Plan Sponsor News

In this challenging year for investors, you may be hearing concerns from employees about market volatility and its potential effects on their retirement savings. Here are some common questions and answers to help your employees stay on track toward long-term financial security.

Q: When stocks are going down, should I pause contributions to my retirement plan?

A: It’s better to keep contributing to your retirement plan through regular paycheck deductions, regardless of market conditions. By contributing the same amount at fixed intervals, you’re actually reducing the impact of market volatility over time. This is known as dollar-cost averaging, and it allows you to buy more shares when prices are lower and fewer shares when prices are higher.

Q: Since the market has been fluctuating wildly, should I take advantage of one of the high points to sell out of my equity investments and shift those assets to bonds or cash?

A: Predicting market movements is nearly impossible, and studies show that market timing does not work. In fact, investors tend to benefit by riding out stock market downturns instead of making short-term moves. Although past performance is no guarantee of future results, in 2020, investors who remained in the stock market when it hit lows in March saw their equity investments generally rise through the rest of that year and 2021. Generally, sticking to the asset allocation that is designed for your long-term goals and takes into account your age and risk tolerance is a smart choice.

Q: I’m a new employee. Should I wait to enroll in my company’s retirement plan until the stock market is less volatile?

A: By investing as early as you can—regardless of what’s happening in the markets—you’re putting time on your side with compounding. Check out the U.S. Department of Labor’s simple and helpful explanation of the power of compounding for long-term investments, which illustrates why starting earlier can make a huge difference at retirement age.

Q: What’s the best way to stay on top of progress in my retirement plan?

A: Visit mutualofamerica.com and log in to view your account. You can review your balance and the performance of your investments. If you decide that your asset allocation doesn’t quite match your long-term goals and current situation, you can make changes for future contributions. Mutual of America’s Investment Questionnaire is another helpful tool you can consult if you’re considering an asset-allocation change.

You should consider the investment objectives, risks, and charges and expenses of the investment funds and, if applicable, the variable annuity contract, carefully before investing. This and other information is contained in the funds’ prospectuses and summary prospectuses and the contract prospectus or brochure, if applicable, which can be obtained by calling 800.468.3785 or visiting mutualofamerica.com. Read them carefully before investing.

Mutual of America’s group and individual retirement products that are variable annuity contracts are suitable for long-term investing, particularly for retirement savings. The value of a variable annuity contract will fluctuate depending on the performance of the Separate Account investment options you choose. Upon redemption, you could receive more or less than the principal amount invested. A variable annuity contract provides no additional tax-deferred treatment of benefits beyond the treatment provided to any qualified retirement plan or IRA by applicable tax law. You should consider a variable annuity contract’s other features before making a decision.

With 2022 coming to a close, employee well-being is a key workplace concern. As employers plan for the new year ahead, many are broadening their focus and emphasizing new benefit offerings in response to a range of worker requests. The Employment Benefit Research Institute’s (EBRI) Retirement Security Research Center recently published a paper highlighting some of these trends. 

Helping to ensure employees’ financial security extends beyond providing a salary. For example, many employers are offering retirement planning tools and flexibility around benefits to better address the needs of their workforce. A broader focus on employees’ overall financial wellness—with retirement savings remaining one key part of that picture alongside issues such as childcare and student loans—is now widely viewed as a responsibility of employers.

With employers looking for differentiating factors on a competitive playing field, helping employees understand how to transition their retirement account balances into income in later years is gaining traction, according to the EBRI. A lack of knowledge can negatively impact retirement goals. Tools that assist employees with spend-down strategies and projected income are gaining popularity.

To help ensure that employees understand their retirement benefits, education and engagement are vital. In particular, as workforces grow more diverse, helping all employees achieve favorable financial outcomes will require tailoring communications accordingly. Reach out to your Mutual of America representative for more information about education for your employees.

As the end of the year approaches, it’s the perfect time for retirement plan participants to reevaluate how much they’ll contribute in the new year. The IRS has raised contribution limits for 2023, which can serve as a launching point for a conversation with employees about stepping up their savings and potentially increasing per-paycheck contributions.

The 2023 contribution limit for 401(k) and 403(b) plans has been raised to $22,500. The catch-up contribution rate will be capped at $7,500, meaning that employees age 50 and over will be able to contribute up to $30,000. Full details on 2023 limits can be found in IRS Notice 2022-55.

The maximum contribution that employees are currently allowed to make to their employer-sponsored 401(k) or 403(b) plans is $20,500. Participants age 50 or older can make an additional contribution of up to $6,500 for 2022.

Please reach out to your local Mutual of America representative with any questions.