What is a key responsibility of employees in DC plan investment provisions?

In a Defined Contribution (DC) plan, a key responsibility of employees is deciding how to invest their account balances. This aspect of a DC plan places significant responsibility on the employee, as they must choose from various investment options provided by the plan. Employees are tasked with evaluating their risk tolerance, retirement goals, and time horizon, which ultimately influences how they allocate their funds among available investment choices such as stocks, bonds, mutual funds, or target-date funds.

This decision-making process is crucial because the growth of their retirement savings is directly tied to the investment choices they make. Unlike Defined Benefit plans, where the employer usually handles the investments, DC plans empower employees to take control of their retirement savings, making informed choices that will impact their financial future. Understanding investment options and their potential risks and rewards is essential for employees to maximize their retirement benefits.