Displaying items by tag: 401k

Cryptocurrency is making its way into retirement accounts, but it's not the right fit for every investor. Crypto IRAs, also known as bitcoin IRAs, allow individuals to hold digital assets like bitcoin and ether within tax-advantaged accounts. 

While these accounts offer potential tax benefits—especially within a Roth IRA—they come with high fees, regulatory uncertainty, and extreme price volatility. Unlike traditional brokerage firms, crypto IRA providers operate under different standards, adding another layer of risk. 

Some investors may find bitcoin ETFs a lower-cost alternative to direct crypto ownership within an IRA. Regardless of your approach, diversification remains crucial to balancing the risks and rewards of crypto in a retirement portfolio.

Finsum: Crypto is a very good alternative to integrate into the portfolio, but most investors either over or under index so be careful when integrating into your portfolio.

The 401(k) industry has played a critical role in improving retirement security, yet challenges remain, including access gaps, rising costs, and demographic shifts. Defined contribution (DC) plans are evolving to address these issues, with major trends shaping the future of retirement savings. 

Affordability is increasingly strained as rising costs for essentials make it harder to prioritize retirement, especially for mid- and lower-income earners. Legislative changes, such as SECURE 2.0 implementation and potential tax policy shifts, could impact retirement savings strategies in the coming years. 

Meanwhile, industry consolidation and integration are reshaping financial services, enhancing efficiency and expanding participant-focused solutions. Innovations in AI, private assets, and fiduciary services are driving new approaches to personalized retirement planning, making financial security more accessible and adaptable.

Finsum: We should be very weary of policy changes to 401(k) plans, while it’s unlikely that Trump makes any changes, the sheer number of policy changes make it worth monitoring. 

A key advantage of a 401(k) is its generous contribution limits, which allow workers under 50 to save up to $23,500 in 2025, not including any employer match. Those 50 and older can save even more, with a standard limit of $31,000. 

Thanks to a recent SECURE 2.0 Act update, workers aged 60 to 63 can contribute an additional $11,250 as a catch-up, bringing their total contribution limit to $34,750 for 2025. This higher limit, tied to inflation, could increase further in the future but reverts to $7,500 once participants turn 64.

Maximizing contributions is most beneficial for high earners looking to reduce taxable income while saving for retirement, but even smaller contributions can significantly impact long-term savings. 

Finsum: Advisors and investors should stay informed about future 401(k) changes to make the most of their retirement savings opportunities.

The latest T. Rowe Price study reveals a notable shift in how employers and advisors approach retirement income within workplace plans. More plan sponsors now hold defined views on retirement income compared to previous years, reflecting increased engagement on the topic. 

Managed accounts with income planning features and target-date investments offering managed payouts or embedded annuities are gaining interest as viable solutions. Collective investment trusts (CITs) have also surpassed mutual funds as preferred target-date vehicles due to their cost-effectiveness and flexibility. 

Additionally, the study highlights growing employer interest in financial wellness programs, including emergency savings accounts, as tools to enhance employee satisfaction and retention. While ESG integration garners moderate support, the study identifies regulatory and implementation challenges as barriers to broader adoption.

Finsum: Research shows how important advisors are to clients in setting up DC strategies, and they can leverage their influence to shift perspectives. 

A recent study highlights the significant impact of engagement on 401(k) savings, with active participants saving far more than those who aren't involved in their retirement planning. According to Empower's research, engaged individuals contribute 56% more to their retirement accounts, and those actively participating in their plan's resources save even higher amounts. 

These engaged savers are also more likely to fully utilize their employer's match, with 22% of them missing out compared to 48% of disengaged participants. The study also shows that those who consolidate their financial accounts or seek advice tend to save nearly twice as much as their less engaged peers. 

With fewer workers feeling confident about making investment choices, many are turning to financial professionals, which boosts their confidence in securing a comfortable retirement. Despite facing inflation and economic uncertainties, a majority of Americans remain optimistic about their long-term financial future, although short-term financial concerns have shifted their focus from retirement goals to immediate needs.