The past decade has been exceptionally favorable for US defined contribution (DC) retirement plans. The retirement solutions providers—also known as retirement recordkeepers—that administer DC plans on behalf of various employers have experienced consistent revenue growth over this period, as plans have become more accessible and equity market performance has been strong.

Now, things are changing. The retirement industry is approaching a tipping point due to demographic shifts, industry developments, and increased competition—all of which are hitting retirement recordkeepers’ profitability and reshaping how they do business.

DC plans, which were designed for hyperefficient wealth accumulation, are now in a decumulation phase: As baby boomers retire and their withdrawals outpace younger savers’ contributions, the DC system is showing net outflows—a trend that’s expected to intensify as the number of people turning 65 is projected to peak in 2026–27.

Moreover, the industry’s entire business model has shifted. Retirement recordkeepers’ revenues from administration fees have been declining as they have substantially reduced these fees to win new business. At the same time, cross-subsidized business models have become more common, as some retirement solutions providers view the recordkeeping part of their business as a way to generate additional revenue streams, such as those from wealth and asset management. The retirement and wealth management industries have been converging quickly, with retirement solutions providers moving to diversify their revenues with ancillary products such as brokerage accounts and services such as financial advice, for assets within employer-sponsored plans and outside these plans.

However, while the size of the DC market shows a consistent upward trend, the underlying economics of the system has undergone a significant transformation below the surface. Total revenues generated from the DC system—including investment products and recordkeeping—grew by $11 billion between 2013 and 2023, from $28 billion to $39 billion. Over the same period, the DC system created $45 billion in new revenues from retail wealth management. These figures underscore the industry’s shift from product-centric to participant-centric strategies.

Trends affecting the retirement industry

The United States has the most retirement market assets in the world, estimated at roughly $36 trillion as of 2024—including assets in corporate, governmental, and not-for-profit DC plans, as well as corporate and public defined benefit plans and IRAs—up from about $20 trillion in 2013. Approximately 67 percent of US private-industry workers have access to a DC plan, and about 49 percent participate, according to the US Bureau of Labor Statistics (BLS).

Access to—and use of—DC plans has grown in recent years, partly thanks to plan features such as automatic enrollment and automatic escalation, which periodically increases employee contributions, and to legislation designed to boost retirement savings, including the SECURE Act and the SECURE Act 2.0 (which became effective in 2020 and 2023, respectively). Assets under administration (AUA) and participation in DC plans have also grown meaningfully, thanks to strong equity returns during the past decade, helping to accelerate revenue growth for DC recordkeepers. Between 2013 and 2023, AUA in DC plans rose 74 percent, while total revenues grew 39 percent.

Demographic shifts are now putting pressure on the retirement industry’s growth potential and profitability. About 11,200 Americans turn 65 every day, which adds up to more than 4.1 million people annually in the years from 2024 to 2027. At the same time, more of them keep working, partly to afford retirement. According to the BLS, roughly 11.1 million Americans over 65 were employed in January 2025, up from about 9.9 million in January 2019, illustrating the importance of retirement readiness and retirement solutions providers’ role in this pivotal process. Because of baby boomer retirements, the DC system is set to remain in net outflows until 2030, meaning that DC asset growth during this period will be driven primarily by market performance.

Retirement solutions providers also face intensifying competition, both within the industry and from other ecosystem providers—such as asset managers, insurers, and wealth managers—that are jockeying to serve retirees and people saving for retirement.

Shifting revenue and profitability mix

Retirement solutions providers generate revenues from traditional recordkeeping, including administrative and other fees; investment products such as investment management fees for actively managed funds; and retail wealth management products, for example, brokerage accounts and cash sweep products.

Declining recordkeeping fees

The industry experienced notable compression in recordkeeping administrative fees, roughly 25 to 35 percent, between 2013 and 2023. The reasons for this trend include recordkeepers significantly lowering their fees to attract business in response to increased competition, tighter regulations that have led to the unbundling of retirement products and services, increased litigation over fees, and a greater prevalence of cross-subsidized economic models.

Concentrated profitability in recordkeeping

Profits from traditional recordkeeping are concentrated, with more than 75 percent of industry profits in 2023 coming from three segments: small and micro 401(k) plans for corporate employees, 403(b) plans for not-for-profit employees, and 457(b) plans for state and local government employees. Mega and large 401(k) plans generated just 3 percent of profits because of rising costs and falling revenues.

