Displaying items by tag: retirement

Collective Investment Trusts (CITs) are rapidly reshaping the retirement landscape, becoming a major alternative to mutual funds across defined contribution plans due to their lower fees and growing accessibility. CITs now hold over $5 trillion in assets, representing nearly 30% of DC plan assets, up sharply from just over a decade ago. 

Their rise is largely driven by cost efficiency, with fees that can be half those of comparable mutual funds, providing long-term savings potential for plan participants. Once limited to large retirement plans, CITs are now gaining traction among smaller plans, helped by lower investment minimums and broader recordkeeper availability. 

Even so, ongoing legislative efforts,such as the Retirement Fairness for Charities and Educational Institutions Act, could expand CIT access further, reinforcing their growing role in retirement investing.

Finsum: These vehicles could be right for a variety of retirement plans for client. 

Stable value funds are a conservative investment option that aim to deliver higher returns than cash while preserving principal. They invest in high-quality bonds that are insured through contracts like guaranteed investment contracts or group annuities, which protect investors from losing money. 

These funds are available only in tax-advantaged retirement plans such as 401(k)s, and according to MetLife, more than 80% of defined contribution plans offer them. Stable value funds are often compared to money market funds, since both are designed for safety and stability. Over the 15 years ending March 2023, stable value funds delivered an annualized return of 2.99%, significantly higher than the 0.55% produced by money market funds. 

While money markets adjust quickly to interest rate changes, stable value funds respond more gradually, which can lead to short-term underperformance when rates are rising. Researching stable value funds involves looking at the fund’s goals, portfolio composition, fees, and historical performance.

Finsum: Advisors should also evaluate management tenure and ensure the fund’s returns align with its stated objectives for clients

Assets under management is one way to value an advisory firm, but buyers also want stability, leadership depth, and client retention. Consultant Linda Bready, author of The Exit Equation, says successful sales depend on seven “pillars,” including clear exit goals, strong financials, next-generation leadership, scalable operations, client stability, effective technology, and reduced compliance risks. 

Buyers look for firms that can run smoothly without the founder and have systems in place to support future growth. To prepare, Bready advises advisors to organize their financials, document processes, and consider continuity beyond the founder. 

She also stresses the importance of knowing what life after the sale will look like, since that influences buyer fit. 

Finsum: Asking pointed questions of potential buyers and addressing risks upfront can strengthen both valuation and trust in the process.

The IRS and Treasury finalized Secure 2.0 rules on catch-up contributions for 401(k) and similar plans, which apply to workers age 50 and older. Beginning in 2027, those earning more than $145,000 from their current employer must make catch-up contributions on a Roth (after-tax) basis, though some plans may implement the change as early as 2026. 

Until then, investors can still choose between pretax and Roth contributions if their plan allows. Experts say now is the time to work with advisors to run multi-year tax projections to determine whether to accelerate pretax contributions before the rule takes effect or embrace Roth sooner.

For 2025, contribution limits rise to $23,500 with an additional $7,500 catch-up for those 50+, and workers ages 60–63 can make a “super catch-up” of $11,250. 

Finsum: The key takeaway, according to advisors, is not to sit on the sidelines as the new rules approach, but instead actively plan for the transition.

Indexed annuities are becoming increasingly popular as retirement tools because they blend growth potential with protections not found in traditional fixed annuities. These products allow investors to defer taxes on gains until distributions begin, making them attractive for long-term retirement income strategies. 

Equity-indexed annuities (EIAs) and registered index-linked annuities (RILAs) tie returns to market indexes, with EIAs offering a guaranteed minimum return and RILAs providing downside buffers or floors to manage risk. However, features like caps, participation rates, and fees can limit upside potential, so retirees must carefully review contracts to understand how returns will be credited. 

Indexed annuities are designed for long-term holding, and early withdrawals can lead to surrender charges and tax penalties that erode principal. 

Finsum: For retirement savers, these products can serve as a middle ground between fixed and variable annuities, offering balance, income potential, and risk management over the long haul.