Headlines about "Ret plan investments - self-directed"
Gathered from the web by the editors at BenefitsLink.com.
Convenience, Choice, And Control Are Important Factors As Investments Become More Conservative
Excerpt: "Saving for retirement is very important, according to 96.9% of respondents to a survey conducted by ING Institute for Retirement Research. In addition, respondents overwhelmingly (92.4%) said that automatically deducting from the paycheck is the best way to save; 83.6% said that their employer's plan was very important for saving for retirement, with 11.4% saying that their employer plan is fairly important." (Wolters Kluwer Law & Business)
SEC to Firms: Cut the Mind-Numbing Disclosures
Excerpt: "The SEC expects to soon start reviewing disclosure requirements for quarterly and annual filings. The agency wants to figure out what information should be omitted and what needs to be added. . . . " (Business Insurance)
[Guidance Overview] Broker-Dealers and Other Non-Fiduciaries as Fiduciaries? (Part 2)
Excerpt: "The ultimate outcome of the great wrestling match among the executive and legislative branches of the federal government, and various powerful financial services interest groups as to whether broker-dealers will be turned into fiduciaries and, if so, what kind of fiduciary standard they will have to live up to is not yet known, of course. Given that, many of the registered representatives who believe that they already are fiduciaries to their clients cannot be blamed for perhaps feeling as though they're in a state of suspended animation." (Morningstar Advisor)
[Opinion] Testimony of Morningstar Director of Research: Five Concerns About Target-Date Mutual Funds
Excerpt: "[T]here are certain concerns, given the extraordinary position that target-date funds now occupy as the default investment of choice for America's New Retirement Model. These concerns include:* Variation in fees; * The use of proprietary (in-house) funds; * Lack of manager ownership; * Variation in glide paths among the shorter-dated funds; * Lack of transparency" (Morningstar)
[Guidance Overview] Senate Hearing Considers 401(k) Target-Date Fund Concerns, More Regulation
Excerpt: "Concerns about 401(k) target-date funds aired in a Senate Special Committee on Aging hearing and report raise the prospect of greater regulation. Hearing witnesses praised the funds as an important savings option but reiterated some issues noted in the report, such as wide differences in asset allocations among funds with the same target date, provider fees and potential conflicts of interest. The Department of Labor is working with the SEC to assess the need for more guidance and may revisit rules for qualified default investment alternatives to ensure 'meaningful disclosure.'" (Mercer)
In Quarterly 401(k) Statements, Time Heals Everything
Excerpt: "Investors may think that the market has improved tremendously over just the last few weeks. It hasn't. It's just that by the end of October, the market was more than a year beyond the stock market swoon that followed the collapse of Lehman Brothers. During the worst of the 2008 panic, from the start of last September through Oct. 10, the market lost nearly a third of its value." (New York Times; free registration required)
What the Stock Market Decline Means for Financial Security and Retirement Choices of Near-Retirement Population
Excerpt: "This paper investigates the effect of the current recession on the near-retirement age population. Data from the Health and Retirement Study suggest that those approaching retirement age (early boomers ages 53 to 58 in 2006) have only 15.2 percent of their wealth in stocks, held directly or in defined contribution plans or IRAs. Their vulnerability to a stock market decline is limited by the high value of their Social Security wealth, which represents over a quarter of the total household wealth of the early boomers. In addition, their defined contribution plans remain immature, so their defined benefit plans represent sixty five percent of their pension wealth. Simulations with a structural retirement model suggest the stock market decline will lead the early boomers to postpone their retirement by only 1.5 months on average." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)
How Do Pension Changes Affect Retirement Preparedness? The Trend to Defined Contribution Plans and the Vulnerability of Retirement Age Population to Stock Market Decline of 2008-2009 (PDF)
55 pages. Excerpt: "This document has two parts. The first part presents background information on trends in pensions drawn from our forthcoming book, Pensions in the Health and Retirement Study. Using data from the Health and Retirement Study (HRS), trends in pensions are described among three cohorts: those aged 51 to 56 in 1992, called the HRS cohort; those 51 to 56 in 1998, called the war baby cohort; and those 51 to 56 in 2004, called the early boomer cohort. The second part is a paper which deals with the likely effects of the stock market decline on those approachingretirement age." (University of Michigan Retirement Research Center)
Working Longer, Reducing Withdrawals, Buying Annuities Improves Retiree Savings
