Building Financial Resilience During Economic Fluctuations
By Kevin Merrow, CFP®, CMFC®, CRPS® Chairman, Director of Institutional Investment Consulting
Retirement plan sponsors can play a crucial role in fostering financial resilience and helping to mitigate risk for their plan participants. Choosing a trusted expert in fiduciary investment management can help plan sponsors ease their fiduciary burden and keep their plans healthy through market fluctuations.
The economic climate is always fluctuating. For employers, it's critical to not only weather the storms, but to assist employees in building financial resilience during the inevitable ups and downs. Conditions that often contribute to volatility include:
- Geopolitical concerns leaving an uncertain effect on global markets
- Federal Reserve policy changes prompting rates to remain higher for longer
- Inflation hovering above the federal target
From recessions to market booms, communicating with your retirement plan participants is key to keeping their long-term savings goals on track.
Plan sponsors: A unique role
While market downswings can be a challenge, plan sponsors can leverage these periods as opportunities to guide employees toward financial resilience and implement proactive savings measures. Engaging employees in retirement planning is key.
Tax-deferred savings
By providing a retirement plan, employees are empowered to invest in their future. It allows for tax-deferred savings, enabling them to maximize their contributions and potentially grow their nest eggs over time. This tax advantage can significantly benefit employees during economic fluctuations, as they can continue saving for retirement while potentially reducing their taxable income.
Employer contributions
Retirement plans typically offer employer contributions, such as matching contributions or profit-sharing. These contributions can be a powerful motivator for employees to save for retirement, especially during economic downturns when they might be tempted to reduce their savings.
Varied investment options
Stock prices will rise and fall. By offering employees a wide choice of options to choose in their plan, employees can align their portfolios with their risk tolerance and goals, so that their exposure to any one type of asset is limited.
Knowledgeable guidance for retirement plan sponsors and participants
Dealing with forces out of our control can be enormously stressful, especially when it comes to finances. Employees are rightfully concerned about the impact on their retirement savings and need to know that their plan sponsor is doing everything they can to keep things on track.
A trusted expert in fiduciary investment management can help retirement plan sponsors ease their fiduciary burden, reassess the plan's investment lineup and mitigate the risks. With ADP Strategic Plan Services, LLC, businesses can rely on investment expertise to help oversee fiduciary obligations, gain access to a diverse group of funds and offer plan participants a varied fund menu with low-expense fund fees.
Resources
To learn more about the potential impacts of economic uncertainties, access our quarterly newsletter.
Contact our team at (855) 583-4407 or visit ADP Strategic Services to find out how we can help you lighten your fiduciary load.
ADP Strategic Plan Services (SPS) is a registered investment advisor with the Securities Exchange Commission. SPS offers to act as an investment manager assuming full discretion for selecting monitoring and replacing investment options and can also provide advice and guidance to plan fiduciaries, by assisting with plan monitoring and investments. SPS does not serve as an investment advisor to any fund company nor is it an issuer of mutual funds or any publicly traded securities. Investment options are available through either ADP Broker-Dealer, Inc. (ADP BD), Member FINRA One ADP Blvd, Roseland NJ 07068 or (in the case of certain investments) ADP, Inc. Associated persons of SPS and registered representatives of ADP BD are employees of ADP, Inc. ADP, Inc. and its affiliates do not offer investment, financial, tax or legal advice, and nothing in these communications is intended to be, nor should be construed as, advice or a recommendation for a particular situation or plan. Please consult with your advisor for such advice.
Unless agreed to in writing with a client, ADP, Inc. and its affiliates do not endorse or recommend specific investment companies or products, financial advisors or service providers; engage or compensate any financial advisors to provide advice to plans or participants; offer financial, investment, tax or legal advice or management services; or serve in a fiduciary capacity with respect to retirement plans.
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