Managing Inflation Risk
- Seek to preserve participants’ purchasing power
Helping participants protect their purchasing power in retirement is an essential yet often overlooked component of plan design.
- Enhance diversification*
Inflation-hedged investments can improve the overall diversification of your plan’s core options.
- Strengthen your overall investment menu
We can help you consider how best to incorporate Inflation-hedged investments into your default option or core investment menu.
Plan for Inflation Risk
A defined contribution plan participant must manage to a real liability—his or her own expenses in retirement. The need to support this individual’s real cash flow is a critical difference between the way that defined contribution assets and defined benefit assets are typically managed. Inflation-hedged investments can help participants mitigate the impact of inflation on their purchasing power. At SSGA, we can help you evaluate how to more effectively incorporate inflation-hedged solutions into your plan’s investment menu.
*Increase in real interest rates can cause the price of inflation-protected debt securities to decrease. Interest payments on inflation-protected debt securities can be unpredictable.
Role of Conservative Investments
- Preserve Accumulated AssetsParticipants of all ages may occasionally need or want to preserve capital.
- Meet a broad range of needsConservative options should meet the needs of participants at many different stages of the retirement planning process.
- Perform as expected in most market conditionsWhen markets are volatile or declining, conservative options should continue to provide liquidity, solvency and transparency.
Preservation of Assets When Participants Need It Most
As defined contribution plans increasingly serve as the primary investment vehicle for future retirement security, your choice of conservative investment options may play a key role in the design of your investment menu. That’s why it is vital for plan sponsors to consider the following:
- What is the role of conservative investment options in your plan?
- What investment solutions meet those objectives?
- What is the optimal way to design your investment menu to help participants make suitable choices?
At SSGA, we can help you consider the needs of your participants and the goals of your plan in order to evaluate the role of conservative investments in your defined contribution plan.