What’s a Target Date Fund

What’s a Target Date Fund? 

Determining your retirement timeline helps direct the level of risk for your investment. Target date funds can be used to help build and maintain an age-appropriate retirement investment strategy. A target date fund (also called a lifecycle fund) provides long-term appreciation and capital preservation based on your age or target retirement date through a mix of asset classes. 

How do target date funds work? 

Set it and forget it…that’s one way people think about target date funds. Target date funds age with you by selecting a growth-oriented portfolio when you’re younger that gets more conservative as you near retirement. For example, a portfolio while you’re younger might feature more stocks and higher-risk investments rather than fixed-income investments, such as bonds. As you get older, your portfolio moves toward bonds and money market accounts because they have less risk. 

Pick your target date fund

First, you’ll select your ideal retirement year. This doesn’t have to be set in stone. Instead, it’s a general goal to help you pick which target date fund so you’ll have a timeline that aligns with your age. Usually funds are available in five-year increments (2035, 2040, 2045, etc.). For example, let’s say you’re 39 and plan to retire when you’re 70, which would be in year 2051. You’d select the target fund year closest to 2051, so you’d select a Target 2050 fund. 

Why do participants choose target date funds? 

People like the ready-made, simplicity of a target date fund. It’s not complicated and the assets are allocated without having to select each stock, bond, etc. Some investors get into trouble if they panic and pull funds instead of riding out market issues. With a target date fund, investors are in it for the long haul. 

Interested in learning more? Contact Retirement Plan Consultants for guidance! 

What is a Plan Sponsor

What is a Plan Sponsor

Retirement Plan Consultants assist a variety of people with retirement planning, including financial advisors, plan participants and plan sponsors. In this post, we’ll take a closer look at plan sponsors. A plan sponsor is essentially the company that offers a retirement plan to its employees. 

Plan Sponsor Responsibilities

If you’re the designated plan sponsor at your company, you might have varying responsibilities. Some plan sponsors make important decisions to determine the retirement’s plan design and employee eligibility. You also may also be responsible for regularly reviewing, updating and revising the plan. 

Some companies enroll the help of a third-party company, like Retirement Plan Consultants, to handle the company’s retirement plan. If that’s the case, we can provide resources to help guide you: 

  • Enrollment assistance resources, such as guides to walk employees through completing common actions on participant and plan sponsor websites
  • Web guides on how to select and adjust contributions
  • Calculators to help employees plan for retirement
  • Investment term glossary to help explain investment and retirement planning terminology
  • Helpful FAQs 
  • Easy to complete forms for the plan sponsor and employee participants
  • Questionnaires about “how to invest” to help participants plan
  • Informational quarterly newsletters
  • Educational webinars

Feel free to contact us if you’re a plan sponsor and have additional questions. We’re passionate about what we do and enjoy helping with all of your investment questions! 

Rickie Taylor – Easter RD is Awarded The See It, Be It Role Model Award by Investment News

Rickie has been awarded the See It, Be It Role Model Award by Investment News! He is being honored for his work in Diversity & Inclusion, demonstrating great leadership in advancing the D&I cause in the financial advice industry.

Rickie is our eastern regional director and has been with RPC since 2016. We are proud to have Rickie as part of our team!

Read the entire article here: https://www.dandiin.com/indivi…/see-it-be-it-role-model-8/

How to Get Started with Dimensional Investing

Investors like dimensional funds because they provide consistent income during your retirement. Dimensional’s investment strategies have delivered impressive investment performance. This is why many longterm investors choose Dimensional funds. Before we dive into how to get started with dimensional investing, learn more about dimensional funds in this blog post

You might be curious about how to start investing with dimensional funds. Dimensional funds aren’t available to the general public. Instead, investors work with dimensional-approved firms like Retirement Plan Consultants

Dimensional structures broadly-diversified portfolios that emphasize higher expected returns. Portfolio managers and traders aim to balance costs against expected returns and diversification. They work for the slightest expected gain because each incremental improvement can add up over time. This helps long-term investors who can ride the ups and downs of the market and depend on a steady stream of income in the future.

If you still have questions about how to get started, we’d be happy to answer any questions. Please reach out! 

