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Why 401(k) plans are the ‘final frontier’ for exchange-traded funds

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2 years ago

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While many investors have flocked to exchange-traded funds, they haven’t gained much ground with 401(k) plan participants.

Exchange-traded funds, or ETFs, debuted in the early 1990s and have since captured about $10 trillion.

Mutual funds hold about $20 trillion, but ETFs have chipped away at their dominance: ETFs hold a 32% market share versus mutual fund assets, up from 14% a decade ago, according to Morningstar Direct data.

“ETFs are becoming the novel structure to be used in wealth-management-type accounts,” said David Blanchett, head of retirement research at PGIM, Prudential’s investment management arm.

However, that same zeal hasn’t been true for investors in workplace retirement plans, a huge pot of largely untapped potential for the ETF industry.

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At the end of 2023, 401(k) plans held $7.4 trillion, according to the Investment Company Institute, or ICI, and had more than 70 million participants. Other 401(k)-type plans, such as those for workers in universities and local government, held an additional $3 trillion, ICI data shows.

But hardly any of those assets are in ETFs, experts said.

“There’s a lot of money [in workplace plans], and there’s going to be more,” said Philip Chao, a certified financial planner who consults with companies about their retirement plans.

“It’s the final frontier [for ETFs], in the sense of trying to capture the next big pool of money,” said Chao, the founder of Experiential Wealth, based in Cabin John, Maryland.

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About 65% of 401(k) assets were invested in mutual funds at the end of 2023, according to ICI data. The group doesn’t report a corresponding statistic for ETFs.

A separate report from the Plan Sponsor Council of America, a trade group representing employers, suggests ETFs hold just a tiny fraction of the remaining share of 401(k) assets.

The PSCA report examines the relative popularity of investment structures, such as mutual funds and ETFs, across about 20 types of investment classes, from stock funds to bond and real estate funds, in 2022. The report found that 401(k) plans used ETFs most readily for sector and commodity funds — but even then, they did so just 3% of the time.

Key benefits are ‘irrelevant’

Mutual funds, collective investment trust funds and separately managed accounts held the lion’s share of the 401(k) assets across all investment categories, PSCA data shows.

Such investment vehicles perform the same basic function: They’re legal structures that pool investor money together.

However, there are some differences.

For example, ETFs have certain perks for investors relative to mutual funds, such as tax benefits and the ability to do intraday trading, experts said.

However, those benefits are “irrelevant” in 401(k) plans, Blanchett said.

The tax code already gives 401(k) accounts a preferential tax treatment, making an ETF advantage relative to capital gains tax a moot point, he said.

Blanchett said 401(k) plans are also long-term accounts in which frequent trading is generally not encouraged. Just 11% of 401(k) investors made a trade or exchange in their account in 2023, according to Vanguard data.

Additionally, in workplace retirement plans, there’s a decision-making layer between funds and investors: the employer.

Company officials choose what investment funds to offer their 401(k) participants — meaning investors who want ETFs may not have them available.

There may also be technological roadblocks to change, experts said.

The traditional infrastructure that underpins workplace retirement plans wasn’t designed to handle intraday trading, meaning it wasn’t built for ETFs, Mariah Marquardt, capital markets strategy and operations manager at Betterment for Work, wrote in a 2023 analysis. Orders by investors for mutual funds are only priced once a day, when the market closes.

There are also entrenched payment and distribution arrangements in mutual funds that ETFs can’t accommodate, experts said.

Mutual funds have many different share classes. Depending on the class, the total mutual fund fee an investor pays may include charges for many different players in the 401(k) ecosystem: the investment manager, plan administrator, financial advisor and other third parties, for example.

That net mutual fund fee gets divvied up and distributed to those various parties, but investors largely don’t see those line items on their account statements, Chao said.

Conversely, ETFs have just one share class. They don’t have the ability the bundle together those distribution fees, meaning investors’ expenses appear as multiple line items, Chao said.

“A lot of people like to have just one item,” Chao said. “You feel like you’re not paying any more fees.”

“It’s almost like ignorance is bliss,” he said.

