This Time, It’s Personal: Four Distinct Benefits of a Retirement Managed Account

This Time, It’s Personal: Four Distinct Benefits of a Retirement Managed Account

Personalized strategies such as retirement managed accounts may outweigh other qualified default investment alternatives.

Defined contribution plans have become a mainstay in the workplace retirement savings landscape, with target date funds as the qualified default investment alternative of choice. Although target date funds offer advantages such as low fees and a simplified investment strategy, research suggests that the potential long-term benefits of more personalized strategies such as retirement managed accounts (RMAs) may outweigh those advantages in some situations.

The key to understanding the value of RMAs lies in looking beyond historical performance. We believe the true measurement of RMA value lies in the ability of these accounts to influence investor behavior, encourage increased savings rates that help provide lifetime income, and provide personalized and appropriate diversification.

 

Key findings

  • By putting more investment decision-making in the hands of investment professionals, RMAs have the potential to mitigate investors’ behavioral biases such as loss aversion.
  • Studies have shown that RMA savers tend to save more — and more regularly — than do-it-yourself savers.
  • According to Empower participant and industry data, engaged employees with RMAs have a better chance of maintaining income through their entire retirement than they would with target date funds.

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