specifically, among participants aged 50+, about one‑quarter (26%) did not make any investment changes, while half (50%) increased their exposure to equities, and the remainder reduced their equity allocation (24%).

As retirement approaches, complexity increases. Decisions become more nuanced as savers navigate how to draw income; when to claim Social Security; how to sequence withdrawals; and how to balance longevity, market risk, and health care costs. These participants are typically more receptive to guidance that addresses their specific circumstances.

Our research suggests that for younger participants in their early to mid-careers, the benefits of personalized investment strategies may be less compelling as the optimal portfolio for most during this period will emphasize growth. However, as participants approach retirement and their financial situations become more complex, some may want to personalize their investments. Advances in technology provide an opportunity to introduce tailored solutions to these participants more efficiently and cost effectively than ever before. We expect more plan sponsors to consider offering these options in the coming years.