For decades, the defined contribution (DC) plan playbook was straightforward: accumulate during working years, then shift to conservative allocations as retirement neared. That model assumed a relatively short post-work period. But demographic shifts have upended that assumption. Americans are now retiring at an average age of 56, according to a 2025 Manulife John Hancock Retirement survey, leaving fewer accumulation years and a longer drawdown phase. The same survey found that only 12% of retirement savers have enough to cover a decade or more of expenses after leaving the workforce.
This widening gap has pushed longevity risk—the chance of outliving one's assets—to the top of the DC planning agenda. Advisors are being asked to design portfolios that can sustain income for 30 to 40 years, a challenge for traditional target-date strategies that gradually de-risk into bonds and cash. While that approach mitigates near-retirement drawdowns, it can also starve portfolios of growth just when longevity risk escalates.
One emerging answer is to expand the opportunity set beyond public equities and fixed income. A growing share of economic growth now occurs in private markets, as many high-growth companies delay or avoid IPOs. Private assets—including private equity, private credit, infrastructure, and real estate—offer access to these companies and projects, potentially delivering long-term growth, income, and diversification that public markets alone may not provide.
The regulatory environment is also shifting. Earlier this year, the Employee Retirement Income Security Act (ERISA) issued a framework for evaluating and selecting private assets within DC plans, easing the path for plan sponsors to consider nontraditional investments. In practice, private assets are typically embedded in professionally managed vehicles like target-date funds or managed accounts. For example, a modest allocation to private assets can be added along the glide path of an existing target-date fund, which is then repackaged as a collective investment trust (CIT). The CIT structure can generate recordkeeping credits and other fee discounts, helping to offset plan costs.
Private equity can tap into companies and growth opportunities not available in public markets, while private credit offers income through direct loans to businesses. Real assets such as real estate and infrastructure generate recurring revenues from rents, tolls, and usage fees—often contractual and inflation-linked, which helps preserve purchasing power in retirement. When blended with traditional stocks and bonds, these assets can provide diversified sources of growth and income while still supporting daily valuation and liquidity through careful portfolio construction.
Volatility management is another key benefit. Because private asset valuations are less correlated with daily market swings, they can smooth portfolio volatility over time. This is particularly valuable in managing sequence-of-returns risk, which becomes more critical in early retirements. Within a target-date glide path, especially as de-risking begins near the target date, private assets' volatility-dampening effect may reduce drawdown risk and improve long-term outcomes.
Interest is especially strong among younger investors. A Forbes Finance Council piece from July 2025 noted that more than 70% of investors aged 21 to 43 believe traditional asset classes alone may not deliver the returns they seek. As plan sponsors look to improve longevity preparedness and meet evolving participant needs, private assets are becoming a valuable addition to the DC toolbox. For advisors, this trend aligns with broader discussions about pre-retiree demands for flexibility and guarantees, and the ICI's 2026 agenda highlighting private markets in 401(k)s.
Private assets are not a standalone solution to longevity risk, nor are they appropriate for every plan. But they can complement traditional assets by providing new sources of long-term growth and income, enhancing diversification, and smoothing volatility. As the 2027 Social Security COLA forecast prompts advisors to reassess retirement income plans, integrating private assets into professionally managed DC vehicles may help today's workers live longer and better in retirement.
