Retirement Savings Resilience: The Power of Strategic Rebalancing
By Kevin Merrow, CFP®, CMFC®, CRPS® Chairman, Director of Institutional Investment Consulting, Retirement Services, ADP
Market change is inevitable. But strategic rebalancing and asset allocation can help retirement plan participants maintain financial resilience in uncertain economic times.
In today's market, even a carefully crafted investment strategy can quickly unravel. Volatility, uncertainly, inflation and worldwide political change have given investors a challenging environment to navigate.
While Q32024 economic reports suggest that economic activity has continued to expand, and the inflation rate has inched closer to the Federal Reserve's 2% target, financial markets will likely continue to experience volatility into 2025.
As a retirement plan sponsor, employees are looking to you to help them maintain a sound investment strategy, no matter the market conditions. When it comes to investing assets for retirement, a long-term approach can help ensure that they're allocated in a way that's consistent with an individual investor's time horizon, goals and risk tolerance.
A rebalancing act
Successful investors understand that temporary market instability is not a reason to forego their strategy. Knee-jerk reactions can often lead to sizeable long-term financial losses. Investors that abandon equity markets during selloffs can miss out on potential recovery and significant growth.
Historically, markets normalize and trend upward over time. And with inflation eroding purchasing power, maintaining an investment strategy that outpaces economic shifts is crucial for preserving and growing retirement savings.
Target-date funds offer a dynamic strategy designed to automatically adjust risk as investors approach retirement, rebalancing on a regular basis to ensure that the stock and bond allocation percentages remain appropriate. These funds may be ideal for plan participants seeking a low-maintenance investment approach, as they:
- Provide multiple retirement year options
- Progressively shift from stocks to more conservative bonds and cash
- Automatically rebalance to maintain appropriate asset allocation
- Simplify portfolio management for hands-off investors
For investors preferring hands-on retirement planning, custom portfolio management offers another strategic approach, allowing them to:
- Select diverse stock and bond funds from retirement plan options
- Allocate assets based on personal preferences
- Conduct regular portfolio reviews to make sure there's alignment with their original strategy
Staying the course
Successful investing isn't necessarily about timing the market, but time in the market. That's why ADP Strategic Plan Services provides our retirement plan clients with knowledgeable fiduciary support, diverse investment options and low-expense fund selections for participants to help them make the most of their working years to help achieve a comfortable retirement savings when the time comes.
Contact the ADP Retirement Services team at (855) 583-4407 or visit ADP Strategic Plan Services to find out how we can help you support your retirement plan participants.
Market commentaries may contain forward-looking statements. Target date funds generally invest in a mix of stocks, bonds, cash equivalents, and potentially other asset classes, either directly or via underlying investments, and may be subject to all the risks of these asset classes. Past performance is no guarantee of future results.
Investment options are available through the applicable entity(ies) for each retirement product. Only associated persons of ADP Strategic Plan Services, LLC (SPS) may speak to any investment management or advisory services provided by SPS or any third party in connection with such ADP retirement products. SPS is an SEC Registered Investment Adviser. Registration does not imply a certain level of skill or services. Unless otherwise disclosed or agreed to in writing with a client, ADP, Inc. and its affiliates (ADP) 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. Questions about how laws, regulations, guidance, your plan's provisions, or services available to participants may apply to you should be directed to your plan administrator or legal, tax or financial advisor.
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