Displaying items by tag: 401k

Many investors today fear outliving their savings, a concern intensified by market volatility and persistent inflation, creating an opening for advisors to rethink how they deliver reliable retirement income solutions. 

Although annuities can address longevity risk, outdated perceptions of high fees and complexity still discourage clients, even though modern, low-cost versions now exist. To rebuild trust, advisors must simplify the experience by focusing on outcomes such as guaranteed lifetime income, downside protection, and tax-deferred growth rather than product jargon. 

Annuities also work best when integrated into a broader financial plan, balancing market exposure, liquidity needs, taxes, and estate goals instead of being presented as standalone products. 

Finsum: Ultimately, transparency, clear communication, and honest comparisons will help advisors shift annuities from misunderstood products to trusted tools.

The 401(k) system has significantly expanded retirement security, but many Americans still struggle to save due to rising living costs, shifting social norms, and limited access to plans. Looking ahead, five major trends are poised to reshape the industry: affordability pressures, new legislative and regulatory developments, increased consolidation and collaboration among providers, rapid innovation, and the rise of professional fiduciary services. 

Inflation and overlapping life milestones are making it harder for mid- and lower-income workers to prioritize retirement savings, increasing the importance of tools that support better habits and financial decision-making. 

Industry consolidation and wealth-retirement integration are creating more scalable, participant-focused models, while innovations like personalization, AI, CIT expansion, and retirement income solutions are transforming plan experiences.

Finsum:The growth of OCIO services and pooled employer plans is expanding fiduciary support, especially for smaller employers. 

Collective Investment Trusts (CITs) are rapidly reshaping the retirement landscape, becoming a major alternative to mutual funds across defined contribution plans due to their lower fees and growing accessibility. CITs now hold over $5 trillion in assets, representing nearly 30% of DC plan assets, up sharply from just over a decade ago. 

Their rise is largely driven by cost efficiency, with fees that can be half those of comparable mutual funds, providing long-term savings potential for plan participants. Once limited to large retirement plans, CITs are now gaining traction among smaller plans, helped by lower investment minimums and broader recordkeeper availability. 

Even so, ongoing legislative efforts,such as the Retirement Fairness for Charities and Educational Institutions Act, could expand CIT access further, reinforcing their growing role in retirement investing.

Finsum: These vehicles could be right for a variety of retirement plans for client. 

Stable value funds are a conservative investment option that aim to deliver higher returns than cash while preserving principal. They invest in high-quality bonds that are insured through contracts like guaranteed investment contracts or group annuities, which protect investors from losing money. 

These funds are available only in tax-advantaged retirement plans such as 401(k)s, and according to MetLife, more than 80% of defined contribution plans offer them. Stable value funds are often compared to money market funds, since both are designed for safety and stability. Over the 15 years ending March 2023, stable value funds delivered an annualized return of 2.99%, significantly higher than the 0.55% produced by money market funds. 

While money markets adjust quickly to interest rate changes, stable value funds respond more gradually, which can lead to short-term underperformance when rates are rising. Researching stable value funds involves looking at the fund’s goals, portfolio composition, fees, and historical performance.

Finsum: Advisors should also evaluate management tenure and ensure the fund’s returns align with its stated objectives for clients

The IRS and Treasury finalized Secure 2.0 rules on catch-up contributions for 401(k) and similar plans, which apply to workers age 50 and older. Beginning in 2027, those earning more than $145,000 from their current employer must make catch-up contributions on a Roth (after-tax) basis, though some plans may implement the change as early as 2026. 

Until then, investors can still choose between pretax and Roth contributions if their plan allows. Experts say now is the time to work with advisors to run multi-year tax projections to determine whether to accelerate pretax contributions before the rule takes effect or embrace Roth sooner.

For 2025, contribution limits rise to $23,500 with an additional $7,500 catch-up for those 50+, and workers ages 60–63 can make a “super catch-up” of $11,250. 

Finsum: The key takeaway, according to advisors, is not to sit on the sidelines as the new rules approach, but instead actively plan for the transition.