2025 Retirement Market Outlook
Retirement industry at a crossroads
Introduction
Evolving default investment options. Increasing plan adoption of retirement income solutions. Growing momentum for emergency savings programs. These are the major trends we see influencing the U.S. retirement industry in 2025. What challenges and opportunities will they bring?
Our 2025 U.S. Retirement Market Outlook highlights many of the key challenges and opportunities in today’s defined contribution retirement plan landscape. And we offer some valuable insights on how to move forward.
Hello. I’m Michael Davis, head of Global Retirement Strategy at T. Rowe Price.
We’re pleased to present our 2025 U.S. Retirement Market Outlook, “Retirement industry is at a crossroads.”
In this year’s edition, we offer insights on three key areas that we expect to gain attention in the defined contribution retirement plan marketplace:
- First, evolving target date and default investment options;
- Second, increasing adoption of retirement income solutions; and
- Third, the growing momentum for emergency savings programs.
Additionally, we look ahead at some key legislative and regulatory themes that are likely to impact the retirement landscape in the coming years.
Qualified default investment alternatives, or QDIAs, transformed retirement plan investing, with target date strategies gaining prominence due in part to their automated, age-based asset allocation.
More recently, there’s growing interest for these strategies to incorporate blend investment approaches. These blend strategies combine both active and passive elements to help enhance cost efficiency while leveraging the potential benefits of active security selection.
We’re also seeing greater interest in collective investment trusts, or CITs, an increasingly popular investment vehicle that often provides lower costs and greater investment flexibility to target date investors.
And personalized managed accounts are getting more traction, especially as more participants approach retirement.
Additionally, we have seen a flurry of new retirement income products over the past year.
Overall data shows increasing interest among plan sponsors in retaining retirees in their retirement plans postretirement. And many are proactively inquiring about the landscape of retirement income products and services.
Consultants and advisors will continue to be essential in helping plan sponsors select products and services best suited to their plans.
Finally, there’s growing recognition of the importance of overall financial wellness, and emergency savings is a central element of that discussion.
Provisions in the SECURE 2.0 Act of 2022 have bolstered employer-sponsored emergency savings programs, introducing new solutions to participants.
And we expect to see more conversations on the adoption both of in-plan and out-of-plan emergency savings solutions.
Looking ahead, we outline some key legislative and regulatory themes that could impact the retirement landscape in the coming years, including tax reform, enhancements in SECURE 2.0, litigation reform, and more.
We’re excited to present our 2025 U.S. Retirement Market Outlook, and I encourage you to download the full report at troweprice.com for more detailed information on these and other topics.
Thank you.
Evolution of target date solutions and QDIAs
What’s happened?
Target date strategies dominate as default plan investments.
- $3.8 trillion target date assets as of June 30, 20241
What’s next?
Cost-efficient target date collective investment trusts (CITs) continue to gain market share over mutual funds, and demand is increasing for active/passive blends.
- 51% of target date assets are in CITs1
- 12% three-year compounded annual growth in assets for blend versus 10% for passive and 4% for active2
What to keep an eye on
Managed accounts appear poised for future growth, especially as participants near retirement and seek customized solutions that can incorporate individual financial circumstances.
Retirement income universe expands, plan adoption on the horizon
What’s happened?
The SECURE Acts of 2019 and 2022 spurred the creation of innovative retirement income products to support retirees who stay in plan.
What’s next?
More plan sponsors are taking a stance on retirement income.3
- 68% drop in plan sponsors with no stated opinion on in-plan solutions (from 59% in 2021 to 19% in 2024)
- 125% increase in plan sponsors offering or planning to add in-plan solutions (from 8% in 2021 to 18% in 2024)
What to keep an eye on
Diverse solutions demand careful evaluation. Industry professionals can help plan sponsors analyze and evaluate options to find the best fit for their participants.
A new era for emergency savings after SECURE 2.0
What’s happened?
SECURE 2.0 introduced new provisions for emergency savings, a key element of financial wellness.
What’s next?
