ING US Wealth Management Reinforces the Importance of Stable Value Investments to Plan Participants Actively Seeking Stability of Their Retirement Savings
ING US Wealth Management is focusing greater attention on educating plan sponsors and consultants about the importance of including a stable value investment option within a defined contribution plan, and the motivating factors that have driven so many participants to rely on this asset class, no matter how close they are to retirement.
With over $413 billion in assets, stable value represents the largest conservative investment in defined contribution retirement plans1. It is already established as one of the more popular asset classes among investors of all ages, and not just Baby Boomers. “The attraction of a stable value offering—specifically its risk and return characteristics—fits the changing times, and is meeting the needs of a broad workforce that includes investors across every age demographic.” says Bill Jasien, of Sales and Service, Public Markets, at ING.
Today, plan sponsors operate in an environment in which they are conscientious of both heightened public and regulatory scrutiny, as well as market volatility, when considering plan design. While target-date funds are an excellent way for participants to automate their retirement savings through a set time horizon, when it comes to actively seeking protection against unexpected market downturns, industry evidence shows that they are choosing stable value funds. According to The Stable Value Investment Association (SVIA), an overwhelming majority of 401(k) investors who actively select their investments choose stable value funds as a core investment.
“We’re seeing an accelerated need for investment products that put a high premium on capital preservation,” says Jasien. “The closer participants get to retirement, the greater the premium they place on stability,” he adds. With nearly 8,000 Americans turning 60 each day, there’s been a tremendous demographic surge as the Baby Boomers retire. And, according to a recent survey by CRA International, nearly half of older Americans report they are concerned that they will run low on money as they grow older. The findings also showed that fewer than one in 10 were willing to take significant investment risk in hopes of getting a substantially higher return.2
1 Stable Value Investment Association (SVIA)
2 “Making the Case for Stable Value,” CRA International; David F. Babbel, Professor, WhartonSchool and CRA Int’l and Miguel A. Herce, Ph.D., CRA Int’l, October 2007.
Yet stable value options are also popular with younger participants who benefit from stability whether they are just starting to build a small retirement portfolio, or simply seek to protect the nest egg they have worked so hard to accumulate. As their portfolios likely mature to include a more aggressive mix of both stocks and bonds, stable value funds can become a vehicle of choice to help mitigate the risk of loss they face in turbulent markets. Recent data from Hewitt Associates shows that while Baby Boomers have between 17.1 - 26.7 percent of their retirement invested in stable value (or other guaranteed investment contracts), investors between the ages of 20-29 are not far behind, with 18.6 percent allocated in the asset class; investors between the ages of 30-39 allocate just over 14 percent3.
“The bottom line is – investors never outgrow stable value investments, nor do they go out of style,” says Jasien.
Demand for stability, guaranteed returns, and liquidity is not waning despite plan sponsors’ shift away from pension plans to a defined-contribution model. Now more than ever, plan sponsors face a fiduciary responsibility to create a truly diversified line-up of “best in class” investment choices, which include both target-date funds and vehicles that can offer traditional pension-like attributes.
ING is dedicated to raising awareness among plan sponsors about the role stable value funds play in defined contribution retirement plans now, and in the future. ING seeks to educate sponsors and consultants about their full range of options and where product innovation is heading in this space.
ING has more than 40 years experience in supporting retirement plans for Government, Education, Corporate and Healthcare Employers, and boasts more than 30 years of experience as a stable value provider for defined contribution plans. ING manages over $58 billion in stable value assets (as of 9/30/07).
Deborah Pont, ING Group, US Wealth Management, 860-723-3415 or Deborah.Pont@us.ing.com
ING Groep, N.V. is a global financial institution of Dutch origin offering banking, insurance and asset management to more than 75 million private, corporate and institutional clients in more than 50 countries. With a diverse workforce of more than 120,000 people, ING comprises a broad spectrum of prominent companies that increasingly serve their clients under the ING brand.
In the U.S., the ING family of companies offers a comprehensive array of financial services to retail and institutional clients, which include life insurance, retirement plans, mutual funds, managed accounts, alternative investments, direct banking, institutional investment management, annuities, employee benefits, financial planning and reinsurance. ING holds top-tier rankings in key U.S. markets and serves more than 15 million customers across the nation. For more information, visit www.ing.com.