Retirement planning

Bank of America wants to remind everyone that Merrill Lynch is more than just a sideshow. Trying to move beyond the lawsuits and congressional hearings, BoA will finally start using Merrill for what it intended when it bought the beleaguered investment bank in January: to develop wealth management products.

NEW YORK - After the terrible performance of markets last year, disgruntled investors of all sizes are considering switching financial advisers to someone else, even if their own adviser buffered their portfolio so that it lost less than the market's overall 38% decline.

NEW YORK - Selling retirement income guarantees after a recession is like selling flood insurance after a flood. Timing is everything, and currently the timing could not be better.

Forty-six percent of those leaving a job in 2008 tapped into their 401(k), maintaining an “alarmingly high” rate of people cashing in since 2005, Hewitt Associates said. Sixty-percent of those cashing in were in their 20s, and 33% were in their 50s.

The Senate Special Committee on Aging held a hearing Wednesday to examine the risks and potential conflicts of interest inherent in target-date funds.

Eighty-four percent of workers who are automatically enrolled in a 401(k) plan stick with the plan, up from 77% in 2007, Charles Schwab found. Participation among all plans rose to 77%, up from 73% in 2007.

Prudential Financial on Oct. 18 launched its “Morse Code SOS” advertising campaign touting the 401(k) administration and healthcare insurance services it offers U.S. companies.

Stunned by trillions of dollars of losses in the financial crisis, Americans will be investing significantly less in the future, according to a new survey by AlixPartners. Forty-nine percent of the 1,000 people the consulting firm surveyed have either stopped or reduced investing in stocks or mutual funds, 26% have no intention to return to these bedrock financial vehicles in the next three years, and another 27% were unsure whether they had the endurance to return to the markets in that timeframe.

The Internal Revenue Service has decided to keep contribution limits for 401(k)s, IRAs and other retirement accounts unchanged in 2010, rather than lowering them, as some had feared due to negative inflation. The Labor Department reported Thursday that the consumer price index has fallen 1.3% over the past 12 months.

To prevent other target-date investors from being burned as so many were in 2008, when the average 2010 and 2015 fund lost 25% of its value or more, more advisers are telling their clients that they need to look closely at the asset allocation and glidepaths of these funds so that half of their portfolios are not exposed to stocks on the eve of their retirement.

More than three-quarters, 77%, of 401(k) investors have not made any changes in the past 12 months leading up to April, J.P. Morgan Retirement Plan Services found in a survey titled “Anything But Certain.”

The variable annuity value proposition appears to be eroding, as mutual fund sales outpaced those of annuities during the second quarter, and more of the same is expected through next year.

Workers who had already been investing in their 401(k) for at least five years through 2008 saw their balances drop an average of 24% last year, compared with the S&P 500's sharp 37% decline, the Investment Company Institute and the Employee Benefit Research Institute said.

If there is anything positive to be gleaned from the financial crisis, it is that 401(k) plan designs need to be revised so they are more resistant to extreme volatility and market downturns, Putnam Investments CEO Robert L. Reynolds told executives at the National Investment Company Service Association’s East Coast Regional Meeting in Boston.

Noting that 15% of 401(k) participants have engaged in some form of “leakage,” that is, hardship withdrawals from their plans or failure to roll the money over when changing jobs, between 1998 and 2006, the Government Accountability Office is recommending that Congress eliminate the ban on additional contributions for six months by those who make such withdrawals.

A provision by the Internal Revenue Service that permits people age 70-1/2 or older to contribute up to $100,000 of their IRA money to a charity each year without tax consequences is slated to expire at the end of the year.

Wholesale changes are in store for both pension and 401(k) plans, according to a survey of 140 financial executives by Prudential Financial. Nearly half of the execs at companies with pension plans said their firms were considering freezing or terminating their pension plans in the next two years. Seventeen percent have already closed their DB plan to new entrants, and 27% said they are likely to do so in the next two years.

For the past year, investors have been nervously avoiding stocks and pumping billions of dollars into bonds and bond mutual funds, but a new study indicates that a large percentage of investors may have a limited understanding of how bonds work.

Fidelity has adjusted the holdings in its Freedom Fund lifecycle line as well as other asset allocation portfolios to include more international stocks, commodities and TIPS. International exposure throughout all of the Freedom Funds will rise from an average of 20% to 30%, with exposure to U.S. stocks falling commensurately.

The Hartford Financial Services Group has created a new division called Hartford Life Distributors in which all sales and marketing for both investment and retirement products will be handled. This includes all strategic relationship management and business development for mutual fund, annuities, 401(k) plans and 529s.