Slight growth in investment product revenues despite massive market appreciation

Retirement solutions providers rely on three main sources of revenues from investment products: asset management, with fees typically based on assets under management (AUM); stable value funds, which are portfolios of bonds backed by a contract from a bank or insurer that protects against the loss of principal; and managed accounts, which provide participants with a personalized mix of investments.

Between 2013 and 2023, recordkeepers’ revenues from investment products within retirement plans, excluding managed accounts, grew 3 percent a year. However, this was primarily the result of market performance, as fees steadily declined.

Wealth management takes the spotlight

Retirement solutions providers’ ability to generate retail wealth management revenues has continued to grow rapidly, significantly outpacing growth in investment products and administrative fees. Retail wealth revenues soared to $45 billion in 2023 from a negligible amount in 2013. Many retirement solutions providers are focusing on these alternative revenue sources, using the DC plan platform as a distribution channel for products and services, including brokerage accounts, cash sweep accounts, and robo and traditional advisory.

Annual rollover contributions to IRAs steadily increased between 2013 and 2022, more than doubling over that period to about $770 billion before declining in 2023 because of various macroeconomic factors. Rollovers to IRAs generated $4.5 billion in revenues for retirement recordkeepers in 2023, presenting a continued opportunity for growth given the overall trajectory of this segment.

Transforming cost structures

Retirement solutions providers’ average costs per participant decreased 1 percent a year between 2013 and 2023; however, costs related to technology and support functions such as finance, HR, and legal have increased largely due to inflation, prompting a restructuring of expenditures to boost profitability.

The cost per participant is an important measure of how unit costs within the retirement ecosystem have shifted over the past decade. The following drivers are noteworthy:

• Sales is the largest cost category, driven by the high external commissions paid to financial professionals who help bring in new business.
• Technology support, including both in-house and outsourced services, represents the second-largest cost category.
• The cost categories that experienced the largest increases were support functions, rising 5 percent a year, and other indirect costs, including operational, administrative, and facility costs, growing 1 percent a year.

From administration to new profit pools: Key considerations

Given the evolving industry dynamics, it is imperative for retirement solutions providers to optimize their core recordkeeping business and move into adjacent revenue streams to remain competitive and grow profitably. Generating additional revenue streams requires relationship building at the participant level, which has historically been challenging given the limited connection and general lack of awareness that plan participants typically have with their retirement solutions providers.

Retirement solutions providers can take various steps to capture value from their relationships with plan participants, boost participants’ satisfaction, and, consequently, improve their reputation and participant retention rates.

Within their core retirement business, recordkeepers can take the following actions:

• Assess plan-level profitability for the current book of business, focusing on segmentation by the plan sponsor’s industry and size, to outline future areas for growth.
• Define a winning small business strategy that allows for growth by focusing on the highest-margin subsegments, while also maintaining an efficient cost structure through high automation and low customization.
• Simplify the IRA rollover process and lower barriers by offering personalized consultations and financial-planning services to review retirement plan options and streamline the fund transfer process.

When it comes to building new sources of revenue, providers can consider these steps:

• To serve plan participants who wish to keep their assets within the plan through retirement, provide options such as in-plan annuities or technology-driven custom decumulation solutions.
• To manage decumulation of assets and ensure retirement readiness, establish a retiree counseling service-to-sales team to proactively share options for keeping assets within the plan following retirement or transferring them to affiliated solutions, such as annuities or wealth management products.
• Pursue product innovation, such as developing retirement income solutions that are not tied to an employer-sponsored plan—including annuities, IRAs, and life insurance products—depending on the recordkeeper’s ownership structure.

Conclusion

The retirement industry is, and will continue to be, a critical component of the financial-services ecosystem and society more broadly. The industry’s gradual transformation will keep the challenges coming for incumbent business models, while also creating new opportunities for growth. The most successful retirement solutions providers will be those that seize the moment in an industry at a crossroads and benefit from shifts both within the core recordkeeping business and in adjacent markets with broader growth potential.

FAQ

Q: What are the key challenges facing retirement solutions providers in the US?

A: The key challenges include demographic shifts leading to net outflows, declining recordkeeping fees, rising costs, and intensifying competition within the industry.

Q: How can retirement solutions providers adapt to the changing landscape?

A: Providers can optimize their core recordkeeping business, explore new revenue streams such as retail wealth management, and leverage technology to improve participant engagement and satisfaction.

Q: What are some recommendations for providers to stay competitive?

A: Assessing plan-level profitability, simplifying the IRA rollover process, offering personalized financial-planning services, and pursuing product innovation are key steps for providers to stay competitive in the evolving retirement industry.