Modernizing Retirement Software: Monolith or Microservices Architecture

Introduction

Retirement administration software supports retirement plan administrators, recordkeepers, and third-party administrators (TPAs). It integrates with existing systems, consolidates information from multiple sources, and streamlines recordkeeping and plan administration functions.

Selecting the right retirement software architecture is crucial for recordkeeping systems’ efficient performance, scalability, and maintainability. This guide will walk you through Monolith and Microservices architecture concepts to help you decide on your 401(k) retirement software needs.

Why Picking the Right Software Architecture Matters?

Before diving into the technical details, it is essential to understand the significance of the right architecture for your retirement plan administration software.

Choosing an appropriate architecture can significantly impact your organization’s bottom line and directly affect the efficiency of your retirement software systems.

The retirement plan industry continuously changes with new regulations, market trends, and evolving user requirements. In 2022, the number of 401(k) plans in the US reached 625,000, with an estimated $6.3 trillion in assets under management (AUM) and 60 million Americans actively participating. Managing vast amounts of assets and participants requires software systems that can efficiently adapt and scale to these changes.

The architecture of your retirement plan administration software is an important factor to consider when selecting a system. An optimal architecture should enable timely adaptation to evolving regulations and changing user requirements while providing stability, scalability, and performance.

A well-crafted architecture can make all the difference in terms of achieving the following goals:

Security – Participant data and other sensitive plan information must be stored and shared securely.
Performance – The system must meet required response times to address participant and recordkeeper requirements in real time.
Scalability – The software must be able to handle increasing data volumes due to the rising number of participants and changes in regulatory requirements.
Adaptability – Staying up-to-date with regulatory changes and participant expectations is essential.

It is, therefore, essential to understand the two software architectural approaches, Monolith and Microservices. Evaluating how each can fit into your organization’s 401(k) retirement plan administration needs will ease decision-making.

What is Monolith Architecture?

Monolithic architecture entails building an entire software solution as a unified system. All the software’s functionalities, components, and modules are combined and interconnected. It is a tightly coupled and complex system.

Monolith architecture makes retirement plan administration systems cost-effective. However, the tight coupling between components makes it difficult to isolate and fix any issues that may arise with a single component without affecting the entire system.

Pros of Monolith Architecture

Simplicity: Since all the components and functionalities are combined in a single solution, the overall complexity may be relatively low initially. It may have quicker development and deployment times.
Consistent Development Environment: A monolithic system typically has a uniform development environment, making it easier for developers to operate and make changes.
Cross-functional Communication: With all components and modules together, cross-functional communication is relatively more straightforward as all data and resources are readily available within the system.

Cons of Monolith Architecture

Scalability Issues: A monolithic architecture might face challenges when scaling individual components as a single, interconnected system. It often requires scaling the entire system, even when only certain parts demand it.
Single Point of Failure: Since all modules and components are tightly integrated, an issue in one module can lead to the entire system’s failure. It affects the software’s reliability and stability.
Challenging Maintenance: Over time, the complexity and interdependencies within the system might increase. It will be more time-consuming and challenging for developers to maintain or introduce updates.

What is Microservices Architecture?

On the other hand, Microservices architecture refers to a software design approach where individual functionalities and components are developed as separate, loosely-coupled services. Each service can operate independently, and they communicate with each other through API calls. It allows for modular, decentralized services which can be scaled and maintained independently.

Microservices architecture is particularly advantageous in a retirement plan administration system because it enables high scalability. The system’s individual components can be developed, tested, and deployed separately while still allowing them to communicate through API calls. It allows teams to work on different system parts simultaneously, making development and upgrades faster and more efficient. It enables higher levels of security by compartmentalizing sensitive participant data within each service instead of having all data stored in one extensive centralized database.

Pros of Microservices Architecture for Retirement Plan Software

Scalability: Microservices architecture allows individual components to be scaled independently. It improves overall system performance and adaptability.
Flexibility: Each service in the microservices architecture can be developed, modified, and maintained individually, with minimal impact on the overall system. It allows easier and more efficient updates and maintenance.
Reliability: With each service running independently, a single service failure does not necessarily lead to the system’s complete failure. It improves the system’s availability and reliability.

Cons of Microservices Architecture for Retirement Plan Software

Complexity: Breaking down large functionalities into multiple microservices can significantly increase complexity. Developing and maintaining the architecture becomes challenging and time-consuming.
Integration Challenges: Different services in the architecture require different technologies resulting in integration challenges. System components find it difficult to communicate with one another.
Debugging & Testing Issues: As components are distributed across multiple services, debugging code or testing new features is tedious. Developers will have to trace all related components to trace a single issue.

Monolith or Microservices Architecture- Making the Right Choice

Monolith and Microservices Architectures have their own set of pros and cons. Therefore, retirement plan administrators and recordkeepers should carefully evaluate what fits best with their development team’s current capabilities, resources, and requirements.

Monolith architecture might be suitable for simple applications that do not require frequent changes or scalability in the future. At the same time, microservices architecture works for more complex solutions that require modularity and high stability.

Depending on the scale of work involved, a hybrid approach can also be considered to get the best of both worlds. Ultimately, planning and anticipating potential challenges when selecting between monolith or microservices architecture is essential.

Conclusion

Monolith and microservices architectures are two different approaches used for developing software applications. Each has its own advantages and disadvantages, depending on the nature of the application. However, microservices architecture outperforms monolithic in terms of quicker development, scalability, ease of maintenance, and performance. It offers retirement plan administrators greater flexibility, reliability, and uninterrupted uptime.

It is also important to note that monolith and microservices architecture constantly evolve as technology changes over time. Therefore, recordkeepers and retirement plan administrators must ensure they have a secure and scalable system that meets their changing needs.

CORE 2.0 by Congruent Solutions is a contemporary cloud-based retirement administration software based on advanced microservices architecture designed to be flexible and scalable. The software comprises loosely coupled and logically grouped components that can be deployed independently. It helps recordkeepers and retirement plan administrators to quickly and accurately respond to client needs with its fully responsive UI.

The modern CORE 2.0 is a cloud-based retirement plan administration software that is future-agnostic and meets the changing demands of the retirement industry. It adopts compliance changes faster and can be updated by specialized teams without the need for long downtimes.