Over the past two decades, alternatives and technological advances have reshaped asset allocation. However, a conventional approach to retirement savings still dominates, with a 60/40 or 70/30 split between equities and fixed income. This strategic asset allocation has long been the foundation of retirement planning, focusing on asset growth during the accumulation phase and minimizing volatility by shifting to more fixed income and cash over time. Yet, this approach doesn’t guarantee financial security for retirees in the decumulation phase, especially as people live longer and social security becomes uncertain. Millions of Americans face the risk of outliving savings, as BlackRock chief Larry Fink highlighted in his annual letter.
Technology is driving greater financial access, enhanced product diversification, and the ability to design portfolios with specific outcomes. While equities and fixed income will always dominate due to their market size, discussion around “pensionization” of 401(k)s is emerging, which requires different thinking about asset allocation.
Retirement planning is shifting
Retirement planning has evolved, moving from traditional pension plans, which provided defined benefits, to 401(k)s and other defined contribution plans. Workplace pension plans guaranteed lifetime income based on salary and years of service, with the employer bearing the investment risk. In contrast, defined contribution plans shifted that risk to employees, who must regularly save and manage funds, in exchange for independence from an employer’s financial health. Retirees also face the burden of deciding how much money to withdraw without knowing their lifespan. As lifespans extend, savings need to last longer, making predictable portfolio performance and tailored decumulation strategies crucial.
Technology driving change
Technology enables greater precision in retirement portfolio performance management, rather than relying on historical returns. Structured investment strategies, previously available only to institutional investors, are becoming accessible to individuals and advisors. Automation of option overlay strategies allows advisors to define performance outcomes in plain language, like “I want a minimum return of X” or “Limit downside to no more than Y.” Advisors can input these parameters into portfolio builders and execute choices with a click. Innovations in data infrastructure and middleware also allow the inclusion of lifetime income products in 401(k)s, either as individual elections or within target date funds, a common default investment election.
New investment products
For individual investors, alternative assets and new products in 401(k) plans aim to diversify portfolios, boost returns, and increase available assets at retirement. A growing priority is including defined outcome investments, such as annuities, which offer guaranteed lifetime income. Annuities, historically inaccessible to the mass market and unsuitable for defined contribution environments, gained substantial traction following the Secure Act, which eased employer endorsements. Technology solutions now standardize data, connect industry stakeholders, and provide AI tools for fiduciaries to evaluate lifetime income products at scale, driving 401(k) “pensionization.”
The diverse crop of startups powering this transition targets all industry layers, making retirement exciting for early-stage fintech investors. There’s a significant opportunity in solving the 401(k) asset allocation problem and increasing access to retirement plans for underserved employee segments. The continuing growth of 401(k) assets means that investment products that deliver true financial security in retirement are of great importance.
It’s time to make room for new thinking around asset allocation for retirement. A greater focus on products that provide guaranteed income and defined outcomes is necessary for financial security of retirees. While recommending the inclusion of lifetime income products into defined contribution plans is optional for fiduciaries today, we are quickly nearing a time when not recommending them will mean breaking fiduciary duty.
Anna Garcia is the founder and managing partner of Altari Ventures, a New York-based early stage enterprise fintech fund focused on data-driven enterprise intelligence, capital markets and asset management technology, CFO tech stack, embedded finance and decentralized/centralized infrastructure convergence.
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