A Clear Conscience As You Age: How Can You Be Sure Your Retirement Plan Is Ethical?
By Jess Walter
Forty-five percent of respondents in last year’s retirement survey conducted by GOBankingRates said they had no money saved for retirement. Saving for both a comfortable lifestyle and care as we age is a pressing problem for many people, and planning ahead has become more crucial than ever before. Added to this is an increasing awareness of ethical finances, and a rising number of people want to be certain that their savings and investment plans aren’t supporting causes they’re morally opposed to. So, what can we do to save for our golden years in a way that will sit well with our consciences?
Invest In Ethical Mutual Funds
Prior to beginning your retirement, it’s important to plan for your withdrawal rate – four percent is usually a good rate to start with. For example, if you need $45,000 a year from your retirement funds, a starting portfolio would need to be $1,125,000. These figures would assume that your funds will last 30 years after you begin your retirement. Some mutual funds are specifically designed with this in mind and aim to balance the preservation of assets with income and growth, making them a good choice for the retiree.
However, a potential problem with larger funds is that they gather together many large corporations, which means there’s a risk that some of them are involved with issues you may ethically oppose. The good news is that there are options that will allow you to invest without supporting companies you have moral issues with. These include gun-free mutual funds, such as Blackrock and Calvert Emerging Markets Equity Fund, addressing an issue many older Americans are concerned with. Be sure to research the companies involved in any fund you invest in before you make a commitment.
Check Whether Your 401(k) Plan Is Ethical
A survey by Ignites Research revealed that 52 percent of 401(k) advisers asked had some assets for retirement plans that followed environmental, social and governance (ESG) criteria, but under 15 percent of the companies sponsoring those plans had provided employees with the choice of ESG options. However, with a younger workforce eager to invest using ESG criteria, this could soon be set to change. Already, there are more social investment and ESG products available than there were ten years ago, and this is set to improve further.
Ask your company for clarity on your 401(k) plan, and check whether there are ESG and social investment products available to you. If your employer is unable to provide this, consider selecting funds for your own retirement plan. Your company may be willing to help with this, or you can seek financial advice to help clarify your options. You can also rally the support of your peers and press for change within your company. Many businesses are prepared to listen when it’s clear that the majority of employees seek change.
Saving for the care we may need as we age is crucial, but so too is knowing that we’re making socially responsible choices. Thankfully, more companies are now becoming aware of this, and ethical retirement packages are likely to become more available as time goes on. Be careful to research the corporations involved in any mutual funds you invest in to support your retirement, and don’t take for granted that your 401(k) plan is ethical. There are ethical options out there; they just take a little more research.