10 Retirement Quick Facts for June

Here are some great stats, figures and trends to help with the oversight of your company sponsored retirement plan and may aid in conversations or communications with plan participants.  

1. INFLATION DEFLATES BENEFITS.  By March 2021, inflation caused Social Security benefits to have a 30% loss of buying power since 2000. Based on the consumer price index, the current projected cost-of-living adjustment to Social Security benefits for 2022 is 4.7% - the highest increase since 2009. (Source: The Senior Citizens League)
2. WHO IS A FIDUCIARY? Based upon a recent Plan Sponsor survey, most plans use a Fiduciary Advisor. Of Plans with less than $100 million in assets, 48% use a 3(21) Fiduciary and 37% use a 3(38) Fiduciary.  (Source: PLANSPONSOR 2020 DC Survey)
3. A 22%-SIZED HOLE. Estimates show that approximately 22% of net contributions made by participants between ages 20-50 leak out of retirement savings each year. Job separation is the primary factor leading to leakage. Other reasons include divorce, home purchase, medical expenses, and new tuition payments. (Source: Joint Committee on Taxation)
4. SWEET SPOT UNDER 100. For 2019 plan years, 177,073 plans filed a Form 5500 annual return - these plans will generally have 100 or more participants. A whopping 659,016 plans filed Form 5500-SF - which is filed by plans with fewer than 100 participants. (Source:  IRS Tax Exempt and Governmental Entities Division) 
5. OVERLY OPTIMISTIC? The share of workers who say they feel somewhat or very confident in their ability to retire comfortably has increased from 60% in 2017 to 72% in 2021. Worker confidence levels are now close to those reported prior to the financial crisis of 2008. (Source: Employee Benefit Research Institute)
6. ASSET ALLOCATION. Based on 2018 account balances, 63% of 401(k) plan assets were invested in equity funds*, 28% in fixed income securities, and 26.6% in Target Date Funds (TDF). The allocation in TDFs was 50.5% of 401(k) assets for participants in their 20s, while the percentage invested in TDFs for participants in their 60s was 22.9%. (Source: Investment Company Institute)  
7. COUNTDOWN TO RESTATEMENT.  Pre-approved defined contribution plan documents must be restated every 6 years. The current 6-year cycle requires plan sponsors to execute restated plan documents by July 31, 2022.  (Source: IRS)
8. SECURE ACT VERSION 2021. A new version of SECURE Act 2.0 was unanimously passed by the Ways and Means Committee to the House floor for vote. Changes from the 2020 version include requiring catch-up contributions to be designated as Roth contributions and allowing participants to designate employer matching contributions as Roth contributions. Interested in learning more about the proposed changes? Reach out to Allied and we will add you to our invite list for our upcoming Legislative & Regulatory Update Webinar.  (Source: The Securing a Strong Retirement Act of 2021)
9. THANKS, DAD.  Happy Father's Day on June 20th! There are an estimated 72 million fathers in the U.S. - 29 million of them are also grandfathers. (Source: US Census Bureau)
10. QUESTION. Which plan provisions are many of our Montana and Wyoming retirement plan clients considering adding with their upcoming document restatement?   Reach out to Allied and we would be happy to share with you.  

*Equities include equity funds, company stock, and the equity portion of balance funds.

The views expressed in this post represents the opinion of Allied Investment Advisors, a Registered Investment Adviser. This material is for informational purposes only. It does not constitute investment advice and is not intended as an endorsement of any specific investment or services. Nothing contained herein constitutes financial, legal, tax, or other advice. The information provided herein is obtained from sources believed to be reliable, but no representation or warranty is made as to its accuracy or completeness. Investing in equity securities involves risks, including the potential loss of principal. While equities may offer the potential for greater long-term growth than most debt securities, they generally have higher volatility. International investments may involve risk of capital loss from unfavorable fluctuation in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Investment recommendations may change and readers are encouraged to check with their investment advisors before making any investment decisions. Past performance is not indicative of future results. Investments are not a deposit of or guaranteed by a bank or any bank affiliate. Please notify Allied Investment Advisors if there have been any changes to your financial situation or investment objectives or if you wish to impose or modify any reasonable restrictions on the management of your accounts through Allied Investment Advisors.