 

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$20,000 Caution Bond Requirement for US Visa Applications imposed on 50 Countries

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7 days ago

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August 8, 2026

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The United States Department of State has officially implemented a revised visa policy introducing a mandatory posting requirement for caution payments of up to $20,000 on select foreign travel applications. Under the updated regulatory framework, consular officials are authorized to require temporary nonimmigrant visa applicants from targeted foreign countries to post a refundable financial bond of $20,000 as a condition for visa issuance. The policy mechanism is designed to address diplomatic concerns regarding high overstay rates among temporary visitor, business, and educational visa categories.

The caution bond pilot program applies selectively to foreign nationals from designated countries whose diplomatic entities record historical visa overstay rates exceeding established federal thresholds. Under administrative guidelines published by the State Department, the full financial deposit is posted directly to a dedicated federal escrow account prior to final visa issuance. The entire caution payment is automatically refunded to the applicant upon verified proof of timely departure from the United States in strict compliance with the authorized duration of stay. Conversely, failure to depart within the legal timeframe results in full forfeiture of the posted financial bond to the United States government.

Diplomatic representatives and travel policy experts have expressed varying perspectives regarding the operational implementation of the caution bond system. Administration officials emphasize that the measure serves as an effective, market-based incentive to enforce international travel compliance and preserve domestic immigration security standards. However, international trade organizations and foreign diplomatic missions have raised concerns regarding the financial burden imposed on legitimate business travelers, foreign students, and commercial partners from developing nations.

The United States finalized the rule to make the temporary visa bond program permanent, taking effect on August 3, 2026. The updated permanent regulation replaces the prior 12-month pilot, eliminates the lowest $5,000 tier, and raises the maximum required bond amount to $20,000 for specific B-1/B-2 business and tourist visa applicants.

Here is the list of the 50 countries on the list as o August 3, 2026

African Nations (31 Countries)

  • Algeria
  • Angola
  • Benin
  • Botswana
  • Burundi
  • Cabo Verde (Cape Verde)
  • Central African Republic
  • Côte d’Ivoire (Ivory Coast)
  • Djibouti
  • Ethiopia
  • Gabon
  • The Gambia
  • Ghana
  • Guinea
  • Guinea-Bissau
  • Lesotho
  • Malawi
  • Mauritania
  • Mauritius
  • Mozambique
  • Namibia
  • Nigeria
  • São Tomé and Príncipe
  • Senegal
  • Seychelles
  • Tanzania
  • Togo
  • Tunisia
  • Uganda
  • Zambia
  • Zimbabwe

Asian & Eastern European Nations (11 Countries)

  • Bangladesh
  • Bhutan
  • Cambodia
  • Georgia
  • Kyrgyzstan
  • Mongolia
  • Nepal
  • Papua New Guinea
  • Tajikistan
  • Turkmenistan
  • Uzbekistan

Caribbean & Latin American Nations (5 Countries)

  • Antigua and Barbuda
  • Cuba
  • Dominica
  • Grenada
  • Venezuela

Oceanian Nations (3 Countries)

  • Fiji
  • Tonga
  • Vanuatu

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Next-Generation Retirement Planning: Managing Longevity Risk and Variable Income Streams

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1 week ago

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August 7, 2026

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Retirement planning strategies are evolving in 2026 to address increased life expectancies, shifting dynamic market conditions, and the transition away from traditional defined-benefit pensions. Individual investors and financial advisors are abandoning rigid retirement models in favor of flexible, multi-asset strategies designed to mitigate longevity risk and preserve purchasing power over multi-decade retirement horizons.

Mitigating Longevity Risk with Dynamic Asset Allocation
As average life expectancies extend past eighty-five years, one of the primary financial risks facing retirees is outliving their accumulated wealth. Traditional fixed income allocations—such as the standard 60/40 equity-to-bond portfolio—are being reevaluated to ensure portfolios generate sufficient capital growth alongside reliable income.

Financial planners recommend maintaining a meaningful equity allocation throughout retirement to offset long-term inflation erosion. High-dividend equity funds, global real estate investment trusts (REITs), and inflation-indexed Treasuries are combined to create diversified portfolios that deliver both growth and income stability.

