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Retirement Planning: Investment Options for Retirees

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Retirement planning options for retirees: mutual funds, IRAs, ESG funds, and more.

A graph showing the different types of retirement planning investment options available to retirees.

,"Retirement plan participants should be provided with the option of diversifying their retirement plan investments into ESG funds or..." Retirement planning is an essential part of financial planning. As the time for retirement nears, it is important for retirees to consider their options for retirement investments. Mutual funds are an excellent investment option for retirees. An IRA provides similar benefits to a workplace retirement plan, with tax advantages and a wide range of investment options. Another option—which is not retirement specific at all—is to invest via a brokerage account.

For more help making the most of your retirement savings plan, it is important to understand the fees associated with different investment options. Investment fees: These are fees charged by the investment options in your retirement plan, such as mutual funds, annuities, and other investments. These fees can vary significantly, and can have a major impact on your overall investment performance.

“Retirement plan fiduciaries should be free to consider climate change as they identify and select investments,” said Representative Suzan DelBene (D-WA) in a statement. She introduced the Climate Risk Disclosure Act in December, which would require retirement plans to disclose climate-related Risk and opportunities. The bill also gives workers the option to invest in the best plans that include investments that are designed to address the climate crisis.

According to the IRI, including such options in plans would back up research showing that “millions of workers and retirees are concerned about the environment and looking for ways to invest their retirement savings in companies and funds that are taking steps to reduce their carbon footprint.”

The ESG rule—Prudence and Loyalty in Selecting Plan Investments and Exercise of Shareholder Rights—was finalized by the U.S. Department of Labor in 2020. The rule requires retirement plans to consider the Risk and opportunities of ESG investments when they select investment options and exercise shareholder rights, including voting and filing shareholder resolutions.

Consider these options for what to do with the money this year: 4% of those surveyed planned to use the money for some type of retirement saving, 6% who planned to invest specifically in stocks or mutual funds, and 8% who said they would use the money to pay off debt.

Conversely, most retirement plans offer a limited set of investment choices while IRAs offer a much broader set of investment choices. This can be a great benefit for those who are looking for more diverse investing options, such as those with a focus on environmental, social and governance (ESG) criteria.

Principal acquired the Wells Fargo retirement plan business in 2019. The company’s retirement plan offering includes a broad selection of investment options, including ESG funds. The new investment options can also offer positive or enhanced investment returns while helping to reduce the Risk of climate change.

Retirement plan participants should be provided with the option of diversifying their retirement plan investments into ESG funds or other investments that are focused on environmental, social, and governance (ESG) criteria. This will help ensure that their retirement savings are invested in companies that are taking steps to reduce their environmental impact and support social causes.

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