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How should you handle the upcoming investment changes to the Intel retirement plans?

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Summary:

  • Intel is simplifying its retirement plan lineup by removing six investment options
  • This change goes into effect September 1st, 2017
  • If you own any of these funds and don't make a change before the deadline, your investment will be automatically sold and the proceeds transferred into an age-appropriate retirement date fund
  • For a complete list of eliminated funds and potential replacement, see our table below.
  • For clients of Cordant, we will coordinate any changes necessary on your behalf

 

If you’re like most Intel employees, you want to make smart financial decisions. You like being certain you’re doing the right things with your investments and making confident choices.

But, between a demanding career, family commitments, and other social obligations it’s not like you have a lot of extra time (or interest in the subject perhaps) to research your Intel retirement plan investment lineup and weed through the upcoming changes. So, how do you keep from making a mistake? Do you simply elected the default option or do you do something else?

Since we look at this stuff all the time for clients (and enjoy doing it too!), let's lay out the changes, the time frame, and the choices you'll be forced to make.

But first, why is Intel making the changes in the first place?

The first stated reason is to remove overlap between similar fund choices. According to the notice, “A simplified lineup makes decision-making easier and less overwhelming.” We agree here.

An interesting piece of research by Sheena Iyengar of Columbia (pdf here if you're curious) has shown that as the number of investment options in workplace retirement plans increases, employee participation declines (relevant chart from the study is below). 

401k Options.pngSource: How Much Choice is Too Much?: Contributions to 401(k) Retirement Plans

The other reason given is in the 401k plan, the two Emerging Market investment options are removed due to “the high volatility of this asset class means greater risk.” Despite the fact that “these investments can provide additional diversification to a well-thought-out portfolio.”

We disagree with this change as we think exposure to Emerging market stocks are a valuable addition to a portfolio, but thankfully an allocation to this area of the market can still be achieved on stand-alone basis through the BrokaerageLink account or as part of an investment in the BlackRock MSCI ACWI ex-US IMI Index Fund (Emerging Markets stocks make up around 12% of this fund).

Logistics

The changes will take effect on September 1, 2017, and if you don't make a change, the default option is that "existing balances and/or future contributions will transfer to an age appropriate Target Date Fund.” 

For those wanting to make a change before the deadline, and we’d recommend you do as a switch from one of the discontinued fund to a target date fund could drastically change the level of risk in your account, let’s take a further look at the changes.

The Fund Changes – What’s Going Away

Six funds will get trimmed between the 401k and the SEPLUS account. A bond fund, two U.S. stock funds, and three non-U.S. stock funds.

In the table below (click for a larger version), you will see the funds being eliminated (highlighted in red), the potential substitute funds (in green), and the default option (in yellow). Additionally, you will find a description of the fund, whether it’s actively managed or an index fund, and its annual expense ratio.

(For those participating in the SERPLUS account, there are a few additional substitute funds available which are not listed in the table below. Please see your notice for a full list.)

Intel Retirement Plan Changes.png 

To Recap:

  • Six investment options are being eliminated from the Intel Retirement account lineup
  • The changes go into place September 01, 2017
  • If you own any of these funds and don't make a change before the deadline, your investment will be automatically sold and the proceeds transferred into an age-appropriate retirement date fund
  • You have the choice of a close substitute fund in every category except for the Emerging Market funds.

 

So, there you have it. Hopefully, this helps you weed through the changes and make some smart decisions before the deadline in September. And, for a 4-step framework for putting this information to work in your retirement account, check out our eBook “Navigating the Intel Retirement Plan: A 4-Step Guide to Making the Most of Your Investment Options.”

Intel Retirement Plan

Click here for disclosures regarding information contained in blog postings.
Cordant, Inc. is not affiliated or associated with, or endorsed by, Intel.

Published on August 16, 2017

Isaac Presley, CFA

Isaac Presley, CFA

Isaac Presley is Director of Investments for Cordant, a wealth management firm serving current and former Intel employees. To learn more, you can read Isaac's full bio.

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