In My Investment Options, you’ll learn about the providers who offer the investment fund options for the plan, what your investment fund options are, how those investment funds are performing, fees that you pay when you invest and factors to consider in determining the right investment mix for you.
Comparing Local Providers
When you enroll in MaineSaves, one of the first things you’ll do is choose a provider so you can decide where to invest your savings. There are three providers for the plan⎯AIG Retirement Services (formerly known as VALIC), MassMutual, and Voya⎯but you can invest with only one provider at a time. How do you know which one to choose? Here are four factors to consider.
1. Fund Options
Each of the providers offers the same variable return investments along with a proprietary Fixed Account fund. In addition, each provider has a Self-Directed Account (SDA), which offers you investment alternatives beyond the plan’s core funds. For more detail about any of the core funds, see the Fund Fact Sheets or the fund prospectuses (available on the provider website). To help guide your decisions, view the Fund Performance Chart, which shows a summary of past performance for all the fund options.
All of the providers charge fees to manage your investments and administer the plan. Fees can reduce the return on your investment over time. They can also vary widely from one investment to another. So, it’s a good idea to understand how much you’re paying in fees when you choose to invest in any fund. View the “Fee Information” section of the Fund Performance Chart to learn more about the fees you pay and how they’re determined, and to see the actual amount you pay for each fund.
Each provider offers certain services to the plan. For example, each provider has local representatives who are available to help you enroll in the plan and answer your questions about participating in the plan. These local representatives may also visit State locations from time to time to hold live meetings about the plan. Each provider also has a website where you can see the actual performance of your individual account, perform account transactions (such as changing your investment options) and make use of education and tools to help you use the plan to your best advantage. So, look through the websites to see which you find most helpful:
4. Fixed Account Fund Returns
The Fixed Account is a conservative fund that guarantees a certain return on your investment, much like a bank account. Each provider offers one. If the Fixed Account will be one of your investment choices, you should compare the rates from each of the providers, as shown in the Fund Performance Chart.
What Are My Investment Options?
The MaineSaves investment fund lineup has been reorganized to make it easy for everyone to choose an investment mix based on your comfort level as an investor. Here are the three broad groups of funds:
- Target Date Funds
- Core Funds
- Capital Preservation Funds
- Bond Funds
- U.S. Large Cap Stock Funds
- U.S. Mid-Cap Stock Funds
- U.S. Small Cap Stock Funds
- Global Stock Funds
- International Stock Funds
- Self-Directed Account
Each provider offers the same variable return investments along with a proprietary Fixed Account fund. Learn more about the new fund lineup here.
Dig a Little Deeper
Read up on the asset classes (types of investments) offered in MaineSaves. They say one of the keys to long-term success as an investor is picking the right asset classes for your investment mix. For more information about the asset categories offered in MaineSaves, view the List of Investment Funds and Asset Classes.
Check how the funds are performing. View the Fund Performance Chart to see the current list of funds in order of risk, from lowest to highest, along with their performance and associated fees.
Read the Fund Fact Sheets to learn about the funds’ objectives and strategies. A Fund Fact Sheet provides a concise summary of a fund’s investment objective and strategy, principal risks, performance history, and fees. (Note: Although each provider offers the same variable return funds, the names may be slightly different.)
Here are the latest fact sheets for each investment option in the plan, organized by provider:
- AIG Retirement Services (formerly known as VALIC) Fund Fact Sheets
- MassMutual Fund Fact Sheets
- Voya Fund Fact Sheets
To learn more about each fund, read the prospectus (available on the provider’s website).
The Fund Performance Chart shows the investment options’ rates of return for these timeframes: 3 months, 1 year, 5 years, 10 years/inception date. The Fund Performance Chart also shows the fees associated with investing in each option.
The Advisory Council that governs MaineSaves meets periodically during the year to review fund performance and plan operations. If you would like a copy of the most recent meeting materials, please contact the Office of Employee Health & Benefits.