Excerpt: "In its October 2009, issue of ThoughtCapital, Principal suggested a number of ways that someone approaching retirement can postpone the depletion of his or her retirement portfolio beyond the 14-year period caused by poor market performance in the early years of retirement. First, scaling down retirement spending from 4% to 2%, adjusted for inflation, would help sustain retirement income from 14 to 30 years. Second, delaying retirement by five years would help sustain retirement income from 14 to 23 years, assuming that the retirement spending rate stayed at 4%, adjusted for inflation. . . . For more information, including the assumptions used to arrive at these conclusions, visit http://www.principal.com/about/news/research.htm." (Wolters Kluwer)
Personality, Lifetime Earnings, and Retirement Wealth
Excerpt: "Lifetime earnings vary widely, even controlling for education. Households vary widely in their retirement wealth, even when controlling for lifetime income (Venti and Wise, 1998). The role of conscientiousness and other personality traits as independent factors in labor market outcomes early in the life cycle has recently been demonstrated (Borghans, Meijers, & Ter Weel, 2008 ). We propose to examine the association between personality measures assessed near or past the end of work life with lifetime labor market outcomes, and with retirement saving conditional on lifetime earnings, using data from the HRS and the linked Social Security administrative records." (University of Michigan Retirement Research Center)
401(k) Performance: The Numbers Add Up
Excerpt: "I'm a little tired of reading about how 'buy and hold' is dead, and diversification doesn't work, and how 'target-date funds don't work,' and that there was too much risk, especially for pre-retirees, in these balanced funds. These stories seem to continue regardless of what's going on in the real world. So I won't discuss much. Instead, here's some math." (The Vanguard Group, Inc.)
Converting Assets to Income in Retirement: What Near-Retirees are Thinking
Excerpt: "Savings is necessary but not sufficient to generate a secure and adequate lifetime income for retirees. In retirement, savings must be managed and used to generate a stream of income. Annuitization is the only means to convert savings into an income stream guaranteed to last the lifetime of a retiree. This report examined the concerns of savers approaching retirement age in the higher education sector regarding managing that savings in retirement and their plans for converting it into income." (TIAA-CREF Institute)
Desire for Advice Influenced Retirement Money Movement in Past Year
Excerpt: "A new analysis shows that contrary to popular opinion, mass affluent consumers were not passive during the difficult financial environment of 2008-2009 - they moved significant amounts of retirement money, including taxable assets, over the past year, in search of better value, personalized advice and guidance, and a financially sound provider. 'Retirement Money in Motion: Capitalizing on IRA, Rollover & Taxable Money Movement' found that the desire to consolidate accounts was the number one driver of Retirement Money in Motion decisions - but a minimum, pre-existing 20% wallet-share capture was required to win this business. Financial soundness perceptions (and realities) drove a third of retirement money movement decisions." (PLANSPONSOR.com; free registration required)
Behind the Rally in Retirement Accounts
Excerpt: "Despite the biggest and broadest decline in financial markets in a generation, the median 401(k) retirement account at Vanguard Group on Sept. 30, 2009, was up 7% from where it was two years earlier, when the market was near its all-time high." (The Wall Street Journal)
Financial Literacy and Financial Sophistication Among Older Americans
Excerpt: "This paper analyzes new data on financial literacy and financial sophistication from the 2008 Health and Retirement Study. We show that financial literacy is lacking among older individuals and for the first time explore additional questions on financial sophistication which proves even scarcer. For this sample of older respondents over the age of 55, we find that people lack even a rudimentary understanding of stock and bond prices, risk diversification, portfolio choice, and investment fees. In view of the fact that individuals are increasingly required to take on responsibility for their own retirement security, this lack of knowledge has serious implications." (Pension Research Council; registration required to download fulltext of paper)
Benefits and Finance Departments Collaborate on 401(k)s
Excerpt: "While benefits executives report they are, in general, working well with their counterparts in finance, research points to patterns of divergent perceptions of 401(k) participants' goals and needs, as well as different operational priorities for the plan itself, that could hinder its ultimate success. . . . [A] recent survey did, however, show a basic consensus among benefits and finance professionals that employees are focusing more on long-term 401(k) investment returns than on simply avoiding short-term losses." (Employee Benefit News; free registration required)
Should You Use 401(k) Money to Buy an Annuity?
