401K Average Return May Increase By 8%, Here’s How!

A study from Georgetown University reveals that adding investments to the 401(k) plans may increase the 401K average return by 8%. In this article, read and find out how!

401(k) retirement plans have investment options that may produce mutual funds into one’s stocks, cash and cash equivalents, or bonds. These investment options have been available ever since the 401(k) retirement plans were launched in 1978. To date, a recent study from Georgetown University’s Center for Retirement Initiatives discovered that adding other investments would increase the 401k average return by 8% in the future.

According to O’Connor, the recent study claims that adding other investments or assets may improve the diversity in the portfolios of the 401(k) retirement plans. In turn, other contribution retirement plans could issue similar but greater returns like in the 401k average return. This means that the retirement income for millions of U.S. employees may improve.

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According to Williams, the other investments that may produce a greater 401k average return is a range of options. These options include hedge funds, commodities, collectibles, and financial products like collateralized debts and credit default swaps.

That being said, the recent study from the Georgetown University focused on three other investments. These three investments include private equity funds, private credit, and real estate. The study also investigated how adding these other investments to target date funds (TDFs) could increase the 401k average return.

Target date funds (TDF) are a type of mutual fund that stabilizes the asset allocation and risk profile of the fund as the fund’s target date approaches. This type of investment focuses on the year when the investor is expected to start claiming their money for retirement.

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