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The Great Resignation Is Adding These Flexible Options to Your Retirement


The Great Resignation is having a huge impact on many parts of American life. One impact you might not think of immediately is the impact it has on the retirement savings space — fewer people working means fewer participants in workplace-sponsored retirement plans like 401(k) plans. With that in mind, plan providers are focused on making sure those who are still participating in defined contribution plans are getting the options they need, according to a recent study from investment consulting firm NEPC.

If you want help navigating the current economic situation, consider working with a financial advisor.

The Great Resignation and Retirement Savings

great resignation retirement

The wave of American workers leaving their job has had myriad impacts, including some employers reporting struggles to staff up and consumers dealing with the fallout of that. It has also impacted the world of retirement savings, both for plan participants and for the companies that offer retirement plans.

“Because the Great Resignation placed immense stress on the retirement ecosystem, flexible features and purpose-driven investment options are now deal-breakers and deal-makers,” said Bill Ryan, Partner and NEPC’s Head of Defined Contribution (DC) Solutions. “This survey helps illustrate how plan sponsors are looking for consultation beyond simple ESG negative screening and TDF ‘best practices.’ Plans are looking for partners to advise them on new opportunities in 2022 and beyond.”

Trends in Defined Contribution Plans

What, then, are the ways defined contribution plans are looking to adjust to the modern world? The most obvious is the increased emphasis on target-date funds as a turnkey solution for retirement savers. Target-date funds are financial products specifically designed to retirement savers. You pick one based on the year you expect to retire and invest your money in that fund throughout your years of savings. The plan adjusts over time to better serve savers based on how close to retirement they are. Target-date funds that are far from the target retirement date will be more aggressive, investing heavily in equities and looking for growth. Once you approach your retirement date, though, the mix turns more towards bonds and fixed-income to protect your money as you get to the withdrawal stage of your savings journey.

In 2011, 28% of all savers had some money in a target-date fund. In 2021, that had grown to 44%. Furthermore, 95% of respondents in the poll said a target-date fund was the default investment for their retirement plan.

The other major trend is a shift towards index funds, including index target-date funds. Index funds are a category of investment product that track a stock index such as the S&P 500. Index funds are the alternative to traditional actively-managed funds, where a fund manager picks investments based on what they think is going to perform best. Index funds are generally seen as safer in the long-run as they simply track the stock market, which generally grows over time. Even if you have a short-term dip because of a recession or other economic event, over a period of decades an index fund will generally end up with growth. There isn’t as much potential for huge gains as with an actively managed fund, though, as there is no chance of beating the market.

According to the study, 38% of plans offer indexed target-date funds and 40% of plan assets are in indexed offerings.

The Bottom Line

great resignation retirement

The Great Resignation current happening in America is having an impact on the retirement space, and plan sponsors are responding by being as flexible as possible for participants. This includes offering turnkey solutions in the form of target-date funds and moving towards safer indexed options.

Retirement Savings Tips

  • A financial advisor can help you make the most of your retirement savings. Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Don’t miss out on any free money: take advantage of any 401(k) employer match you have access to.

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