Help Employees Guard Retirement Savings Against Market Volatility

March 13, 2024

A recent survey revealed 86% of employees feel increasingly stressed about their finances — and nearly 50%  worry about not having enough saved for retirement¹. Workers who frequently fret about covering unexpected car or home repairs, paying off student loans or credit card debt, or saving for retirement may have their financial worries compounded by the market’s current volatility.

Employers can play an important role in alleviating some of that financial stress by adopting investment strategies for the organization’s retirement plan and helping employees reduce the impact of market volatility on their retirement savings.

Protection Starts With Investment Strategy

To create a retirement plan investment strategy that addresses market volatility and reduces risk, employers can:

• Conduct routine portfolio reviews
• Request guidance from experts
• Diversify investments and allocate asset classes
• Establish a long-term investment outlook

USI Consulting Group’s (USICG’s) retirement plan experts provide these services to organizations to help them follow a disciplined approach and diversify their portfolios. Whether the organization offers a retirement savings plan or pension plan, USICG’s retirement plan consultants can place employers and employees in a better position when the next bear market arises.

Solutions to Combat Market Volatility

Aside from setting a sound investment strategy for retirement plans, USICG suggests organizations take additional steps to help employees lessen the impact of market volatility on their retirement savings.

Step 1: Promote the usage of target date funds (TDFs), which provide benefits such as diversification and asset allocation. Retirement plan participants are often invested in TDFs without understanding how they work. Educate your employees about TDFs, explaining how the fund manager diversifies each TDF portfolio by making investments and allocating portions of the total portfolio among three key asset classes (i.e., stocks/equity, bonds/fixed income and cash).

Historically, these asset classes have performed differently over time, and often when one asset class is performing poorly, another may be performing well, thus helping to smooth out any large movement in the value of the portfolio. In addition, research from T. Rowe Price shows retirement plan participants are less likely to make investment changes during periods of market volatility.

Step 2: Provide retirement income planning tools and resources to enhance employees’ understanding of the income they may need when they are no longer working, their sources of retirement income, and how to build savings.

Step 3: Establish emergency cash accounts that allow employees to have automated deposits made through the payroll system. Employees can reach into these accounts when unexpected expenses arise, rather than negatively impacting their retirement savings account by lowering their deferral rate, or taking a loan or hardship withdrawal.

According to two recent surveys, a top priority for nearly half of employees is to have an emergency savings fund — yet 58% of Americans don’t have one, and 40% would use a credit card to pay for an unplanned expense.