Understanding Fee Charges
As you choose your investment fund options, don’t forget to consider how much you’re paying in fees. Over time, even small differences in fees can substantially reduce the growth of your retirement savings.
View the “Fee Information” section of the Fund Performance Chart to learn more about the fees you pay, understand how they’re determined, and see the amount you pay in fees for each fund.
Is Your Investment Mix Right for You?
Choosing the right combination of investments is key to getting your savings on the right track. Here are five questions to ask yourself as you make your decisions.
The amount of time you have to save and invest before you retire is called your time horizon. The more time you have before you need to take a distribution of your account, the more risk you can afford to take when you invest. That’s because early losses may be offset by later gains if you have time to ride out stock market ups and downs. Are you on track to retire early? Try the CNNMoney early retirement calculator to find out how much you should already have if you want to retire by age 60.
Your plans and goals for your retirement years are a significant factor in determining how much you need in retirement savings. Most experts estimate that, annually, you will need anywhere from 75% to 90% of what you earn in the last year before you retire. See Planning for Retirement for more on this question.
If you’d like to estimate how much you will need, try the CNNMoney calculator.
You can use the CNNMoney’s Calculator: How Much Will You Need for Retirement? to get a rough estimate of how much money you will need for a comfortable retirement.
Your retirement income will come from all your investments and assets. Consider the big picture before deciding how to invest. For example, if you can expect income from a pension or Social Security and those portions of your retirement portfolio are relatively conservative and secure, then you may want to be more aggressive when you invest your MaineSaves account balance. To estimate how much you need to save for retirement, click here.
Don’t think that once you retire, you will all of a sudden stop investing. Your savings will need to keep growing. You may need income for 20 or more years after you retire so you’ll need to consider inflation. To keep up with the rising cost of living, your retirement income needs may increase each year.
People have different thresholds for dealing with market swings. Your risk tolerance refers to how comfortable you are with taking risk in order to achieve your financial goals:
What is risk?
Risk is the possibility that the value of your investment will not increase at the expected rate or will even decrease. Each of your investment options has a different degree of risk. Generally, the higher the risk, the higher the potential return on your investment. Likewise, lower risk investments, with their lower potential for loss, tend to offer lower average returns. Here are some of the different types of risk an investor can face:
- Inflation risk is the risk that over time your investments will not keep pace with increases in the cost of living. You are vulnerable to this risk if you invest too conservatively—that is, if you put all your money in “safe” investments that have low rates of return.
- Interest rate risk is the risk that if interest rates rise, your fixed income investments—such as bonds—may be locked into receiving a lower rate of return, and, as a result, lose value. On the other hand, when interest rates fall, bond prices generally rise. This means your investment can rise in value.
- Business risk is the possibility that a company’s stock or bonds may experience poor returns if the issuing company has a business problem or goes out of business.
- Stock market risk is the possibility that a downturn in the market will cause your stocks to decrease in value.
An aggressive investor with a high risk tolerance is more likely to risk losing money to get greater potential returns. A conservative investor with a low risk tolerance will likely favor investments that will preserve his or her original investment. Whether you’re aggressive or more conservative, you will want to consider reducing the overall risk in your investment mix through diversification and asset allocation. Note: Diversification and asset allocation are strategies to protect against risk, but they cannot ensure a profit or guarantee against loss. To estimate your risk tolerance, try the CNNMoney Asset Allocation tool.
MaineSaves offers you the ability to choose from a range of different investment types, including fixed interest, bonds, balanced funds, U.S. stocks, international stocks and global stocks. By using diversification and asset allocation, you’re less likely to feel the effect of a single investment’s poor performance. Note: Diversification and asset allocation are strategies to help boost the potential for gain and minimize the potential for loss. They cannot ensure a profit or guarantee against loss.
You can learn more about diversification and asset allocation from the pros at the U.S. Securities and Exchange Commission. Your providers also have education and tools on their sites.