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Winter 2023  Volume 15, Number 4        

New 401(k) Superpowers: How Your Plan Will Work Smarter for You

Your 401(k) is getting ready for a high-tech makeover. Cutting-edge upgrades are arriving that will supercharge these workplace retirement plans like never before. Artificial intelligence, new savings options, and simplified lifetime income choices are some of the new capabilities coming soon from 401(k) providers across the industry.

AI Takes the Wheel

Artificial intelligence will provide 401(k) plan sponsors with sophisticated tools to enhance plan design, better engage participants, and improve investment recommendations. For example, AI can project outcomes of different company match formulas and analyze participant engagement with online tools to identify confusion points.

AI can also suggest appropriate target-date funds and other investments based on your age, salary, and more. It does this by examining choices other participants with similar demographics have made. However, AI still has limits and cannot completely replace human financial advisors who understand nuanced personal situations.

Emergency Savings Support

New legislation now makes it easier for 401(k) plans to offer emergency savings accounts. These accounts let you divert a portion of each paycheck to an accessible fund for unexpected expenses.

This handy option will especially benefit lower-paid employees. Surveys show that 88% of millennial workers intend to utilize it. With an emergency savings buffer, you’ll be less tempted to raid your long-term 401(k) balance when surprise costs hit.

Lifetime Income Gets Easier

Until now, few 401(k)s offered annuities. These insurance products provide guaranteed income for life to reduce the risk of outliving your savings. But new rules removed obstacles to including annuities within 401(k) investment lineups.

More plans will likely add annuities over the next decade. Target-date funds may also begin incorporating annuities to deliver lifetime income. Annuities allow purchasing an income stream with part of your 401(k) balance for steady extra retirement cash flow.

Auto Account Consolidation

To prevent account leakage when you change jobs, an automated “portability” feature is arriving. This seamlessly transfers your small 401(k) balances from a former employer to your new workplace plan.

Auto portability helps consolidate accounts and preserves more of your retirement savings as you switch jobs over your career. Experts estimate a 30-year-old who cashes out a $5,000 401(k) balance today misses up to $52,000 in potential earnings by age 65.

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In this issue:

This Just In... Can You Still Retire Comfortably in this Economy? Tips to Get Back on Track

Retirement Planning When You’re Your Own Boss

The Self-Employed Person’s Guide to Navigating Health Insurance

Five Life Insurance Don’ts: How to Avoid Putting Your Family at Financial Risk

New 401(k) Superpowers: How Your Plan Will Work Smarter for You




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