Excerpt: "About a quarter of all companies these days offer their employees the option to purchase annuities with their 401(k) money, according to the Profit Sharing/ 401(k) Council of America, an industry group for plan sponsors. But these are lump-sum purchases that typically happen at the brink of retirement and aren't too popular with employees, says David Wray, president of the PSCA. What insurers have been working on during the past several years are specially-designed guaranteed-income products that can be purchased in small chunks with each paycheck, just like shares of a mutual fund." (SmartMoney)
Retirement Planning and Risk: How Much Is Enough? (PDF)
20 pages. Excerpt: "While the global financial crisis that shook markets to their core last autumn may have finally begun to abate, the damage inflicted on investors' portfolios -- and their psyches -- has proven far more enduring. For all investors but especially those poised to retire, the fallout has resulted in an imbalance among the current value of retirementassets, the projected future retirement needs of investors and the ability to close the gap through additional funding. Investors face difficult choices related to what we've termed the 'trilemma,' where the three dimensions of retirement planning -- increasing savings, adjusting risk levels and resetting goals -- must be reevaluated as part of a comprehensive financial plan. But merely highlighting these dimensions -- and the difficult decisions they require an investor to make -- may still not be enough to bring portfolios back into balance. Thus, we propose a nontraditional approach toward managing retirement assets that allows investors to match specific segments of their portfolios to clearly defined objectives,which reflect stated needs, wants and wishes." (UBS Financial Services Inc.)
Retirement Income Products Fall Short of Retirees' Needs
Excerpt: "According to Fidelity, 85% of Americans aged 55-70 now value guaranteed monthly income more than above-average returns. In response to the need of pre-retirees for products that guarantee income and the impending retirement of the baby boom generation, retirement plan providers have continued to invest in income-oriented product innovation." (BusinessWeek)
Four in Five Investors Misusing Target Date Funds, AllianceBernstein Study Finds
Excerpt: "The study found that 76% of defined-contribution-plan participants who are using target date funds think these all-in-one investment options provide better performance than they could get if they selected individual mutual funds on their own. Eighty-six percent of all target date fund users plan to maintain or increase their investment in such funds. However, the same study found that only 19% percent of the more than 1,000 participants polled had put 80% to 100% of their assets in a target date fund ? the way in which they are intended to be used. Sixty-percent of those investors don't want to put all of their assets in a single target date fund because they 'don't want to put all of their eggs in one basket,' according to a release issued by AllianceBernstein." (Investment News; free registration required)
Investor Attitudes in the Wake of the 2008?2009 Market Decline
Excerpt: "A survey conducted by Vanguard Center for Retirement Research in May-June 2009 examines investor attitudes toward equity investing following the market turmoil of 2008-2009. Although the study found that expectations for investment returns were relatively modest and worry about market risks remained high, it also found an ongoing commitment to holding equities for retirement and other long-term goals." (Vanguard Institutional)
401(k) Asset Allocation, Account Balances, and Loan Activity During 2008 (PDF)
63 pages. Excerpt: "After rising in 2003 and for the next four consecutive years, the average 401(k) retirement account fell 24.3 percent in 2008. The average 401(k) account balance moved up and down with stock market performance, but over the entire five-year time period increased at an average annual growth rate of 7.2 percent, attaining $86,513 at year-end 2008. The median 401(k) account balance increased at an average annual growth rate of 11.4 percent over the 2003?2008 period to $43,700 at year-end 2008." (Investment Company Institute)
[Opinion] TIME Magazine's 401(k) Plan Cover Story: Bad Facts, Bad Story
Excerpt: "[T]his article is emblematic of the uneven, at times unfair, coverage of 401(k)s during the market decline." (Vanguard Blog)
Are Target-Date Funds the No-Worries Answer to Saving for Retirement?
