Displaying items by tag: IRAs

Morningstar’s latest Retirement Plan Landscape report finds that while the average cost of workplace retirement plans continues to decline, expenses still vary significantly—especially for those in smaller plans, who often pay nearly three times as much as participants in large plans. 

These cost discrepancies stem largely from economies of scale, with larger employers able to spread administrative expenses more efficiently. Despite the variation in fees, most participants across plans have access to high-quality investments, with over 94% of defined-contribution assets allocated to Morningstar Medalist-rated options. 

The report highlights that even small plans can be cost-effective, with 20% of them coming in below the median cost for medium-sized plans. However, more than $600 billion has exited workplace retirement plans annually since 2020, often due to rollovers into IRAs when employees change jobs. 

Finsum: Investors should carefully weigh whether their workplace plan offers better value through low fees and strong investment options before making such moves.

Annuities in IRAs can provide surprising benefits for required minimum distributions (RMDs), particularly with fixed index annuities (FIAs) or variable annuities (VAs). 

While annuities often draw criticism for fees and opaque structures, they can sometimes be the best tool for specific retirement planning needs. FIAs, despite their bond-like returns with added stock beta, can offer secure lifetime income to meet critical retirement cash flow needs. 

When paired with goals-based planning, annuities excel in providing inflation-hedged, lifetime income that’s challenging to replicate with other investments. For flexible retirement expenses and longevity protection, the mortality pooling aspect of annuities often delivers payouts surpassing self-built solutions. 

Finsum: While not without flaws, annuities can play a crucial role in comprehensive retirement planning strategies.

(New York)

The SEC’s new Regulation Best Interest (Reg BI) is causing a lot of headaches and anxiety for brokers. Particularly, brokers are worried that the new rules governing rollovers are going to end up being a trap. Reg BI does address rollovers, even laying out some (but not all) of the factors that one should be considering when recommending them. But brokers feel the rules are too vague, which could lead to big trouble. In particular, there are fears that of all the factors, cost will have by far the most weight, which could lead to heavy penalties when recommendations are viewed in hindsight.

FINSUM: In addition to the Reg BI anxiety about rollovers, there is also growing tension because everyone is expecting the new DOL Fiduciary Rule to try to grab some power in the rollover area, which means there will be new complications to deal with.