PLANSPONSOR - November - December 2023 - 14
UPFRONT
Growth-Asset Needs of Pre-Retirees
AMID widespread concerns about inflation
and the rising cost of living, it is not
uncommon for older plan participants, or
even retirees, to look at their assets with
a sense of dread. As individuals near
retirement, they may feel a need to use
their investments to play catch-up.
Incorporating alternative assets into
an investment menu, while a rarity in
defined contribution plans, could allow
for significant growth, according to
Jeremy Stempien, a principal in, and portfolio
manager at, PGIM DC Solutions.
A recent Georgetown University
Center for Retirement Initiatives report,
for example, found that, for an individual
participating in a DC plan, investing
in a mixture of private equity and real
assets, done over the course of a career,
could result in an additional $2,400 per
year in spending power for a retiree with
$48,000 per year in retirement income.
Downside Protection Is Key
Stempien says older participants should
have a balance of growth assets and
protection against some key risks, such
as inflation and market volatility. He
adds that inflation is more of a " subtle
risk " to a person's retirement savings,
because, if all the retiree does is draw
down his portfolio, he has no income to
offset inflationary cost increases.
Mercer's " Top Considerations for
in 2023 "
Defined Contribution Plans
report argued that portfolios diversified
with real assets historically have weathered
inflation and market volatility better
than portfolios without, and it highlighted
" the need for including diversifying asset
classes managed in a risk-controlled way. "
While alternatives are not commonly
found in DC plans, the authors of the
Mercer report wrote that exposure may
be offered through target-date funds.
Stempien says incorporating alternatives
into TDFs could produce " the most
impact for participants in the defined
contribution industry. " But because
of litigation related to alternative assets,
as well as a lack of understanding, he
says, there has been little uptake of alternatives
among DC sponsors. In addition,
these asset classes are often pricier than
the asset classes typically offered.
" I think, to a sponsor, whereas a lot
of the rhetoric in the DC market has been
about reducing fees, the sponsor sees
something like that and it gives them
pause in adding alternatives, " Stempien
says. He argues that incorporating
nontraditional asset classes into a diversified
portfolio could be more efficient.
" You don't want to offer certain asset
classes that can end up taking the fee of
your portfolio to some really large expense
ratio that's outside of the norm, " Stempien
14 PLANSPONSOR.COM November - December 2023 Art by Ellen Weinstein
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PLANSPONSOR - November - December 2023
Table of Contents for the Digital Edition of PLANSPONSOR - November - December 2023
INSIGHTS
PARTICIPANT ANALYSIS
RULES & REGULATIONS
UPFRONT
A Cost-Conscious Approach
Exploring the Choices
2023 PLANSPONSOR Service Stars
PLANSPONSOR Roadmap
A Thorny Issue
Take Under Advisement
A Repair Guide for Errors
FIDUCIARY FORUM Annual Notice Season
NSIDE ANGLE An Influential Opinion
PLAN PROFILE A Focus on Wellness
PLANSPONSOR - November - December 2023 - Cover1
PLANSPONSOR - November - December 2023 - INSIGHTS
PLANSPONSOR - November - December 2023 - 1
PLANSPONSOR - November - December 2023 - 2
PLANSPONSOR - November - December 2023 - 3
PLANSPONSOR - November - December 2023 - PARTICIPANT ANALYSIS
PLANSPONSOR - November - December 2023 - 5
PLANSPONSOR - November - December 2023 - RULES & REGULATIONS
PLANSPONSOR - November - December 2023 - 7
PLANSPONSOR - November - December 2023 - 8
PLANSPONSOR - November - December 2023 - 9
PLANSPONSOR - November - December 2023 - UPFRONT
PLANSPONSOR - November - December 2023 - 11
PLANSPONSOR - November - December 2023 - 12
PLANSPONSOR - November - December 2023 - 13
PLANSPONSOR - November - December 2023 - 14
PLANSPONSOR - November - December 2023 - 15
PLANSPONSOR - November - December 2023 - A Cost-Conscious Approach
PLANSPONSOR - November - December 2023 - 17
PLANSPONSOR - November - December 2023 - 18
PLANSPONSOR - November - December 2023 - 19
PLANSPONSOR - November - December 2023 - Exploring the Choices
PLANSPONSOR - November - December 2023 - 21
PLANSPONSOR - November - December 2023 - 22
PLANSPONSOR - November - December 2023 - 23
PLANSPONSOR - November - December 2023 - 2023 PLANSPONSOR Service Stars
PLANSPONSOR - November - December 2023 - 25
PLANSPONSOR - November - December 2023 - 26
PLANSPONSOR - November - December 2023 - 27
PLANSPONSOR - November - December 2023 - PLANSPONSOR Roadmap
PLANSPONSOR - November - December 2023 - 29
PLANSPONSOR - November - December 2023 - 30
PLANSPONSOR - November - December 2023 - 31
PLANSPONSOR - November - December 2023 - A Thorny Issue
PLANSPONSOR - November - December 2023 - 33
PLANSPONSOR - November - December 2023 - Take Under Advisement
PLANSPONSOR - November - December 2023 - 35
PLANSPONSOR - November - December 2023 - A Repair Guide for Errors
PLANSPONSOR - November - December 2023 - 37
PLANSPONSOR - November - December 2023 - FIDUCIARY FORUM Annual Notice Season
PLANSPONSOR - November - December 2023 - NSIDE ANGLE An Influential Opinion
PLANSPONSOR - November - December 2023 - PLAN PROFILE A Focus on Wellness
PLANSPONSOR - November - December 2023 - Cover3
PLANSPONSOR - November - December 2023 - Cover4
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