Excerpt: "How could an investment specifically aimed at someone retiring in just a few years be so heavily into stocks? Shouldn't the money be tucked in less risky options, like bonds and money market instruments? Congress, the Labor Department and the Securities and Exchange Commission all held hearings looking into the funds' marketing and investment strategies. 'The problem with target-date funds is that the underlying message has been, 'Look Ma, no hands!' ' said Steve Vernon, a financial adviser in Oxnard, Calif. 'They tried to make them idiot-proof. But if you put your money in a fund without knowing what they're invested in, you're an idiot.'" (The New York Times; free registration required)
Retirement Planning Beyond the Longevity Tables
Excerpt: "WHEN financial markets began to plummet two years ago, many retirees faced the very real prospect of outliving their money. As a solution, many academic researchers have long advocated 'fixed life annuities': investment vehicles that pay a set amount each year until the investor -- or, sometimes, a spouse -- dies. These annuities are not to be confused with a range of other products with 'annuity' in their names, including many known loosely as 'variable' annuities. Most of these other products don't directly address retirees' risk of outliving their money. These vehicles also generally exact higher fees. Only a tiny minority of the products sold as annuities in the United States are of the 'fixed life' variety, enjoying that academic seal of approval." (The New York Times; free registration required)
[Opinion] Book Review: 'The Smartest Retirement Book You'll Ever Read'
Excerpt: "The first problem is inflation. Even if it runs at a relatively tame 3 percent a year, the impact will be substantial. . . . Second, you'll need to figure out how to withdraw enough money during retirement to live the way you want, but without outliving your savings. [The author] sets out to deal with both topics, throwing in advice about other retirement issues like health care costs and estate planning." (The New York Times; free registration required)
[Guidance Overview] IRS Guidance on 2009 Waivers of Required Minimum Distributions; DOL Says Summary Prospectus Satisfies ERISA Section 404(c) (PDF)
3 pages. Excerpt: "The IRS has issued Notice 2009-82 providing needed guidance for employers on the waiver of 2009 required minimum distributions (RMDs), including sample plan amendments. The guidance also provides plan operational relief for the period of January 1, 2009 through November 30, 2009, rollover relief until November 30, 2009, and Q&As that address miscellaneous issues related to the waiver of 2009 RMDs. Separately, the DOL issued Field Assistance Bulletin (FAB) 2009-3 providing that the prospectus requirement for ERISA Section 404(c) compliance can be satisfied by furnishing participants with a 'Summary Prospectus,' a new short-form prospectus approved by the Securities and Exchange Commission (SEC) earlier this year as part of its enhanced disclosure framework for mutual funds." (Buck Consultants)
[Opinion] Why It's Time to Retire the 401(k)
Excerpt: "If you have even peeked at your account statements in the past year, it's painfully obvious that something is wrong with the way we save. The tax-deferred 401(k) plan, and others like it, such as the 403(b) and the IRA, have become our nation's go-to retirement piggy bank. Invented nearly 30 years ago as an executive perk -- one more way to dodge Uncle Sam -- the 401(k) was never meant to replace the employer-guaranteed pension fund, supplemented by Social Security, as the cornerstone of our nation's retirement system. But propelled by a combination of companies looking to cut costs and consumers who wanted control of their retirement destiny, that's exactly what happened." (Time Inc.)
Average 401(k) Balance Among Consistent Savers Fell 24% in 2008
Excerpt: "Maybe the best that can be said about the effect of last year's market crash on average 401(k) balances is: It could have been worse. The average balance dropped 24% in 2008, according to a study of accounts held by 6 million workers who consistently participated in a 401(k) plan from 2003 through 2008, by the Employee Benefit Research Institute and the Investment Company Institute." (MarketWatch, Inc.)
[Opinion] Financial Planners and Market Bulls Are Blowing Smoke
Excerpt: "These days, I see more and more reports about the market stabilizing, about the little guy dipping his toes back into the water. The old catch-phrases are returning: We are in the midst of one of the great bull markets in history; March was a once-in-a-lifetime buying opportunity. Balderdash. The current bull market is a classic sucker rally in the middle of a bear market. This happened all the time during the Depression. The recent 50% bounce still leaves the Dow about 4,000 points below its all-time high. March was not a once-in-a-lifetime buying opportunity; it was a once-in-a-lifetime salvage opportunity. It was a chance to buy back your lost shirt while conceding that your pants are gone for good. Even more infuriating are the 'experts' advising people how to invest the money they plan to retire on." (Los Angeles Times)
