Bill Overview
Title: Retirement Savings Modernization Act
Description: This bill specifies that fiduciaries for employee-sponsored retirement plans are permitted to diversify a plan's investments across certain asset classes, such as digital assets, hedge funds, private equity, and venture capital.
Sponsors: Rep. Meijer, Peter [R-MI-3]
Target Audience
Population: People participating in employer-sponsored retirement plans
Estimated Size: 60000000
- Fiduciaries for employee-sponsored retirement plans will have the authority to diversify investments, impacting plan management.
- Employees participating in employee-sponsored retirement plans could be affect in terms of their financial security and retirement savings.
- In the US, many employer-sponsored retirement plans like 401(k)s might invest in the newly permissible asset classes.
- Globally, if similar regulations are considered or adopted, it could affect retirement savings strategies beyond the US.
- Investors and companies operating in specified asset classes (digital assets, hedge funds, private equity, and venture capital) could see a shift in demand and investment flows.
- Universally, working adults part of retirement plans will likely experience changes depending on the performance of these new asset classes.
Reasoning
- Consider that about 60 million Americans participate in employer-sponsored defined contribution retirement plans. The target population should be mainly in the working adult age range (18-65).
- Many people involved in jobs where employers offer these retirement plans could potentially see a change in financial security due to altered investment strategies, affecting their wellbeing scores.
- The policy may not equally impact all demographics. For example, younger employees might have a longer time frame to benefit from diversified investments' volatility; whereas, those nearing retirement might be more risk-averse.
- There should be individuals who are not impacted by the policy to gauge its range, as well as those who benefit or potentially face adverse effects.
- Common occupations such as teachers, engineers, retail workers, and individuals in tech or finance can provide a broad perspective across the workforce.
Simulated Interviews
Software Engineer (New York, NY)
Age: 45 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 4/20
Statement of Opinion:
- I think diversifying into digital assets can generate higher returns in the long term.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 7 |
| Year 3 | 9 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 6 |
Financial Analyst (San Francisco, CA)
Age: 30 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 15.0 years
Commonness: 3/20
Statement of Opinion:
- This could lead to better investment performance for the retirement plans I manage.
- I am cautious about the volatility of these asset classes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 6 |
| Year 5 | 8 | 6 |
| Year 10 | 8 | 6 |
| Year 20 | 9 | 6 |
Teacher (Phoenix, AZ)
Age: 63 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 2/20
Statement of Opinion:
- I am concerned about the increased risk in my retirement investments.
- At my age, I can't afford losses.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 6 |
| Year 2 | 5 | 6 |
| Year 3 | 5 | 6 |
| Year 5 | 5 | 6 |
| Year 10 | 5 | 6 |
| Year 20 | 5 | 6 |
Retail Worker (Austin, TX)
Age: 25 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 0.0 years
Commonness: 8/20
Statement of Opinion:
- I don't know much about investing, but if it's good for my savings, I'm okay with it.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 5 |
| Year 2 | 5 | 5 |
| Year 3 | 5 | 5 |
| Year 5 | 5 | 5 |
| Year 10 | 5 | 5 |
| Year 20 | 5 | 5 |
Nurse (Chicago, IL)
Age: 50 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 10.0 years
Commonness: 5/20
Statement of Opinion:
- I'm worried about market fluctuations impacting my retirement.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 7 | 5 |
| Year 20 | 7 | 5 |
Tech Entrepreneur (Seattle, WA)
Age: 40 | Gender: other
Wellbeing Before Policy: 9
Duration of Impact: 20.0 years
Commonness: 1/20
Statement of Opinion:
- This opens more opportunities for higher returns in my retirement investments.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 9 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 9 | 8 |
| Year 10 | 9 | 8 |
| Year 20 | 9 | 7 |
Construction Worker (Atlanta, GA)
Age: 55 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 5.0 years
Commonness: 6/20
Statement of Opinion:
- I prefer stable returns and am unsure about these new asset classes.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 6 |
| Year 3 | 6 | 5 |
| Year 5 | 6 | 5 |
| Year 10 | 6 | 5 |
| Year 20 | 6 | 5 |
Research Scientist (Boston, MA)
Age: 35 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 0.0 years
Commonness: 4/20
Statement of Opinion:
- I hope the diversification includes sustainable investments too.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 7 |
| Year 10 | 7 | 7 |
| Year 20 | 7 | 7 |
Marketing Specialist (Miami, FL)
Age: 29 | Gender: male
Wellbeing Before Policy: 8
Duration of Impact: 20.0 years
Commonness: 5/20
Statement of Opinion:
- Adding venture capital could improve long-term gains but carries risk.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 9 | 8 |
| Year 3 | 9 | 8 |
| Year 5 | 8 | 7 |
| Year 10 | 8 | 7 |
| Year 20 | 8 | 7 |
HR Manager (Denver, CO)
Age: 48 | Gender: female
Wellbeing Before Policy: 8
Duration of Impact: 15.0 years
Commonness: 3/20
Statement of Opinion:
- I feel the policy gives us the flexibility to better meet our employees' retirement goals.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 8 | 8 |
| Year 2 | 8 | 7 |
| Year 3 | 8 | 7 |
| Year 5 | 9 | 7 |
| Year 10 | 9 | 6 |
| Year 20 | 9 | 6 |
Cost Estimates
Year 1: $20000000 (Low: $15000000, High: $30000000)
Year 2: $20000000 (Low: $15000000, High: $30000000)
Year 3: $21000000 (Low: $15500000, High: $31500000)
Year 5: $22000000 (Low: $16500000, High: $33000000)
Year 10: $25000000 (Low: $18500000, High: $37500000)
Year 100: $50000000 (Low: $37000000, High: $75000000)
Key Considerations
- The diversification into high-risk, high-reward asset classes adds complexity to risk management strategies for fiduciaries.
- The introduction of these asset classes must be complemented with robust regulatory oversight to protect participants.
- Although diversification can yield higher returns, it brings significant investment risks that could impact retirement security during market downturns.