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الأربعاء, 30 نيسان/أبريل 2025 10:23

The Ins and Outs of Target Date Funds

Target-date funds are designed for investors with a specific retirement date in mind, automatically adjusting their investment mix to become more conservative as that date approaches. 

 

These funds typically hold a variety of mutual funds rather than individual stocks or bonds, making them a diversified “fund of funds” that simplifies asset allocation. Early in an investor’s career, target-date funds emphasize growth by leaning heavily on equities, then gradually shift toward bonds to preserve capital as retirement nears. 

 

Each fund follows a predetermined glide path, which guides the transition from aggressive to conservative investments over time. Investors benefit from a hands-off approach, as the fund handles rebalancing and risk adjustments without the need for active management. 


Finsum: Overall, target-date funds offer a convenient, age-based solution that combines diversification, risk control, and simplicity in a single investment vehicle.

Published in Wealth Management
الخميس, 17 نيسان/أبريل 2025 03:47

Morningstar Sheds Light on Defined Contribution

Morningstar’s latest Retirement Plan Landscape report finds that while the average cost of workplace retirement plans continues to decline, expenses still vary significantly—especially for those in smaller plans, who often pay nearly three times as much as participants in large plans. 

 

These cost discrepancies stem largely from economies of scale, with larger employers able to spread administrative expenses more efficiently. Despite the variation in fees, most participants across plans have access to high-quality investments, with over 94% of defined-contribution assets allocated to Morningstar Medalist-rated options. 

 

The report highlights that even small plans can be cost-effective, with 20% of them coming in below the median cost for medium-sized plans. However, more than $600 billion has exited workplace retirement plans annually since 2020, often due to rollovers into IRAs when employees change jobs. 


Finsum: Investors should carefully weigh whether their workplace plan offers better value through low fees and strong investment options before making such moves.

 

Published in Wealth Management
الجمعة, 28 آذار/مارس 2025 07:27

The Big New Trends in Retirement Investing

Defined contribution plans in 2025 will increasingly focus on generating sustainable retirement income as Social Security’s future remains uncertain and traditional pensions decline. 

 

In-plan retirement income products, such as annuities, hybrid target-date funds, and systematic withdrawal strategies, will see greater adoption, driven by regulatory clarity from the SECURE Act and SECURE 2.0. AI-powered digital tools will enhance retirement planning by offering personalized projections, dynamic withdrawal strategies, and automated guidance on Social Security and tax-efficient drawdowns. 

 

Employers will expand financial wellness initiatives, providing targeted pre-retirement education on income strategies, healthcare costs, and managing distributions. Recordkeepers and investment firms will integrate advanced retirement income solutions, making it easier for participants to transition from saving to spending. 


Finsum: Regulatory support is expected to continue, reinforcing the shift toward holistic, income-focused retirement planning.

 

Published in Wealth Management
الإثنين, 10 آذار/مارس 2025 07:39

The Positives and Negatives of Managed Accounts for Defined Contribution

Managed accounts are set for a major transformation as current models often benefit providers more than participants due to high fees. Employers must evaluate how providers personalize portfolios and whether participants actively engage with these features. 

 

While managed accounts generally offer strong investment management, fee structures can erode some of their value, requiring significant equity exposure increases to match target date fund returns. Personalized portfolio returns tend to fall within a narrow 5% to 7% range, with minor impacts from strategic asset allocation shifts. 

 

A subscription-based model could better align incentives, offering lower-cost options for less engaged participants while providing premium services for those seeking greater customization. Inconsistencies in provider methodologies, driven by factors like risk tolerance and retirement readiness, highlight the need for greater transparency. 


Finsum: This is an interesting strategy, but if done properly managed accounts are a great vehicle for retirement and defined contribution. 

Published in Wealth Management
الثلاثاء, 04 آذار/مارس 2025 05:46

Managed Accounts: An Underrated Defined Contribution Tool

Managed accounts have evolved beyond simple investment tools to become a key retirement income solution within defined contribution plans. While their availability has increased significantly over the years, participant adoption remains low, with only 7% utilizing these accounts despite widespread access. 

 

Critics point to ongoing fees as a drawback, though proponents argue that managed accounts provide tailored financial planning, including retirement timing and Social Security optimization. 

 

Some newer offerings even incorporate annuities or structured withdrawal features, turning managed accounts into a direct retirement paycheck solution. This customization makes them an attractive option for plan sponsors considering alternatives to traditional target-date funds. 


Finsum: As the marketplace continues to adapt, managed accounts are gaining traction as a more personalized and flexible retirement planning tool.

Published in Wealth Management
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