Investing in Retirement Accounts: Analyzing Influences on Choice
Excerpt: "Asset allocation patterns in DC accounts as reported by the 2007 Survey of Consumer Finances (SCF) provide a valuable reference. This analysis uses regression techniques to identify factors that are closely correlated with investors' portfolio choices. Considering these salient factors should enable plan sponsors and policymakers to choose financial education tools, policies and default programs to better guide and improve DC plan participants' asset allocations." (Watson Wyatt Worldwide)
401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2008 (PDF)
68 pages. Excerpt: "Because 401(k) balances can fluctuate with market returns from year to year, meaningful analysis of 401(k) plans must examine how participants' accounts have performed over the long term. Looking at consistent participants in the EBRI/ICI 401(k) database over the five-year period from 2003 to 2008 (which included one of the worst bear markets for stocks since the Great Depression), the study found: After rising in 2003 and for the next four consecutive years, the average 401(k) retirement account fell 24.3 percent in 2008. The average 401(k) account balance moved up and down with stock market performance, but over the entire five-year time period increased at an average annual growth rate of 7.2 percent, attaining $86,513 at year-end 2008. The median (mid-point) 401(k) account balance increased at an average annual growth rate of 11.4 percent over the 2003?2008 period to $43,700 at year-end 2008." (Employee Benefit Research Institute)
How to Rebuild a Retirement Investment Portfolio After Recession's Hit
Excerpt: "One year after the collapse of Lehman Bros., the average stock mutual fund is virtually unchanged. The question now: How to rebuild your retirement plan and recover from the bear market that began nearly two years ago. The average stock fund has fallen 28% since the stock market's peak on Oct. 9, 2007. What should you do now? Start with a list of things you shouldn't do . . . ." (USA TODAY)
Hearing on Defined Benefit Pension Plan Funding Levels and Investment Advice Rules
October 1, 2009. Includes links to testimony. (U.S. House of Representatives, Committee on Ways and Means)
Changes Needed in DC Retirement System
Excerpt: "In a recent survey, Mercer asked 180 DC plan sponsors if they believe the 401(k) system can ever provide adequate retirement benefits. Half of the respondents indicated that the existing system is adequate (16%) or would be adequate with additional regulations (34%), while the other half said the 401(k) system cannot provide such benefits (29%) or were unsure (21%)." (Employee Benefit Adviser; free registration required)
Retirement Saving Adequacy and Individual Investment Risk Management Using the Asset/Salary Ratio
Excerpt: "This chapter uses the Asset-Salary Ratio (ASR) to examine the factors that increase the likelihood that defined contribution plan participants will have sufficient assets to generate adequate retirement income, similar to the defined benefit plan full-funding ratio. We apply this measure to a sample of TIAA-CREF participants, and we show that participant assets are on average consistent with at least a 70 percent income replacement ratio. Key factors explaining success are an adequate contribution rate and long tenure in the system; having a portfolio weighted to equities is beneficial but to a lesser extent. Thus good funding and early participation is more important than 'chasing returns.' Measures such as the ASR can help participants make more informed choices." (Pension Research Council; registration required to download fulltext of paper)
Despite the Economy, You Can Play Catch-Up with Your Retirement Plan Investments (PDF)
Excerpt: "Investors who want to crunch their own numbers can try some of the new how-long-to-recoup calculators that have started populating the Web. There's one designed by the investment firm T. Rowe Price at Kiplinger.com, another at Principal Financial Group, and a third at the financial software group Ativa's site. What's the best way to rebuild your nest egg? According to most financial advisers, don't lament the tumult of the last year or try too hard to profit from short-term share prices going forward. Instead, they say, clients should simply stick with their plans: save and invest more, spend less, and try not to worry about the ups and downs that will always be a part of the financial markets." (NewsWeek)
[Guidance Overview] Recent Defined Contribution Plan Guidance: Automatic Enrollment, Paid Time Off Contributions, 404(c) and Mutual Fund Prospectus (PDF)
4 pages. Excerpt: "This Alert highlights recent guidance regarding (1) automatic enrollment features in 401(k) plans, (2) the contribution of unused paid time off to tax-qualified defined contribution plans as either employer contributions or employee salary deferral contributions, and (3) the permissibility of distributing a mutual fund's 'Summary Prospectus' to participants to satisfy one of the requirements for limited fiduciary protection under section 404(c) of the Employee Retirement Income Security Act of 1974 (ERISA)." (Drinker Biddle Reath LLP)