Benefits of Dimensional Funds/Vanguard

Everyone has different retirement goals, and there are a variety of ways to reach them. In this post, we’ll review the benefits of Vanguard and Dimensional Funds. If you have additional questions, please let us know!  

Vanguard Benefits

Vanguard has plenty of notable benefits:  

  • Large mutual fund selection—Vanguard offers a collection of more than 3,100 transaction-fee mutual funds for investing. 
  • Commission-free stock, options and ETF trades—Vanguard offers commission-free online trades of ETFs.
  • Leader in low-cost funds—Vanguard doesn’t offer promotions or bonuses, so it keeps costs low.
  • Customer support—Vanguard’s customer support is available Monday-Friday, 8 a.m. – 9 p.m. (Eastern) and they’re available for email and website support.

Dimensional Fund Benefits

Like Vanguard, Dimensional Fund has its own set of unique benefits: 

  • Innovative researchInvestment strategies are based upon innovative financial market research by Nobel-prize winning economist Professor Eugene Fama of the University of Chicago, Professor Kenneth French of Dartmouth College, Nobel-prize winner Robert Merton of MIT as well as other academic researchers.
  • Dimensional controls and limits access to its fundsDimensional funds aren’t available to the general public. Instead, they’re only accessible through a Dimensional-approved firm. 
  • Internal fund costs are lowUsing a long-term investment strategy rather than switching for short-term market fluctuations keeps turnovers low. This way money doesn’t flow in and out of funds constantly. 
  • Broad diversificationDimensional assigns higher weights to funds (based on their size and value) that demonstrate higher expected returns.

If you’d like to learn more about Vanguard or Dimensional Fund Advisory, please reach out to us

Sources: 

https://www.nerdwallet.com/reviews/investing/brokers/vanguard

Retirement Income Calculator

Retirement Income Calculator

Curious to see your monthly retirement amount? Annual savings, expected rate of return and current age impact your retirement’s monthly income, so it’s helpful to see your future monthly amount. This way you can determine how long your retirement will last. You can use this calculator to determine the monthly income your retirement savings could provide. Click on “Full Report” to view a year-by-year breakdown of your retirement savings. Contact us if you have specific questions about your financial future—we’d love to help! 
Retirement Plan Consultants has plenty of other useful resources and calculators in its Resource Center. Please reach out with any retirement questions or needs.

Performance of Dimensional Funds

Dimensional Funds are unique for many reasons, but performance is an important one. Dimensional Fund Advisors is currently the eighth-largest fund company. It manages assets exclusively for institutional investors and the clients of a select group of fee-based advisers. Those assets were worth $579 billion as of September 2019.

Some say Dimensional Funds are actively managed passive funds. While they’re passive in philosophy, they actively seek higher returns through researched investing. Keep in mind that Dimensional is not an index fund company.  However, they believe in broad diversification of each of its funds. Within those funds, it assigns higher weightings to securities with proven higher expected future returns based on their size (market capitalization) and valuation.

Modern Portfolio Theory (MPT)

Examining Modern Portfolio Theory (MPT) gives better insight into Dimensional Funds’ performance. Dimensional Funds are considered highly-efficient portfolio models. The principal goal of MPT is to achieve the greatest return for the amount of risk taken (or, conversely, to minimize the risk in a portfolio targeted to achieve a specific return). 

Doing so requires combining asset classes in the portfolio to achieve effective diversification. This is accomplished by measuring the correlation between specific asset classes that demonstrate a historically high rate of return and combining the asset classes in such a way that portfolio volatility is minimized. As a result, Dimensional Funds can ride through market ups and downs in the long term. 

Conclusion

Dimensional Funds’ performance is a result of conducting academic research on risk factors, utilizing a robust investment process and structuring portfolios for higher expected returns.

What are Dimensional funds?

Markets go up and down, and dimensional funds provide a steady stream of income in your retirement. Dimensional funds aren’t available to the general public. Instead, investors work with dimensional-approved firms like Retirement Plan Consultants.

Benefits of Dimensional Funds in your Retirement Plan

1. Impressive Investment Performance

Dimensional’s investment strategies have delivered impressive investment performance  compared to mutual fund competitors and to relevant market benchmarks.  

