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A well-designed investment menu is key to helping employeesachieve their primary retirement goal—a secure monthly stream ofincome.
By offering the right mix of investments and products that serveyour employees' needs, you can position them to retire withconfidence while mitigating risk and helping to meet yourobligations as a plan fiduciary. The following checklist providesplan sponsors with five steps to consider when designing orevaluating an investment menu:
1. Understand your employees' retirement income needs.
Use segmentation to determine who your employees are and whatthey need to meet their retirement income goals. Some importantfactors to consider include employee age, expected years untilretirement, investment knowledge and preferences and understandingof retirement income options.
2. Build your investment menu with a focus on retirementincome.
Offer diversified financial and investment products that canprovide a lifetime of retirement income. Include guaranteedproducts in your line up, such as low-cost, in-plan annuities. Onlyfixed annuities can provide a guaranteed stream of income that willlast a lifetime. (Note: Guaranteed income from annuities is subjectto the issuing insurance company's claims-paying ability.)
3. Include a default investment option.
The use of a default investment option can be effective atengaging employees who aren't proactive in making retirementplanning decisions. Select a default investment option that isaligned with your plan's objectives and takes into considerationaverage employee current age and retirement age, contributionlevels, income and other demographic factors.
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