Private Equity: Promise and Peril

Another week, another wave of headlines reshaping how we think about long-term wealth and retirement.

Wall Street is courting retail investors with access to private equity. Meanwhile, advisors warn against cutting retirement contributions, even when times are tough. Plus, a record-setting 401(k) contribution rate gives us something to cheer about.

Let’s dig into the week’s top five.

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—The Money Pickle Team

Easy Access to Private Markets

Wall Street is finding ways to democratize access to private markets. For example, “evergreen funds” offer high-net-worth individuals lower entry points into private equity, credit, and real estate. However, with higher fees, limited liquidity, and growing concerns about systemic risk, financial professionals urge caution. Not only that, but complexity also remains a barrier for many.

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This Retirement Mistake Could Cost You Big

Increasingly, people are considering reducing their 401(k) contributions amid ongoing economic uncertainty. Advisors warn that it can quietly erode retirement savings. People may miss out on potential market gains and lose the habit of paying themselves first.

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Record High for 401(k) Savings

The average savings rate in 401(k) plans hit 14.3% in Q1, including employer contributions, per a Fidelity report. That’s just shy of its recommended 15%. Automatic boosts, dubbed auto-escalations, played a big role. Experts say even if you can’t hit that mark, try to contribute at least enough to get your full employer match.

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Private Equity Poses Systemic Risks

Moody’s warns that a surge in retail access to private markets could pose systemic risks. As Main Street money pours in, fund managers may chase returns by stretching into riskier assets. Limited liquidity could also become a real problem if investors panic in volatile markets.

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Protect Your Retirement Against a Market Crash

With market jitters rising again, many near-retirees are worried about how downturns could derail their plans. Experts stress the importance of diversification (which may mean knowing what’s in your ETFs). It may also be worth considering dynamic withdrawal strategies. Plus, cash buffers can help investors avoid selling low during dips.

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🥒 Pickle Tip:

Private markets may offer new opportunities, but “new” doesn’t always mean “better.” Make sure you understand the risks, fees, and liquidity limitations before exploring alternatives.

🌟 Final Thought

Access is expanding, volatility is returning, and retirement planning is more nuanced than ever. If this week’s headlines stirred questions, it might be time to chat with someone who can help sort signal from noise. A quick conversation with an advisor in the Money Pickle network could offer the clarity you’re looking for.

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