![]() The number of plan participants who lack direction has achieved a critical mass. And the 2022 Schroders US Retirement Survey demonstrates that 87% of 401k plan participants are concerned that they don’t know how to generate retirement income or draw down their assets in retirement. However, the industry’s lack of focus on how to generate retirement income has created a problem according to the Census Bureau, by 2030 every baby boomer will be at least 65 years old. The retirement industry has made accumulation its highest priority because without sufficient assets, plan participants will lack retirement income. The funds, e.g., international value stocks, should also present non-correlating characteristics and factors relative to US growth stocks to potentially dampen the blow of market volatility to investor confidence.ĭecumulation/Retirement income: Because reaching retirement is only half the battle For illustrative purposes only.įigure 3’s review of US and international equity combinations, spanning a spectrum from 100% US/0% international to 0% US/100% international over the last 50 years illustrates the optimal balance between risk and return: an allocation of 60 US equities/30 international equities.Įffective due diligence may uncover active international equity funds that not only generate consistent, top quartile returns, but also high active share with a clear, disciplined approach to finding superior companies. A higher standard deviation indicates greater historical volatility. Risk is represented by standard deviation, a measure of the portfolio’s total return volatility. US is represented by the MSCI USA Index International is represented by the MSCI EAFE Index. Indices are unmanaged and not available for direct investment. Past performance does not guarantee future results. Source: Hartford Funds and Morningstar, 2/22. Since 2012, an average of 82% of the highest performing stocks worldwide have been based outside of the US.įigure 1: Even today, the US isn’t necessarily the best Percentage of world’s top 50 stocks that are non-US To help investors remain invested during periods of volatility, extend to them diversification options among strategies that could be poised to outperform, especially those with a history of delivering consistent returns to potentially mitigate volatility and smooth the ride.Īctively managed international stock strategies could present one such solution. Cash on the sidelines does not contribute to asset growth and negatively impacts retirement savings over time. The 2022 Schroders US Retirement Survey reveals that plan participants keep over 23% of their assets in cash on average as of late February 2022, when Schroders received the feedback of 1,000 US investors. ![]() They may even reduce DC contributions due to fear of uncertainty. Unfortunately, volatility can often shake investor confidence, driving participants to sell at the wrong time and wait too long before jumping back in. ![]() It’s critical that plan participants understand the long-term growth benefits of investing in the equity markets and the power of staying invested. The accumulation phase mandate is clear: grow assets. By providing defined contribution (DC) plans, many offering auto-enrollment and auto-escalation features, plan sponsors endow their employees with what may be their only opportunity to save enough for their golden years.īut plan sponsors can do so much more for employees by reimagining their approach to three areas shaping DC plan design: accumulation, decumulation/retirement income and purpose. Employers are in a unique position to significantly improve the quality of life their employees enjoy in retirement. ![]()
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