In the United States, retirement is a crucial part of life. The
most common form of retirement plan in the U.S. is employer-sponsored
401(k) plans, where employees make contributions
into an account that earns interest and grows over time. This
growth continues until they retire and withdraw funds from it to
live off for many years after they stop working.
But what happens when these workers leave their jobs?
This article will discuss how individuals can use Roth IRAs as
an alternative to traditional 401(k) plans and other types of
retirement accounts to save money for later on in life!
Managing Enterprise or Agency Risks Requires Assessment
and Maturity
This year, more than half (52%) of US-based private sector
employers offer some form of automatic enrollment for their
employees. This boosts participation rates in retirement plans,
which currently stand at about 36% nationally. This means it’s
important to ensure your business has a plan in place to
manage enterprise risks so you can better protect everything
you’ve worked hard to achieve together as an agency or
enterprise with clients through insurance coverage like Errors &
Omissions Insurance, Cyber Liability Insurance, Directors &
Officers Coverage, etc.
In short, if an employee commits an act of fraud on the
company, you need to have insurance that will provide
coverage for all damages.
Test the Resilience of Investments and Increase Operations
Efficiency
As retirement plans continue to grow in importance, the
industry faces many challenges. One challenge is ensuring
your investments are resilient and able to minimize volatility, so
you have more predictable outcomes on returns and operations
efficiency.
A good way to do this is by spreading investment risks across
three major areas: stocks, bonds, and diversified funds (i.e.,
international markets).
This helps protect against unpredictable market swings while
also maximizing growth opportunities.
It is wise to increase operating efficiency for investments and
frequently test for resilience to see how the investments react in
different markets.
This also helps ensure that your retirement plans can provide a
predictable amount of income throughout their lifespan.
Developing and Implementing Stronger Policies for Retirement
Plans
Another challenge is developing stronger policies within the
industry, such as education on investing practices for people
who have never invested before or provided more transparency
around fees. This will help reduce investor bias and improve
plan design to make informed decisions about what they need
from their future financial security.
You may also want to consider creating guidelines for asset
allocation based on age, risk tolerance, and goals, allowing you
to better identify when it’s time to increase exposure by moving
funds into stocks if an individual has reached a certain age.
Investment of Retirement Plan Assets
One of the most controversial questions in retirement plans
today is how plan assets should be invested. There are
disagreements on whether or not there should be a set
percentage allocated to each asset class, age-based guidelines
for when it’s time to move funds into stocks versus bonds, and
what types of investments should constitute the portfolio. It can
also prove difficult to decide how much risk you want your
portfolio to take based on variables such as income (whether it
will continue), life expectancy, health status, and the number of
years until retirement.
Plan Participants Don’t Have All the Power
A final challenge that needs attention is providing more
transparency around fees, so participants know exactly where
their money goes with all the different types of investments they
are making.
After reading this article, you’ve probably realized that there is
no one-size-fits-all retirement plan solution (yet) and will need
to do some research on your own time to determine what type
of investment portfolio works best for you.
Automatic 401(k) Plans: Employer Views on Enrolling
https://assets.aarp.org/rgcenter/econ/auto401k.pdf
AARP
The Power of 401k Automatic Enrollment
https://humaninterest.com/blog/the-power-of-401k-automaticenrollment/
Human Interest