The Transition to Dynamic Withdrawal Strategies
The classic “4% safe withdrawal rule” is increasingly replaced by dynamic withdrawal strategies that adapt annually based on market performance. Under a dynamic withdrawal framework, retirees adjust their annual distribution rates within pre-set caps and floors:
– Market Upside: During strong market returns, retirees can increase discretionary spending or fund family legacy gifts.
– Market Downturns: During market pullbacks, spending distributions are temporarily reduced to prevent sequence-of-returns risk and preserve core investment principal.

Guaranteed Lifetime Income Options and Deferred Annuities
To establish a guaranteed baseline for essential living expenses, individuals are incorporating modern fixed-indexed and deferred longevity annuities into their broader retirement architectures. Modern annuity structures offer competitive return caps, transparent fee schedules, and inflation-adjustment options.

By funding essential expenses—such as housing, healthcare, and insurance—with guaranteed income streams from Social Security, pensions, and annuities, retirees can manage discretionary investment portfolios with greater flexibility and lower emotional stress during market volatility.

Actionable Steps for Future Retirees
1. Calculate Baseline Retirement Expenses: Determine fixed living costs and map guaranteed income sources to cover essential expenditures.
2. Adopt Flexible Withdrawal Rules: Implement dynamic spending rules to protect investment principal against market downturns.
3. Incorporate Inflation-Protected Assets: Maintain exposure to dividend-growing equities and inflation-indexed bonds to safeguard long-term purchasing power.

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Building Generational Wealth: Family Governance, Estate Tax Optimization, and Asset Protection

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2 weeks ago

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August 1, 2026

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As the largest intergenerational transfer of wealth in history accelerates, high-net-worth families, entrepreneurs, and individual investors are placing heightened emphasis on comprehensive estate planning, family governance, and asset protection. Preserving capital across generations requires a balanced approach combining tax-efficient legal structures with open family communication and financial literacy education.

Optimizing Estate Tax Exemptions and Trust Structures
With potential modifications to federal estate tax exemption thresholds on the horizon, proactive estate planning is essential for high-net-worth households. Estate planning attorneys and wealth advisors are establishing multi-generational trust structures to transfer wealth efficiently while minimizing estate and gift tax exposure.

Popular structural strategies include:
– Irrevocable Life Insurance Trusts (ILITs): Utilizing life insurance proceeds to provide liquidity for estate tax obligations without expanding the taxable estate.
– Grantor Retained Annuity Trusts (GRATs): Transferring rapidly appreciating assets to beneficiaries with minimal gift tax consequences.
– Dynasty Trusts: Preserving wealth across multiple generations while providing long-term asset protection from creditor claims and legal liabilities.

Establishing Family Governance and Financial Education
Legal and financial structures alone cannot guarantee long-term wealth preservation without effective family governance. Financial advisors report that a significant percentage of multi-generational wealth dissipation stems from lack of communication and inadequate financial preparation among heir generations.

Families are establishing formal family governance frameworks, including periodic family meetings, written mission statements, and structured philanthropic foundations. Involving younger family members in charitable grant-making and investment discussions fosters financial stewardship and prepares heirs to manage family assets responsibly.

Digital Asset Custody and Legacy Planning
In today’s modern economy, estate planning must extend beyond physical real estate and traditional brokerage accounts to encompass digital assets. Comprehensive estate plans now include detailed inventories and legal access protocols for corporate domain names, intellectual property, digital media rights, and cryptocurrency holdings.

Fiduciaries and estate executors should be provided with secure, encrypted access mechanisms and clear legal authority to manage and transfer digital holdings in accordance with the owner’s estate directions.

Practical Steps for Legacy Planning
1. Review and Update Estate Documents: Ensure wills, revocable trusts, and power-of-attorney designations accurately reflect current family structures.
2. Establish Structured Trusts: Utilize irrevocable trusts to protect assets from creditors and minimize future estate tax liabilities.
3. Create a Digital Estate Inventory: Document access protocols and legal permissions for all online accounts, intellectual property, and digital assets.

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