On January 25th, Goldman Sachs released its Defined Contribution Quarterly Report for the first quarter of 2022. This report outlines trends that the investment giant thinks will occur in both 2022 and the years ahead. The report suggests that the pandemic has had a big impact on future retirees’ investment decisions. It also highlighted trends driving retirement investment decision for the coming year.
2022’s trends will be driven by future legislation and regulation, fears over inflation, industry consolidation, and job market shifts. In addition to these big market shifts, better technological integration in direct contribution plans will allow investors to exert more personalized and responsive controls over their funds. This will lead to changes in the way money is invested in response to their evolving understanding of the current financial climate.
Pending Regulation
Over the course of 2021, average 401(k) balances increased by 29.2% among 25-34-year-olds and 16.5% among 55-64-year-olds. By contrast, the S&P 500 rose by 27.2% over the same period. This suggests that the best self directed IRA strategy likely involved investing heavily in an array of stocks. It’s not clear if this trend will continue into the new year.
CME FedWatch thinks it’s very likely that the Fed will increase interest rates early in 2022. This in turn will have a big impact on the performance of the stock market.
There was a notable lack of regulatory changes in 2021. This is likely due to both a shift in administration and more immediate governmental concerns. Regulatory bodies have had some time to settle, though. It’s likely there will be some nontrivial changes to the rules surrounding retirement accounts in 2022. One example of this is the proposed Securing A Strong Retirement Act of 2021.
Rumored changes surrounding student loans continue to muddy the waters. Any student loan forgiveness program would free up huge swaths of money to be invested in retirement funds overnight. However, this may add to increasing inflation estimates.
Regulatory changes can impact retirement investment decisions. Be sure to stay up to date with what is going on a federal and state level.
Pandemic Effects Continue
Low interest rates, big government spending programs, and rising costs due to supply chain shortages have created big fears over inflation. This has led many investors to reorganize their portfolios to hedge against future market events.
This creates pressure on investment firms. They will have to now provide tools, education, and automatic programs to keep clients happy with target asset allocation. Triggered by lockdown restrictions on in-person meetings, technological growth has driven firms to consolidate services and outsource accounting services. Ultimately, this gives investors more control over their funds and makes it easier for firms to offer personalized options.
Perhaps most importantly, the “great resignation” has put tremendous pressure on the job market in some sectors. Employers must now offer competitive compensation packages to attract employees. This is creating a market where workers can shop around for the best retirement contribution plan.
For instance, Meta, Facebook’s parent company, will match employees’ 401(k) contributions dollar-for-dollar up to $10,250. Employees value these benefits highly. This means that there’s likely to be a big jump in employer contributions to retirement funds in 2022. Working for an employer with a competitive compensation can change some of your retirement investment decisions.
Self Direct Doubt
According to Goldman Sachs’ survey, retirees’ top concerns involved the pandemic, social security reform, inflation, and future healthcare needs. While all of these factors are important to consider, it’s unclear how many of them will be as scary as investors imagine them to be.
These concerns coincide with a shift towards more customizable retirement investments. We might see some market shifts as investors direct IRA funds to gold or real estate investing in lieu of stocks.
Just like any prediction of the future, it’s not clear how many of these concerns will turn materialize for retirees. If the pandemic has shown us anything, it’s that we’ve got the ability to muddle through difficult situations. Though troubling times, we can make the necessary changes to overcome obstacles. Objectively, the stock market performed fairly well over the course of 2021.
This outperformance of expectations rewarded those who chose to tie their portfolios to stock market performance.
The Big Trends For Retirement Investment Decisions in 2022
It’s not immediately clear how retirement investment decisions will go in 2022. However, we’ve got plenty of important metrics to watch out for. First, pay close attention to changes in regulation and legislation as the year progresses.
Expect some changes in portfolios in response to changing investor confidence in the stock market as regulation takes effect. Pay especially close attention to any programs involving student loans. These will have a big impact on younger investors with jobs that require college degrees.
Next, pay attention to shifts in employer contributions in in-demand job markets. The longer the “great resignation” continues, the more pressure will be put on employers to offer competitive retirement benefits, potentially pumping millions of dollars into investments for their employees.
Finally, keep an eye out for changing public confidence in various markets. Consolidated services and digitized tools give investors an unprecedented amount of control over their retirement funds This enables them to shift money around in response to news and public sentiment. Social media will very likely be a big driving factor for investment decisions in 2022, so the next big viral tweet could have huge implications in the financial world.
There are many trends that have come up over the last couple of years that can effect retirement investment decisions. Be sure to stay up to date on regulatory changes, as well as trends in the financial sector.
A Shifting Future
Between pending legislation like the Securing A Strong Retirement Act of 2021, increased employer contributions to retirement accounts, and the stock market’s continued strong performance, there’s plenty to suggest that Americans’ retirement accounts will grow in the future.
Concerns over inflation and the increasingly customizable nature of retirement accounts might mean that this growth will take an unconventional turn. While the financial future is always uncertain, account holders will be able to make more decisions about their retirement accounts. This will ultimately give them a mix of stability and returns that they’re happy with.
With growing financial education programs being offered by both employers and investment firms, this means we’ll see a new generation of smart, educated workers who take their retirement accounts in exciting, personalized directions. With options like gold and physical silver, real estate, and even cryptocurrencies available for self-directed IRAs, this expanding flexibility will cause big changes in the distribution of assets in retirement accounts.
At the end of the day, there are many retirement investment decisions that investors will need to face. It might seem like a small change at first, but over time, this could have a huge impact on how money is invested all over the financial world.
GREAT ARTICLE , THNKS FOR POSTING IT AND KEEP IT UP