Slideshow 5 trends in retirement planning

Published
  • July 01 2015, 1:01am EDT
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Overview

While based on a few fundamental concepts, retirement planning is constantly changing. Two big drivers of change are technology and federal regulations, says Nick Kralj, director of retirement and quality control at BCI Group.

Here are five trends in retirement planning every retirement adviser, plan sponsor and participant should know about.

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1) Data to measure success

“The data collected today is changing the face of retirement plans, and the measurements to determine if a participant is on track for retirement are becoming more and more accessible,” Kralj says. “This helps plan sponsors identify meaningful actions and assist those participants not on track, as well as encourage and validate those who are. Using this new data, sponsors and participants can move in the right direction toward successful retirement.”

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2) Automatic features

“While not a new concept, automatic features continue to pay dividends for plan sponsors who use them wisely,” Kralj says. “Large plans show the highest adoption rates, and not coincidentally show the highest participation and deferral rates. Time and time again, these features prove they move the dial towards getting participants ready for retirement.”

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3) Target-date funds

“Target-date funds are a companion to many auto features and an ideal default investment for participants who are auto-enrolled. They create far more efficient investment structures than what an average participant would do if left to his or her own devices (efficiency as defined by a proper balance of risk and return). While not a perfect solution, target-date funds do put a significant population in a highly prudent position,” Kralj says.

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4) Automatic IRAs (still on the horizon)

“For those employers without retirement plans, the U.S. government is seeking to create easier access to savings vehicles for their employees,” Kralj says. “These automatic IRAs are in their infancy in terms of refinement and usage, and the population they are targeting is a tough one to reach due to small business competing interests, yet we think this should be promoted so that all employees have a suitable savings vehicle (and ideally assistance in financial planning as well, which these do not address).”

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5) 401(k) fee disclosure

“Fee disclosure has worked, but not for the reason the government intended it to,” Kralj says. “It has worked because it created transparency and pressure on plan sponsors, but has not created any motivation from plan participants. We agree that transparency is vital to a services and investment product, and therefore the result is overall a success, despite leaving the participants behind.”

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