Customized 401(k) Plans: A Tailored Alternative to Target Date Funds

401(k) business professionals

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Discover why customized 401(k) plans are a better choice for businesses and learn how to provide diversified investment options for your employees.

The Limitations of Target Date Funds for 401(k) Plans

Target date funds (TDFs) have become increasingly popular in 401(k) retirement plans. While they offer a simple, hands-off approach for employees, there are significant limitations that may not suit the needs of all businesses. As a 401(k) plan sponsor, it’s crucial to explore more tailored investment options to better serve your employees. Ask a Prosperity 401(k) Advisory for more information.

The Drawbacks of Target Date Funds

One-size-fits-all approach: TDFs follow a predetermined glide path based on the anticipated retirement date, which might not align with the individual risk tolerance, goals, or financial situation of each employee.

Limited diversification: TDFs primarily invest in a mix of stocks and bonds, leaving out other asset classes that could provide additional diversification and growth opportunities.

Performance concerns: The success of TDFs largely depends on the skill of the fund manager. Some TDFs have underperformed their benchmarks, leading to lower returns for participants.

Embrace Customized 401(k) Plans for Your Business

By offering a more diverse range of investment options, you can empower your employees to make better-informed decisions and take control of their retirement savings. Here’s why customized 401(k) plans are a better choice for businesses:

1. Broaden Investment Choices for Your Employees

With over 30 types of plans and a wide array of investment options, customized 401(k) plans can cater to the unique needs and goals of your employees.

This approach allows participants to build a well-diversified portfolio that includes alternative asset classes, such as real estate, commodities, or private equity, to potentially enhance returns and reduce risk.

2. Offer Personalized Risk Management

Customized plans can provide risk management strategies tailored to each employee’s preferences and financial situation. Instead of relying on a one-size-fits-all glide path, employees can choose their desired level of risk and adjust their portfolios accordingly. 

This enables participants to create a personalized investment strategy that aligns with their long-term financial goals and risk tolerance.

3. Leverage Professional Investment Guidance

Since Prosperity Financial Group’s 401(k) provider services can offer valuable expertise and ongoing support to your employees. This includes personalized investment advice, educational resources, and assistance with portfolio management. 

By providing access to professional guidance, your employees will be better equipped to make informed decisions about their retirement savings.

4. Seamless Integration with Existing Benefits

Customized 401(k) plans can be easily integrated with your existing employee benefits package, ensuring a comprehensive and streamlined approach to employee welfare. 

This not only simplifies the administration process for your HR team but also enhances the overall value proposition of your benefits package, making it more attractive to prospective employees.

5. Foster Employee Engagement and Financial Wellness

By offering a tailored 401(k) plan, you can create a culture of financial wellness within your organization. Employees are more likely to engage with their retirement planning when they have access to personalized investment options and professional guidance. This engagement can lead to positive outcomes for your employees and increased satisfaction with their retirement savings strategy. 

Ultimately, this can result in higher employee retention rates, as your team members will feel more secure about their financial futures and confident in their employer’s commitment to their well-being.

Choose Customized 401(k) Plans for Your Business

As a 401(k) plan sponsor, it’s essential to consider the unique needs of your employees and provide them with a diverse range of investment choices. Customized 401(k) plans offer a multitude of benefits, from personalized risk management to professional investment guidance. 

By moving away from the limitations of target date funds and embracing tailored 401(k) plans, you can create a more engaging and supportive environment for your employees, fostering financial wellness and helping them achieve their long-term retirement goals.

We Can Help

Customized 401(k) plans are a valuable alternative to target date funds, providing flexibility, diversity, and support for your employees. As a responsible plan sponsor, it’s crucial to explore these tailored options to ensure you’re offering a robust retirement plan that truly benefits your team members and contributes to the success of your organization.

Take the Next Step with Our Comprehensive 401(k) Services

Don’t let your employees settle for a one-size-fits-all retirement plan. Take control of your company’s future and make a lasting impact on the financial well-being of your team.

To get started, complete our free, no-obligation benchmark assessment or give us a call at (925) 314-8500. This comprehensive evaluation will help identify areas for improvement in your current retirement plan and provide insights into how our customized solutions can better serve your employees. 

Don’t wait—start your journey to a better 401(k) plan today!

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