Bloomberg Surveillance Sep 21, 2026
With Bruce Wolfe, Senior Vice President at Alight
Insurance is now being attached to target date funds, the default investment in most workplace retirement plans, so that the account pays a monthly income once its owner stops working.
The 401(k) replaced the company pension by handing the investment decisions to the employee. Bruce Wolfe's argument is that the industry has started quietly putting part of the pension back, because the decisions it handed over turn out to be the hardest ones in finance.
"I think what we're doing is we're trying to take over time probably the best of both worlds."
Wolfe recently joined Alight to run its 401(k) business. The firm administers benefits for very large employers, including, as the hosts worked out on air, Bloomberg itself.
The full segment is covered here so you can skip it.
Here are the 4 lessons that matter.
Key Takeaways
Annuities are being attached to target date funds, so the default 401(k) investment can pay lifetime income
IBM restarted a defined benefit plan and funded it with the money it had been using to match employee contributions
Drawing money down is a different problem from saving it up, and he says the industry has been solving the wrong one
A retiree asks what monthly income they get, not what return the index delivered
Longevity is the risk an investment portfolio cannot hedge, and today the answer to it is an annuity
A deferred income annuity bought at 65 that starts paying at 85 is the cheapest form of that protection
1. Who Alight Is
Tom Keene introduced Alight by its ticker, ALIT, and asked what the company actually does. Wolfe said it administers benefits for very large employers, and Keene recognized it immediately as the company he shouts at on the phone.
They are, in fact, the people on the other end of that call
In fact, they literally are the ones that you yell at because on the medical side and health side, they, I think, provide benefits to you at Bloomberg. I recently joined them to basically run the 401k business.
Bruce Wolfe
The firm also provides wealth services, which is the side his work sits on.
2. Best Of Both Worlds
Keene set up the history: a previous generation received a defined benefit check, the industry replaced it with the defined contribution 401(k), and Wolfe's research note suggests the direction is now reversing. Is that a retreat from the freedom a 401(k) gives, he asked.
The aim is to keep the freedom and add the income
I think what we're doing is we're trying to take over time probably the best of both worlds.
Bruce Wolfe
A defined contribution plan gives people the autonomy to invest as they like. What it does not give them, he said, is a way to manage money once they stop earning, and that is the part the industry is acknowledging.
A Nobel laureate called it the hardest problem in finance
In fact, I think it was Bill Sharpe, a Nobel laureate, who said that the hardest, nastiest financial problem to solve is the one for individuals trying to draw down money in retirement.
Bruce Wolfe
The first fix is happening inside the default investment.
Insurance is being bolted onto the most popular fund type
We now are seeing that insurance or annuities are being attached to a target date fund, which is the most popular type of investment strategy that individuals have. And the idea is that that would provide them with some lifetime income once they enter retirement.
Bruce Wolfe
The second is that the old structure is coming back in modified form. Employers are not reopening the pension their parents had, but they are reopening something.
IBM turned its matching budget into a defined benefit account
We saw this with IBM a couple of years ago. They started to bring back their defined benefit plan and basically were using the assets that they were going to use to contribute from a matching perspective instead of matching the individual assets.
Bruce Wolfe
He called it early days, and said the point is the convergence of the two systems rather than any one plan design.
3. Spending, Not Returns
Paul Sweeney asked what he actually recommends as the population ages and more people move from contributing to withdrawing. Start by admitting it is a different problem, Wolfe said.
Withdrawing is not the inverse of saving
So start with kind of a fundamental point, which is you're solving a different problem when people move into withdrawing their assets versus accumulating their assets, right?
Bruce Wolfe
The industry's standard tools here are probability-based: Monte Carlo simulations run against capital market assumptions, which produce a likelihood that the money lasts. His view is that a retiree is not asking that question. They are asking what arrives in the account each month, and he put the example at $6,000. The design problem is then how to build investment strategies, with insurance alongside them, that deliver that outcome.
4. Longevity Risk
Keene put the arithmetic on the table. Take the standard couple, a man of 45 and a woman of 42. On joint life expectancy, he said, there is a 75% chance one of them lives to 85, a 47% chance one lives to 90 and a 20% chance one lives to 95. To him there is no other issue in the mathematics of retirement.
Wolfe agreed and named it.
Longevity is the risk that makes retirement different
And that gets to, by far, the most unique and important risk when people enter retirement, which is longevity risk.
Bruce Wolfe
The instrument that covers it, he said, is an annuity, and the cheapest version is the one that pays only in the years a portfolio is least likely to reach.
A deferred income annuity bought at 65 starts paying at 85
And the most efficient way to get that protection is through something called a deferred income annuity, which basically just protects against the longevity element. So for example, when an individual, they could buy it when they're 65, but when they're 85, it kicks in.
Bruce Wolfe
Keene asked what one yields at today's rates, and suggested 6% a year himself. Wolfe would not commit beyond the range.
Around 6%, less whatever the expenses take
Probably somewhere around 6%, maybe a little bit less because of expenses and so forth, but somewhere in that range.
Bruce Wolfe
Bonus Insights
The shortest visit of the hour
Keene closed by saying it had been a short visit and that they had to do it again. The segment ran a few minutes and ended the program.
The rest of the hour
Wolfe took the last segment. The same hour carried Torsten Slok of Apollo Global Management on the AI-driven economy, Meghan Robson of BNP Paribas on credit, Alexis Crow of PwC on the AI trade and Dana Telsey of Telsey Advisory Group on retail.
Wolfe's bottom line is that the defined contribution system solved saving and never solved spending, and that the fix now arriving, which is insurance inside the default fund plus employers reopening defined benefit accounts with the money they used to spend on matching, is the pension coming back in pieces rather than a rejection of the 401(k).
Products, Companies & Tools Mentioned
Alight (His firm, ticker ALIT. A benefits administrator for very large employers, including Bloomberg; he recently joined to run its 401(k) business, and it also provides wealth services)
IBM (Restarted a defined benefit plan a couple of years ago, funding it with the money it had been using to match employee contributions)
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