Congress Eyes Compromise in 401(k) Independent Investment Advisor-Advice Rule
Excerpt: "Now that the Department of Labor is scrapping a rule proposal that would have allowed brokers affiliated with financial-services firms to provide advice to 401(k) participants, Congress will move forward with legislation that would require that such advice be given by independent advisers, according to a key congressman. The rule proposal was one of several Labor regulations put forth by the Bush administration during its final days. Labor Secretary Hilda Solis 'will work with Congress to find ways to further develop the existing market of qualified independent advice,' said Rep. Robert Andrews, (D-New Jersey), chairman of the House Education and Labor Committee's Health, Employment, Labor and Pensions Subcommittee. His recent comments came after Assistant Labor Secretary Phyllis Borzi, head of the Employee Benefits Security Administration, told a conference of 401(k) administrators that new regulations will be issued for investment advice to participants in the $2.3 trillion 401(k) market. She gave no timetable for issuing a new proposal." (Workforce Management; free registration required)
[Opinion] 401(k) Blunder Is an All Too Common Retirement-Killer
Excerpt: "As far as I'm concerned, even if your employer pays the 401(k) match in company stock, holding it for the long haul is one of the biggest mistakes you can make with a retirement plan. The reason is pretty simple: Even if you don't own a single share of your employer's stock, your financial exposure to the company is already huge -- you work there! So, take advantage of the matching plan, but sell the stock off in order to keep it a very small part of your overall portfolio." (The Motley Fool via MSNBC)
401(k) Fixes for All Age Groups
Excerpt: "A recent study by Financial Engines, a company that provides advice to retirement-plan participants, found that investors with as few as five years until retirement can recover their 2008 losses by making modest increases in savings and working two or three more years. Young investors, meanwhile, have much to gain, because they're years from retirement and are able to invest at bargain-basement prices. Here's a look at how investors in different age groups can rehabilitate their 401(k) plans . . . ." (USA TODAY)
Higher Education Retirement Savers Respond to the Market (PDF)
Excerpt: "Data from a recent survey of 1,002 near-retirees (age 50 to 70) in the higher education sector who are saving for retirement indicates realism among this group as they adjust their savings in response to the financial market meltdown. The survey measured the self-reported attitudes and actions of respondents and did not examine actual investment outcomes or objective measures of retirement preparedness." (TIAA-CREF Institute)
[Guidance Overview] Use of Summary Prospectus to Meet Section 404(c) Prospectus Delivery Requirements (PDF)
3 pages. Excerpt: "The Summary Prospectus must include at the beginning or on the cover page, among other things, the mutual fund's name, the share classes to which the Summary Prospectus relates, and a required legend containing an Internet address, email address, and toll-free telephone number where investors may obtain the statutory prospectus and other information free of charge. Furthermore, the Summary Prospectus must contain the key information required to appear at the beginning of the statutory prospectus, including a description of the investment objectives of the mutual fund, fee and expense information, principal investment strategies, associated risks, fund performance, investment advisers and subadvisers, purchase and sale of fund shares, and financial intermediary compensation." (Morgan, Lewis & Bockius LLP)
Labor Department Nixes Bush Rule to Let Brokers Advise 401(k) Plans
Excerpt: "The Department of Labor is killing a regulation issued in the last days of the Bush administration that would have allowed advisers affiliated with mutual funds, brokerage firms and other companies that sell investments to provide investment advice to 401(k) participants. 'We believe the final investment advice regulation published in the Jan. 21, Federal Register went too far in permitting investment advice arrangements not specifically contemplated by the statutory exemption,' said Phyllis C. Borzi, assistant secretary of the Employee Benefits Security Administration, a unit of the Labor Department." (Investment News; free registration required)
Housing in Retirement Monograph
