Plan sponsors need to understand longevity risk in retirement plans because it relates to the potential financial shortfall that can occur if individuals outlive their retirement savings.
This risk is particularly important to consider when selecting retirement plan options, such as target date funds (TDFs), which are often used as a Qualified Default Investment Alternative (QDIA) in defined contribution retirement plans. The selection of TDFs should take into account the trade-off between market risk and longevity risk, as well as preferences for active versus passive management.
Our Level 3 Fiduciary Training presentation on longevity risks walks you through:
- the impacts of longevity risk
- how to mitigate longevity risk
- your committee's responsibility in address longevity
Understanding longevity risk is essential for retirement plan fiduciaries to create successful retirement programs for employees, focusing on core clients and services without being distracted by new trends that may not align with the firm's expertise or add value for clients.
