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October 2019

Defined Contribution Viewpoints

Income for Outcomes

In this issue of GSAM Defined Contribution Viewpoints we discuss rising episodic risks against the backdrop of a moderating market expansion. From a retirement public policy perspective, progress towards retirement reform which previously garnered overwhelming bipartisan support in the House earlier in the year is currently stalled in the Senate, while the regulatory agenda has been active on several fronts. For our DC in Focus topic, we discuss the challenges of participants investing for income in a low-rate environment and opportunities for considering retirement income options in DC plans.

  • Market Highlights – Easy Does It: The global expansion continues, but at a moderating pace. We believe markets remain supportive for risk assets despite emergent, late-cycle vulnerabilities. We would emphasize the potential importance of maintaining strategic asset allocation weights, alpha-oriented, bottom-up strategies over pure equity beta, and income-oriented investing and alternatives as a response to moderating returns.
  • Heard on the Hill – Retirement Public Policy: While the SECURE Act is currently stalled in the Senate, regulators have been busy. The Department of Labor (DOL) finalized rules on “association” multiple employer plans and the Securities and Exchange Commission (SEC) finalized its Regulation Best Interest for broker-dealers when providing recommendations to retail customers. 
  • DC in Focus – Investing for Income: More than half of all 401(k) assets are controlled by investors at or near retirement. As plan design trends have moved towards menu simplification, we assess potential income needs relative to typical investment options available in DC plans and implications for income planning in retirement.

 

 


RELATED INSIGHTS

Easy Does It

We see current conditions as largely benign as long as investors understand that risk may no longer be linear. Political shocks and policy-related risks are the variables to watch, whereas we see recession risk as still moderate.

Building Income in a Volatile Market

At a time when the outlook for major asset classes strikes us as average at best, income generation may be one answer for investors who worry that they are too reliant on a continuation of the sharp gains of the post-financial crisis period.