Excerpt: "The recent bursting of the housing bubble left many Americans unprepared to deal with its consequences as it reverberated throughout the economy. With falling housing prices, foreclosures, tighter credit, and much of their resources invested in housing, many retirees and workers near retirement found themselves placed in a position of risk that they did not anticipate. With these events in mind, the Society of Actuaries Committee on Post-Retirement Needs and Risks (CPRNR) issued a call for papers in the summer of 2008 seeking papers that explored housing wealth, options, and spending issues in retirement. For more than ten years,the CPRNR has sponsored research to enhance understanding of how the public perceives and is dealing with the post-retirement period. In undertaking this effort, it became increasingly clear to the CPRNR that housing is a very significant retirement asset and options related to choice and financing of housing are important considerations for retirement planning. As a result, the call for papers that was issued has led to the publication of this monograph, which contains papers received in response as well a relevant paper that appeared in a previously producedmonograph. Also included in the monograph are discussions of selected groupings of papers by reviewers recruited to provide commentary on them.The papers in this monograph provide varied perspectives on many housing and retirement issues of concern to policymakers, financial planners, and homeowners, among others." (Society of Actuaries)
How Ordinary Consumers Make Complex Economic Decisions: Financial Literacy and Retirement Readiness
Excerpt: "This paper reports on several self-assessed and objective measures of financial literacy newly added to the American Life Panel (ALP), and it links these performance measures to efforts consumers make to plan for retirement. We evaluate the causal relationship between financial literacy and retirement planning by exploiting information about respondents' financial knowledge acquired in school - before entering the labor market and certainly before starting to plan for retirement. Results show that those with more advanced financial knowledge are those more likely to be retirement-ready." (National Bureau of Economic Research; paid subscription or individual purchase required to retrieve fulltext)
[Guidance Overview] Section 404(c) and the Related Regulation to Protect Plan Fiduciaries from Liability (PDF)
3 pages. Excerpt: "The Court of Appeals for the 7th Circuit recently issued an order in the case of Hecker v. Deere that 'clarifi es' its earlier ruling in the case?though in our view, the 'clarifi cation' is more of a reversal of course. The issue addressed in the new order (andin this Bulletin) is the interplay between ERISA Section 404(c)and the fi duciary obligation to prudently select and monitor theinvestments offered in a 401(k) plan; that is, if you comply with404(c), do you still need to prudently select and monitor theinvestments?" (Reish & Reicher)
Why Do Investors Sit Tight in 401(k)s?
Excerpt: "There are bears. There are bulls. And there are sitting bulls. These are the legions of 401(k) investors who don't merely buy and hold; they buy, hold and sit stock-still. Even as the U.S. stock market fell 55% between October 2007 and March 2009, these people barely budged. Among the more than three million 401(k) participants served by Vanguard Group, 17% were 100% in stocks in 2007; at year-end 2008, 16% still were. Of the 11.2 million participants served by Fidelity Investments, 15% still have every penny in their 401(k) invested in stocks, including 14% of those between the ages of 60 and 64. The sitting bulls present a problem for hedge-fund managers and other professional investors who have argued that all it would take to shake individual investors' grip on stocks was a good old-fashioned bear market." (The Wall Street Journal)
[Official Guidance] Text of DOL Field Assistance Bulletin 2009-3: Use of Summary Prospectus for ERISA Section 404(c) Compliance
Excerpt: "The Department believes that the delivery of a Summary Prospectus by an identified plan fiduciary or designee to participants and beneficiaries satisfies the requirements of the ERISA section 404(c) regulations because the required contents of the Summary Prospectus provide key information about a mutual fund that will assist participants and beneficiaries in making informed investment decisions." (Employee Benefits Security Administration, U.S. Department of Labor)
Summary Prospectus Users Still 404(c) Eligible
Excerpt: "Plan sponsors on Tuesday got a bit of a roadmap from the U.S. Department of Labor's Employee Benefits Security Administration (EBSA) on how to rely on a summary prospectus to meet the prospectus delivery component of safe-harbor provisions. An EBSA news release said Field Assistance Bulletin (FAB) 2009-03 describes how an individual account plan can stay under 404(c) protection under the Employee Retirement Income Security Act (ERISA) by giving out the new summary prospectus, under Securities and Exchange Commission (SEC) guidelines." (PLANSPONSOR.com; free registration required)
Issue Brochure: Building Plan Participant Confidence in a Challenging Market Environment (PDF)
4 pages. Excerpt: "Proper plan design and appropriate investment options are the long-term solution to participants' retirement needs. To keep participants focused on the long term, communicating early and often is essential. In this publication, NAGDCA will share some thoughts on thefollowing questions to help you build or fine-tune a communication and education strategy: What should plan sponsors know? What are the participant behaviors to watch for? What messages are helpful? Where can you turn for resources to meet the challenge?" (National Association of Government Defined Contribution Administrators, Inc.)