Emergency savings solutions are expected to gain traction over the next three to five years. Among advisors and consultants:3
- 70% of advisors and consultants anticipate a rise in in‑plan solutions
- 52% expect an increase in out‑of‑plan solutions
What to keep an eye on
With SECURE 2.0, plan sponsors have new opportunities and new incentives to enhance workplace emergency savings and help support employees' financial well-being.
2025 U.S. Retirement Market Outlook
Evolution of Target Date Solutions and QDIAs
Qualified default investment alternatives, target date solutions, collective investment trusts, and managed accounts are transforming retirement investing in defined contribution plans.
2025 U.S. Retirement Market Outlook
Retirement Income Universe Expands, Plan Adoption on the Horizon
As the industry creates new and innovative retirement income products, more plan sponsors are moving from gathering information to making decisions on which solutions to adopt.
2025 U.S. Retirement Market Outlook
A New Era for Emergency Savings After SECURE 2.0
The SECURE 2.0 Act of 2022 expanded the landscape of potential solutions for emergency savings by introducing new opportunities and incentives for employers within their retirement plans.
Policies evolve to support growing needs of plans and participants
Looking ahead, retirement policy continues to be a major congressional and regulatory focus that could impact the retirement landscape, including tax reform, enhancements to the SECURE 2.0, among others.
Hello, I’m Aliya Robinson, director of Congressional Affairs at T. Rowe Price.
We’ve seen several important developments in retirement policy over recent years, particularly with the SECURE Acts of 2019 and 2022, that could impact how we move ahead into 2025.
So let’s take a look at a few policy areas, including:
- Tax reform
- SECURE 2.0 enhancements
- Litigation reform and
- A look ahead to 2025
With the expiration of several major provisions of the Tax Cuts and Jobs Act at the end of 2025, tax reform is imminent.
With the promise to not only maintain but also expand tax cuts, the search for additional government revenue sources could target the retirement industry, including, among other provisions:
- The “Rothification” of retirement contributions. In other words, transitioning from traditional pretax contributions to after-tax Roth contributions or
- Capping the employer deduction for employee benefits or
- Ending nonqualified deferred compensation accounts
The SECURE 2.0 act ushered in a host of optional changes to the retirement plan landscape, but further guidance is still needed for several provisions.
We expect updates and technical corrections to provide greater clarity and guidance in several policy areas, including:
- The structure and management of emergency savings accounts
- The implementation of student loan matching provisions
- And the implementation of after-tax Roth catch-up contributions
Class action litigation and settlements related to the Employee Retirement Income Security Act, or ERISA, have surged over the last decade, with class action settlements reaching $353 million in 2023 alone.
In fact, fear of litigation was the top deterrent listed to the implementation of retirement income solutions in our 2024 Defined Contribution Plan Consultant Survey. Therefore, the industry is actively pursuing legislative changes to address these concerns.
Beyond 2025, we expect congressional themes to focus on two key areas:
- One, a concerted effort to bring new people into the system and expand access to retirement plans. Proposals range from mandating employer-provided retirement plans to reducing plan eligibility age from 21 to 18.
- Two, after years of prioritizing the accumulation of savings, the industry focus is shifting to the retirement income or spending phase, aiming to ensure that savings last throughout retirement.
T. Rowe Price will continue to monitor these emerging issues and provide updates to help employers and financial professionals stay informed on policy changes and their implications.
For more information on this and a range of other topics, please download our full 2025 U.S. Retirement Market Outlook, now available at troweprice.com.
Thank you.
Important Information
1Total assets includes both mutual funds and CITs as of June 30, 2024 (Morningstar). Percentages in CITs represent CIT assets only. CITs are institutional investment vehicles designed for qualified retirement plans.
2Sway Research, as of December 31, 2023.
3T. Rowe Price 2024 Defined Contribution Consultant Study. This study included 48 questions and was conducted from January 12, 2024, through March 4, 2024. Responses are from 35 consulting and advisor firms with over 134,000 plan sponsor clients and more than $7.5 trillion in assets under administration.
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