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Financial and Retirement Planning Blog

What’s next for retirement plans in the U.S.?

In the United States, retirement is a crucial part of life. The most common form of retirement plan in the U.S. is employer-sponsored 401(k) plans, where employees make contributions into an account that earns interest and grows over time. This growth continues until they retire and withdraw funds from it to live off for many years after they stop working.

But what happens when these workers leave their jobs?

This article will discuss how individuals can use Roth IRAs as an alternative to traditional 401(k) plans and other types of retirement accounts to save money for later on in life!

Managing Enterprise or Agency Risks Requires Assessment and Maturity

This year, more than half (52%) of US-based private sector employers offer some form of automatic enrollment for their employees. This boosts participation rates in retirement plans, which currently stand at about 36% nationally. This means it’s important to ensure your business has a plan in place to manage enterprise risks so you can better protect everything you’ve worked hard to achieve together as an agency or enterprise with clients through insurance coverage like Errors & Omissions Insurance, Cyber Liability Insurance, Directors & Officers Coverage, etc.

In short, if an employee commits an act of fraud on the company, you need to have insurance that will provide coverage for all damages.

Test the Resilience of Investments and Increase Operations Efficiency

As retirement plans continue to grow in importance, the industry faces many challenges. One challenge is ensuring your investments are resilient and able to minimize volatility, so you have more predictable outcomes on returns and operations efficiency.

A good way to do this is by spreading investment risks across three major areas: stocks, bonds, and diversified funds (i.e., international markets). 

This helps protect against unpredictable market swings while also maximizing growth opportunities.

It is wise to increase operating efficiency for investments and frequently test for resilience to see how the investments react in different markets.

This also helps ensure that your retirement plans can provide a predictable amount of income throughout their lifespan.

Developing and Implementing Stronger Policies for Retirement Plans

Another challenge is developing stronger policies within the industry, such as education on investing practices for people who have never invested before or provided more transparency around fees. This will help reduce investor bias and improve plan design to make informed decisions about what they need from their future financial security.

You may also want to consider creating guidelines for asset allocation based on age, risk tolerance, and goals, allowing you to better identify when it’s time to increase exposure by moving funds into stocks if an individual has reached a certain age.

Investment of Retirement Plan Assets

One of the most controversial questions in retirement plans today is how plan assets should be invested. There are disagreements on whether or not there should be a set percentage allocated to each asset class, age-based guidelines for when it’s time to move funds into stocks versus bonds, and what types of investments should constitute the portfolio. It can also prove difficult to decide how much risk you want your portfolio to take based on variables such as income (whether it will continue), life expectancy, health status, and the number of years until retirement.

Plan Participants Should Have All the Power

A final challenge that needs attention is providing more transparency around fees, so participants know exactly where their money goes with all the different types of investments they are making.

After reading this article, you’ve probably realized that there is no one-size-fits-all retirement plan solution (yet) and will need to do some research on your own time to determine what type of investment portfolio works best for you.

Investment Advisory Services offered through Retirement Wealth Advisors (RWA), a Registered Investment Advisor. Pennsylvania Wealth Management and RWA are not affiliated. Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. Past performance does not guarantee future results. Consult your financial professional before making any investment decision.

This information is designed to provide general information on the subjects covered, it is not, however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Please note that Pennsylvania Wealth Management and its affiliates do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.

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