Regulators Support Investing In Equities for Retirement

It is usually hard to get excited about government regulation, but an announcement from the Labor Department on Tuesday was good news for working Americans who badly need to save.

In their ruling the Department made it clear that employees need to take risk to receive adequate return to fund their retirement.

Last year Congress passed the Pension Protection Act, which makes it easier for companies to automatically enroll their workers in retirement plans like 401(k)’s.

The Department’s ruling made it clear it favors three strategies for these automatic enrollments. They are diversified and involve equities and fixed income. Fixed rate investments, such as those offered by insurance companies, were not included.

Companies that default workers into appropriately diversified portfolios will be shielded from liability.

We have long believed that exposure to equities is vital during the savings or accumulation years to grow your asset base and in retirement or the distribution years to keep up with inflation.

It is great to see even government regulators get it.