Morningstar's simulation reveals early adoption of personalised managed accounts significantly boosts retirement readiness

Morningstar’s new simulation-based analysis finds that offering personalised managed accounts within workplace defined-contribution plans can measurably improve projected retirement readiness for a broad cross-section of savers, but the size of the benefit depends heavily on who adopts the service and when.

According to a report by Financial Planning summarising research from Morningstar’s Center for Retirement & Policy Studies, the centre used a new microsimulation framework, the Defined Contribution Outcomes Model (DCOM), to analyse millions of participant observations across thousands of plans. The model estimates that, on average, adoption of a managed account lifts the median wealth‑to‑salary ratio at age 65 by 7.7% relative to remaining in a target‑date fund (TDF) or in a self‑directed portfolio. Morningstar launched the 2026 Managed Accounts Research Series and DCOM to evaluate plan design interventions and their likely effects on retirement outcomes.

The gains are not uniform. According to the report by Morningstar, TDF investors who switch to a managed account see a 5.9% increase in their median wealth/salary ratio, while self‑directed (DIY) investors see an 11.4% improvement. “DIY investors see a larger boost from adopting an MA than do TDF investors,” the researchers wrote, noting that DIY holdings often deviate substantially from age‑based allocations. The study points out that equity allocations for self‑directed participants aged 60–64 can vary by as much as 57 percentage points, a dispersion that creates scope for personalised guidance to produce outsized improvements.

Behavioural effects, rather than superior market timing or stock selection, are the dominant driver of the projected benefits. Morningstar’s researchers find that managed‑account users “consistently save more than their peers, even after controlling for age, wage and tenure.” The personalised nudges and tailored recommendations appear to raise contribution behaviour more effectively than generic plan communications.

Timing matters: the largest relative improvements accrue to younger and newer plan participants. The Morningstar model shows the biggest percentage gains for the 20–24 age cohort, up to a 22% increase in the median wealth/salary ratio for DIY investors, driven by the compounding impact of modest increases in savings rates over decades. Similarly, participants with no prior tenure see larger improvements than those with long service, reinforcing the idea that early engagement amplifies lifetime effects.

The study also addresses a common objection: that managed accounts are redundant in plans that already deploy auto‑escalation of contributions. The researchers found that while the incremental benefits are smaller in plans with automatic escalation, they remain positive. In plans with auto‑escalation, TDF investors switching to managed accounts still saw a 2.7% lift, compared with an 11.6% boost in plans lacking escalation. “Auto‑escalation does not eliminate the incremental behavioral lift generated by the savings guidance,” the researchers wrote. Morningstar reports that roughly 92% of TDF investors in plans modelled would still be projected to improve their median retirement wealth by adopting a managed account.

Costs are consequential but do not wipe out the gains modelled. The simulation assumed an added managed‑account fee of 40 basis points (0.40%) per year, bringing the total fee for an MA investor to 71 basis points when underlying fund expenses are included, versus about 30 basis points for a typical TDF investor. Morningstar notes that the headline 7.7% improvement is net of those additional fees, indicating that the behavioural and allocation improvements in the model are large enough to overcome higher ongoing costs for the typical participant.

The findings come from Morningstar’s retirement research arm, which the centre describes as committed to producing unbiased, actionable analysis for plan sponsors, advisers and policymakers. According to Morningstar materials, the centre’s research programme also examines wider threats to retirement adequacy, such as the financial risk of long‑term services and supports (LTSS), and policy proposals that could change participation and savings behaviour. Morningstar’s separate work on LTSS highlights that including the cost of long‑term care materially increases the share of households projected to run short in retirement, underscoring that managed accounts are one tool among many needed to address retirement risk.

Practical implications for plan sponsors and policymakers are twofold. First, managed accounts appear most valuable as an early engagement tool that raises contributions and aligns allocations across a wide diversity of participants, not solely as a high‑net‑worth or late‑career solution. Second, even in relatively well‑designed plans that include auto‑features, personalised guidance can add incremental value. The centre’s work suggests sponsors should weigh the behavioural upside against explicit costs and consider targeting and communications that encourage early adoption.

Morningstar frames the DCOM and the Managed Accounts Research Series as setting a new standard for evaluating retirement interventions and providing actionable insights for improving outcomes. The company said in a statement that the model “provides plan sponsors, advisers and policymakers with rigorous evidence on the conditions under which managed accounts can improve projected retirement wealth,” while cautioning that magnitude of improvement varies across participant types and plan designs.

While managed accounts are not presented as a universal panacea, Morningstar’s papers stress the importance of broader policy and plan features, and their other research highlights additional vulnerabilities such as LTSS exposure, the new simulation-based evidence reinforces that personalised, behaviourally informed services can produce meaningful improvements in projected retirement adequacy for many participants, especially when offered early in a participant’s savings journey.