Sunday, February 25, 2024

WSIB Enhances Retirement Strategy Funds

From the Department of Retirement Systems:

WSIB Enhances Retirement Strategy Funds

This fall, a change is coming to DRS Retirement Strategy Funds (RSFs), which are provided by Washington State Investment Board (WSIB). They will include a new component called the Total Allocation Portfolio (TAP).

The TAP includes a broad mix of asset classes including public market investments (public equities and fixed income) plus private market investments (private equity, real estate and tangible assets such as agricultural lands).

While new to RSFs, WSIB has incorporated private market investments across its portfolio, and TAP is already an investment option for Plan 3 customers.

Research shows that broader exposure beyond public and into private market investment can improve expected returns. Because RSFs are a type of target date fund, the investment mix changes over time to moderate exposure automatically as you age.

WSIB believes the potential investment outcomes outweigh the fee increase associated with incorporating TAP into RSFs.

The revised fees begin Oct. 14, 2021. See this Retirement Strategy Funds flyer for more information.

Fund customers do not need to take any action. Incorporating TAP into RSFs will not materially alter any fund’s investment objectives or risk profile.

Each plan’s Fund Fact Sheets have more information and a breakdown of asset components included in each of the RSFs (inside available investments section).

What is a Retirement Strategy Fund?

DCP and Plan 3 investment account customers can choose among Retirement Strategy Funds (RSFs). This investment option automatically adjusts its investment mix over time based on the date you think you will retire. These are also known as target-date funds and are the default for those who do not select their own investments.

From the start of your career until your retirement years, DRS Retirement Strategy Funds are designed to make retirement investing easier. A Retirement Strategy Fund has a date in its name. This is called the fund’s target date. The target date is the assumed year you would retire and begin withdrawing from your account. Each fund is a portfolio managed to help grow your retirement income as you get closer to retirement.

How does a target-date fund work?

A target-date fund is a diversified mix of investments that adjust over time. If you’re in your early working years, the fund prioritizes growth to build savings. The funds furthest from their target dates start out invested mostly in stocks to emphasize the growth potential you need to build wealth over the long term. As you move closer to retirement, and eventually into retirement, the fund automatically adjusts to a more conservative mix of investments to help protect against market fluctuations. And it all happens automatically.

Usually customers select a single Retirement Strategy Fund for one-step investing. Every customer has unique retirement goals and these funds are designed to work for you throughout your career.

How to find your fund

Say you’re born in 1970 and you plan to retire at age 65.

In this example, your estimated retirement date would be 2035 and you would select the 2035 Retirement Strategy Fund. These funds are spaced five years apart, so you can choose the one closest to the date you’ll start withdrawing your retirement.

Retirement Strategy Funds make retirement saving easier.

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