An estimated 5.4 million small U.S. businesses lack retirement plans, leaving many without a path to financial security, according to the DOL Pension Bulletin. At a time when the defined contribution retirement system struggles with the persistent challenges of expanding access, increasing participation, driving engagement and improving retirement outcomes, a new wave of technology-driven solutions is emerging, according to KWP Growth Partners, a strategic retirement planning advisory firm that collaborates with providers, advisors and fintech innovators.
The $10 trillion retirement plan market is “at a crossroads,” said Lisa Kottler, KWP’s partner of strategic growth and innovation. “Nearly 90% of employers still don’t offer a 401(k). At the same time, technological capability is exploding. AI, machine learning, and embedded finance tools are finally making it possible to scale retirement benefits to the broader workforce. If incumbents and innovators don’t act now, we risk falling further behind.
“The next wave is integration. These solutions can’t exist in silos … challengers need to collaborate. We expect to see more partnerships, M&A, and ecosystem-building to truly reshape retirement for the next generation.”
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Now, more than ever, there’s a chance to close the gap, according to KWP, which has published a first-of-its-kind Next-Gen 401(k) Report that identifies 12 transformative trends shaping the future of retirement, highlighting how digital-forward companies, such as Gusto, Human Interest, Vestwell and Betterment, are driving innovation.
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“It is more possible than ever to offer a plan,” said Will Prest, managing partner at KWP. “New digital-first solutions are making it possible—and affordable—for even the smallest employers to offer retirement benefits.
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“The report highlights how embedded payroll platforms, pooled plans (PEPs), and automated onboarding tools are radically reducing friction and cost. Small businesses no longer need to navigate complex plan design or vendor relationships alone—RetireTech challengers are packaging retirement into the systems they already use.
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“Small businesses are moving from the too hard pile to the next frontier for retirement expansion. Whether you’re building, distributing, funding, or evaluating retirement solutions, this report helps you see where the market is heading and who’s driving the change. It’s also a resource for identifying trends, understanding where innovation is happening, and pinpointing collaboration opportunities.”
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Nearly half of U.S. retirees report significant anxiety over spending their retirement savings, according to the latest research from the Alliance for Lifetime Income. At the same time, the retirement industry is at an inflection point, driven by advances in AI, data portability and financial wellness.
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The Next-Gen 401(k) Report identifies four key challenges for the industry at this critical time: Expanding access, increasing participation, boosting engagement and improving outcomes. The report helps plan sponsors and employers “better understand the forces reshaping the retirement market, anticipate disruptions and recognize new opportunities,” said Prest.
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KWP prioritized digital-first companies that embrace digital transformation to address client needs. “These technologies have the power to help the industry stretch, expanding coverage with a higher probability of success,” said Kottler. “Our aim is to … create collaboration and transparency and collectively solve the industry’s key challenges.”
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Kottler added, “Advisors have a unique opportunity to lead the next evolution of retirement by embracing modern tools, testing new partnerships, and solving real client pain points. With the right mindset and tech, they can shape the future instead of reacting to it.”
The report identifies innovators who are tackling the industry’s most pressing challenges while driving improvements, such as serving underserved markets, including small businesses and communities of color and supporting retirement plan professionals, including advisors and providers.
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Here are the 12 trends shaping the future of retirement, according to KWP’s report:
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1. AI powers the future: Artificial intelligence and machine learning technologies personalize experiences, automate complex processes, and scale solutions to reach more users. From participant advice to operational efficiencies, AI reshapes how firms address user needs.
2. Collaboration fuels growth: Established firms tap into fintech solutions to modernize operations, while startups leverage established players’ distribution networks to grow
3. Embedded solutions: The best financial tools and platforms disappear into everyday workflows—bundling retirement with payroll, benefits, lending, and wealth management to improve access and affordability
4. Human-centered design: Intuitive, user-friendly solutions engage users, simplify decision-making, and drive adoption and engagement.
5. Distribution as a competitive edge: Many companies stumble not from poor products but from weak go-to-market strategies. Workplace RetireTech leaders excel by embedding distribution into design, leveraging channels like payroll systems or fintech partnerships and standing out with sharp messaging and positioning. Winning products make their value immediately clear, driving faster adoption.
6. Legislation unlocks access: New laws are clearing paths for innovation. Pooled Employer Plans are a standout example, allowing small businesses to offer retirement benefits previously out of reach.
7. Digital engagement: Today, digital solutions are reshaping the retirement landscape—giving employees the tools, education, and personalized guidance they need. The best engagement tools change behavior. While the industry often highlights investments, contribution rate is the most critical factor in long-term success, making tools that motivate employees to increase their savings particularly valuable.
8. Data-driven personalization: Advanced analytics are redefining retirement planning. Financial wellness and advisor platforms now use data to target diverse employee demographics, improving engagement, participation, and outcomes.
9. The financial wellness boom: Employers increasingly see the connection between financial stability, savings, and workplace productivity, driving demand for tools that ease financial stress and build better habits
10. Easier rollovers, less leakage: A mobile workforce needs portable retirement solutions. Friction and confusion in account transfers lead to lost accounts and cash-outs, which hurt long-term outcomes. Digital platforms that simplify the transfer process and recover lost funds are solving this.
11. Retirement income reimagined: Innovators are redefining how retirees generate income, offering alternatives to traditional annuities. From blockchain-based payouts to middleware solutions, these firms provide flexible and sustainable retirement income strategies.
12. Crypto and alternative investments enter the mix: The rise and legitimacy of cryptocurrency and alternative investments is making its way into retirement portfolios. Some fintech firms now offer access to these options, though their inherent risk and volatility requires careful consideration.
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“We leveraged our deep experience … when creating this [report],” Prest said. “Our goal is that industry stakeholders are not just asking, ‘how can we optimize?’ but ‘what unmet needs can we solve?’”
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