Newsdash Insight on Plan Design & Investment Strategy from PLANSPONSOR
October 24th, 2017
Editor’s Note
PLANSPONSOR is pleased to bring you a special edition of NewsDash, sponsored by BlackRock, focused on enhancing diversification.
Return Opportunities
Fixed Income: How Active Do You Want to Go?
The Fed’s policy of normalization sounds reassuring. But, in practice, normalization may simply shift uncertainty from short-term rates to further along the yield curve. This uncertainty comes at a time when global competition for U.S. bonds, aging demographics and potential economic headwinds further complicate today’s fixed income market.Read more >
Should Retirement Investors Shun Equity?
A new analysis makes the surprising claim that most common stocks over the long-term fail to outperform one-month Treasury bills—but the real lesson is about diversification, not dumping stocks.Read more >
Fear of Stock Market Hurting Millennials’ Retirement Savings
Many Millennials may be missing out on stock market gains when saving for retirement, according to research from LendEDU. The research found 41% of Millennials are avoiding the stock market and are instead using savings accounts to save for retirement. More than half (58.60%) of Millennials said they would consider themselves to be “afraid of the stock market.” The company did an analysis comparing the expected performance of fully investing in a stock portfolio, fully investing in a traditional savings account and fully investing in cash.Read more >
Data and Research
Health Care in Retirement Will Cost an Average of $315,000
Delivering Robust Retirement Communication and Education on a Budget
Data and Research
Public-Sector Workers Delay DC Plan Decumulation
Evolution in DC Plans
Can Smart Beta Work in DC Plans?
Smart beta’s potential for enhanced returns and improved risk management is gaining interest from defined contribution (DC) plan sponsors. But DC plans have concerns around transparency, cost, participant communications and fiduciary responsibility. View the latest insights from industry experts.Read more >
Decumulation in Defined Contribution: The Second Act
The 401(k) era is entering a new and expanding phase: the era of retirement income and asset distributions. We have already seen a demographic “tipping point” in 2013/2014 with assets leaving 401(k) plans exceeding assets being contributed or entering plans. This trend is expected to remain until 2030, peaking at $40 billion annually in 2019. Plan sponsors seeking to smoothly transition participants into retirement will require sophisticated solutions able to navigate the new era—and help them shift gears to adapt to a new set of behaviors and risks. What should the solution look like?Read more >
The Next Evolution in Indexing: DC Plans and Smart Beta
Smart beta seeks additional outperformance and is a flexible enhancement to traditional index. Here’s what you should consider as a DC plan sponsor.Read more >
401(k) Participant Investing Much Different From 20 Years Ago
Looking over 20 years of the Alight Solutions 401(k) Index (formerly the Aon Hewitt 401(k) Index), two major trends have emerged— 401(k) portfolio allocations have changed dramatically, and trading activity has steadily decreased except when market corrections occur. The analysis finds that in 1997, the asset class with the greatest amount of participant balances was company stock (29%). However, company stock now comprises less than 10% of 401(k) balances in the 401(k) Index. On the other hand, in 1997, only 1% of 401(k) assets were in premixed portfolios. Now, target-date funds (TDFs) are the largest asset class in the Index (25%).Read more >
How American Airlines Combined Two Mega DC Plans
When companies merge, what does it mean for their employees’ financial futures? See how American Airlines’ merger with U.S. Airways resulted in a simplified, yet customizable, investment menu that suited a broad range of employee preferences.Read more >
Target-Date Funds
How the Target-Date Fund Can Help Maximize Plan Design
Plan sponsors have two powerful tools that could help nudge participants toward improved retirements: plan design and target-date funds. However, these tools are frequently considered separately. Fully understanding the target-date fund’s design may help plan sponsors optimize the accumulation potential embedded in it. This can inform plan design choices, leading to potentially more effective deferral rates and, critically, a better understanding of the risk/reward tradeoffs between market risks on the one hand and increased savings on the other.Read more >
Automatic Savings Plans Drive Better Investment Returns
In the U.S., TDFs have consistently had positive gaps because U.S. investors contribute to their 401(k) savings with every paycheck, and TDFs reduce bad market timing decisions.Read more >
TDFs Outperformed Typical DC Investor Since 2006
The Callan DC Index returned “a healthy 3.06%” during the second quarter, reflecting strong equity market performance among DC plan investors. The index actually trailed the typical age 45 TDF, which gained 3.65% in the second quarter and 9.42% in the first half of the year. “These are the TDFs that would be selected by participants age 45 and retiring at age 65—or the typical DC participant,” Callan notes. For context, the firm reports TDFs have benefited from higher exposures to non-U.S. equity and emerging markets relative to real investors; both investing categories are up sharply year to date.Read more >
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Editorial: Alison Cooke Mintzer


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