After Latest Market Drop, Planners and Investors Trying to Figure Out What That Means for Their Retirement Plans
Excerpt: "Last year's meltdown was a sobering moment for 401(k) holders who were used to a market that only went up. Many of them thought of investing as risk free. When that bubble popped along with housing and credit, 401(k) plan sponsors and investors wondered just what would happen next. Kristi Mitchem, head of Barclays Global Investors' U.S. Defined Contribution business took some time to speak with Fortune about what is next for the 401(k) and how investors can get the most out of their retirement plans." (Fortune via CNNMoney.com)
Fees Can Drain Your 401(k) Retirement Savings
Excerpt: "How much are 401(k) fees removing from your retirement nest egg each year? If you are either unaware of such fees or don't know their amounts, don't worry: Nearly 83% of Americans don't know, either, according to AARP." (USA TODAY)
[Guidance Overview] ERISA Section 404(c) Bars Fiduciary Liability Claims Against Trustee for Losses Caused by Participants' Investment Advisor
Excerpt: "EBIA Comment: While the unusual facts may limit the impact of this case, it does demonstrate the potential benefits of an effective ERISA Section 404(c) defense. It also illustrates a fine point of the case law regarding the general fiduciary obligation to provide truthful information to participants. As in this case, in the context of plan changes, most courts impose a duty to disclose changes only when they are under serious consideration, and then only to persons who inquire." (Employee Benefits Institute of America)
[Opinion] Considering Changes to 401(k) Plans
Excerpt: "As a result of risks and mistakes, most American workers who are relying on 401(k)'s fail to amass anywhere near what they will need for a secure retirement. That is not to say that the 401(k) system must be dismantled. But reforms that once seemed far-reaching -- like automatically enrolling employees in 401(k)'s unless they opt out -- now seem quaint. A more thorough revamping is needed. Tax incentives must be changed. Under current law, high-income employees receive the biggest tax subsidies, and low-income employees the smallest. Replacing the current tax deduction for contributions with a tax credit would still give everyone a tax break, but would shift the benefit down the income scale, presumably boosting the savings of low-income workers." (The New York Times; free registration required)
Goal-Based Investing Gains Traction in Retirement Planning
Excerpt: "As defined benefit plans fade into history, more American workers are confronting the fact that they will need to be much more active in deciding how to marshal their retirement savings than their parents had to be. But how best to line up what you have now with what you'll need later? That's where goal-based investing, or what some people call liability-driven investing, comes in. This increasingly popular approach is yet another example of the retail investing world borrowing a page from institutional investors' playbook -- trying to manage people's assets so they better match their liabilities, which has long been a focus of pension funds." (BusinessWeek)
Use of Asset Allocation Funds Helps Participants Diversify, According to Vanguard Data
Excerpt: "The fact that 20% of participants in defined contribution plans administered by The Vanguard Group invested their entire nest eggs in an asset allocation fund at year-end 2008 helped shield the participants from the market's turmoil during the year, new Vanguard research indicated." (PLANSPONSOR.com; free registration required)
[Opinion] This Could Be the Biggest Mistake You'll Ever Make - with Your 401(k) Plan
Excerpt: "As far as I'm concerned, holding your employer's stock in your 401(k) is one of the biggest mistakes you can make with a retirement plan. The reason is pretty simple: Even if you don't own a single share of your employer's stock, your financial exposure to the company is already huge -- you work there!" (The Motley Fool)
The Efficiency of Investment Menus and Individual Portfolio Choice in 401(k) Retirement Plans
Excerpt: "Though millions of US workers have 401(k) plans, few studies evaluate participant investment performance. Using data on over 1,000 401(k) plans and their participants, we identify key portfolio investment inefficiencies and attribute them to offered investment menus versus individual portfolio choices. We show that the vast majority of 401(k) plans offers reasonable investment menus. Nevertheless, participants 'undo' the efficient menu and make substantial mistakes: in a 20-year career it will reduce retirement wealth by one-fifth, in fact, more than what a naive allocation strategy would yield. We outline implications for plan sponsors and participants seeking to enhance portfolio efficiency: don't just offer or choose more funds, but help people invest smarter." (Pension Research Council; registration required to download fulltext of paper)
Rebuilding 401(k) Retirement Savings: Three Stages of Rebuilding
12 pages. Excerpt: "In the following paper, we discuss the key factors contributing to an individual's ability to rebuild an account balance based on . . . study results. To facilitate the discussion of this process with participants, these factors have been simplified into three distinct stages: STAGE 1: Emotional to rational; STAGE 2: Passive to active; STAGE 3: Short-term to long-term." (Principal Financial Services, Inc.)
The links shown above have been gathered from the web by the editors at BenefitsLink.com. Each article's publisher is shown above in parentheses. Opinions expressed in each article are those of the article's publisher, not necessarily those of BenefitsLink.com, Inc. or any web site that displays these headlines in a "frame." You should contact the listed publisher for copyright information about any particular article or to inquire into the right to use the article in any manner.