2. Evidence Based Investment Approach

Dimensional carefully studies markets in order to develop their investment strategies, and they’ve done so for the past 30 years . Their research discovered that smaller, lower-priced value stocks have higher risks and greater expected returns than larger and higher-priced growth stocks. Dimensional uses this information to its advantage by “tilting” its portfolios toward market segments that offer higher expected returns. 

3. Risk Management Strategies

Dimensional implements strategies to reduce risks that weaken investment performance and collect higher expected returns associated with smaller and value-priced equities. In addition, diversification within each Dimensional fund helps to dodge avoidable risks such as holding too few securities or betting heavily on specific industries or regions. 

4. Efficient Trading

Dimensional’s trading is efficient. It’s spent more than 30 years developing its trading infrastructure, so it has a well-known presence in global financial markets. Dimensional portfolios are unique and aren’t held to traditional benchmarks, so the firm positioned its holdings to maximize negotiating strength.  

5. Low Costs

Dimensional funds have low expense ratios, which are much lower than the industry average. 

Visit Dimensional’s public site at www.dfaus.com if you want to explore Dimensional funds in closer detail. 

Top 10 Takeaways Advisors Need from the SECURE Act

  1. Multiple Employer Plans

    – The newest “buzz word” in our industry, employers can more easily participate in a MEP or a new variant, a “pooled employer plan,” or PEP. This could be a potential solution for plan sponsors depending on plan size and goals. For those looking for a more custom solution, this may not be the best option.
  2. Credits Matter

    – The small employer retirement plan startup tax credit increases from $500 to a maximum of $5,000 per year for first three years. Auto-enrollment for both new and existing plans increases from $0 to $500 for each of first three years.
  3. Deadlines Do Too

    – Employers can establish a qualified plan as late as their business tax filing deadline and non-elective plans can be amended up to 30 days before the end of the year if they make a 3% contribution.
  4. Less Paper for Certain Plan Provisions

    – For plans with a safe harbor non-elective or QACA (Qualified Automatic Contribution Arrangement) provisions, notices to participants are no longer required. This can be seen to alleviate the administrative burden placed on plan sponsors. Note that plans with safe harbor match provisions are still required to disseminate notices to participants as well as other notices (i.e. QDIAs).
  5. The Insurance Industry Had a Say in This

    – Defined contribution plans must provide, at least annually, a projected lifetime income stream that a participant’s accrued benefit could generate. This disclosure does not create employer liability for the amounts projected.
  6. Actually, They Had a Very Big Say in This

    – Annuity contracts within a plan are now portable if a
    participant terminates employment or retires. There are also new Safe Harbor for Guaranteed Income Provider Selection which mitigates fiduciary liability in regards to offering insurance within a retirement plan.
  7. No More Exclusion for All Part-Time Employees

    – Employees who work three-consecutive 12-month periods at 500-hours or more must be allowed to make deferrals into the plan by 2021 and later plan years. These participants are not necessarily required to receive any employer sponsored contributions, including Safe Harbor Contributions
  8. People Live Longer…Stop Making Them Take Out Cash Early

    – There is a new requirement for required minimum distributions (RMDs) and that is age 72 effective for distributions required in 2020 and later years for those who reach age 70.5 in 2020 or a later year.
  9. Speaking of IRA RMD’s Contribution Changes

    – Taxpayers with earned income can make traditional IRA contributions any time at any age effective immediately.
  10. No More Stretch IRAs

    – Most non-spouse beneficiaries of IRAs are used to stretching their Inherited IRA distributions over their lifetime. This is no longer the case. Inherited IRA assets must be distributed within 10 years after the death of the original account holder.

What does this mean in terms of your business?

Generally speaking, Congress has lowered the barrier to entry to adopt an employer sponsored retirement plan which is a WIN for the American worker. More tax credits, more fiduciary protection, and more flexibility for adoption. On the other hand, heavy lobbying from the insurance industry has also introduced additional pitfalls for employers if not properly guided by an independent plan fiduciary advisor. In our opinion, plan advisors are still the most critical piece to the retirement plan puzzle to help plan sponsors navigate the retirement plan landscape that is both more flexible, but also inherently skewed to the interests of its biggest lobbyists.

What to Expect at Year End 2019

In this webinar we will answer common questions that advisors have around year end requirements.

-Annual Notice Requirements

-Completion of Annual Census Request and using this information for the Annual Compliance Testing.

-Key Dates