Retirement Plan Update, Q2 2021

As we move into the second half of 2021, the landscape for economic recovery remains extremely positive. Vaccination rates continue to rise with US up to around 50%. Although there are new COVID variants spreading, existing vaccines have proved to be effective. This has translated into another profitable quarter for the stock market. The S&P 500 finished the quarter up 8.4% and the aggregate bond index was up 1.8%.

The one concern investors have is potential inflation. Inflation within expectations is good for the stock market. It is a natural product of a growing economy. However, when the economy overheats and inflation rises above expectations, the Federal Reserve will have to raise rates to maintain price stability. They can only do that, though, when the labor market is at a sustainable level. Since there is still significant unemployment, the Fed continues to state they will not raise rates until 2023.

Small amounts matter - the best time to start investing is NOW!

One of the most valuable aspects of your retirement plan is the compound effect of growth on your account balance. Taking opportunities to save even an extra 1% could have a large impact on your financial future due to this compounding effect. Let’s look at a simplified example of a participant who starts investing 15 years earlier (blue).

As you can see, starting 15 years earlier makes a significant difference in your ending balance and financial flexibility in retirement. Therefore, we encourage you to take a look at your contribution level. If you are able, increase your contribution rate and further take advantage of the effect of compound interest.

This hypothetical example pertains to a tax-deferred account and assumes a 7% nominal return compounded annually. Your own plan account may earn more or less than this example. This example is intended for illustrative purposes only and is not intended to represent performance of any mutual fund.