Compliance July 24, 2018

BlackRock Lays Out Plans to Boost Retirement Readiness

The investment firm calls on the government to pass numerous measures to expand access to retirement plans and boost participation and savings.

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In a new viewpoint white paper, “Roadmap for Improving U.S. Retirement Savings: Make it Easier,” BlackRock lays out several measures that would improve the retirement outlook for millions of Americans.

The first measure is to expand access to employer-sponsored retirement plans. BlackRock says that this could be achieved by encouraging open multiple employer plans (MEPs) by eliminating the “nexus” requirement that they be in related industries. The firm says the “one bad apple” rule should also be eliminated.

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Secondly, BlackRock says the government could reduce reporting and disclosure requirements on plans, starting by simplifying Form 5500 and allowing electronic delivery of disclosures. Thirdly, the government should offer a modified SIMPLE individual retirement account (IRA) plan that small businesses could establish with low start-up and maintenance costs.

The second measure is to increase participation in retirement plans, starting by granting a safe harbor for re-enrollment into a qualified default investment alternative (QDIA). A new safe harbor for automatic enrollment and escalation could also be established, BlackRock says. Thirdly, by simplifying disclosures related to rollovers, this would improve portability of plan assets.

The third measure that BlackRock is calling for is to focus on decumulation by increasing access to lifetime income products, including annuities, in defined contribution (DC) plans. The government could also make it easier for people to move assets from a DC plan into an individual retirement account (IRA), and revisit minimum distribution rules for small DC and IRA balances.

Data and Research July 24, 2018

TDFs Get Millennials on the Right Track

Most Millennials are appropriately invested, with 90% of their portfolios in equities.

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Most Millennials, those between the ages of 22 and 37, are appropriately invested, according to new research by Vanguard. On average, they have 90% of their portfolio invested in equities, which is consistent with the glide path of the Vanguard Target Retirement Funds geared for people in that age group.

One-third of Millennials own target-date funds (TDFs), Vanguard found.

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“Target-date funds are reshaping investors behavior of Millennial and Gen X investors, with the potential to improve outcomes over an investing lifetime,” says Jean Young, senior research associate for the Vanguard Center for Investors Research and author of the paper, “Risk-Taking Across Generations.” “Younger investors are benefiting from balanced, diversified portfolios and shifting away from extreme equity allocations that we’ve witnessed in the early years of previous generations.”

However, 19% of Millennials have no equities in their portfolios, up from 13% in 2012. Before the Great Recession of 2008, only 10% of Millennials had zero-equity portfolios.

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