Retirement planning

Eighty-three percent of Americans are concerned about the effects today's economic conditions could have on their ability to retire, with seven in 10 saying it is harder to retire today than it used to be, according to a survey commissioned by the National Institute on Retirement Security.

Variable annuity sales sank in 2008 as the stock market's swoon scared investors off.

NEW YORK - Millions of aging Baby Boomers heeded the reassuring words of their financial advisers and remained heavily invested in equities throughout 2008, only to watch in shocked disbelief as 40% of their life savings disappeared.

Most executives wouldn't consider themselves "fortunate" if they took over one of the largest fund companies weeks before an historic market collapse.

Despite the rough economy in 2008, U.S. households continued to place their trust and their investments with mutual funds, according to a study by the Investment Company Institute."2008 marked the fifth consecutive year of growth in mutual fund-owning households," said Sarah Holden, ICI Senior Director of Retirement and Investor Research. "The survey finds about 4 million investors were added to mutual fund ownership ranks in 2008-up to 92 million from 88.2 million in 2007."Shareholder views of mutual funds continued to track stock market performance, with favorability declining from 77% in 2007 to 73% in 2008, and "more seasoned" investors tended to give mutual funds higher ratings than younger investors did.

It started badly on the tail end of the subprime crisis that began in the fall of 2007 and managed to get worse when catastrophic third-quarter results poured in, sending many of the biggest financial services firms straight down the crapper.The question is, where do we go from here?Analysts say the next year is going to be tough for advisers."What's an adviser to do?" said Kenneth Kehrer, the director of consulting at Kehrer-Limra in Princeton, N.J. "How can he encourage clients not to cash out their holdings when all the adviser's advice is proving wrong?"Advisers "are still sticking to theories, the experience and wisdom of the profession, while clients are losing confidence in them," Kehrer said. "We're all waiting for a comeback, but in the meantime financial advisers just look foolish. The tenets of diversification and rebalancing are shaken."It's small consolation that this is a crisis of confidence for everyone. No one really knows what's going to happen from one minute to the next, and no one knows when the crisis will end. The current consensus is pointing to anywhere from the end of the first quarter to early 2010.And at the same time advisers are trying to calm clients, their business may be shifting as the biggest banks digest their acquisitions and smaller banks try to accommodate a growing client base.One thing for advisers to remember is that the needs of clients and prospects haven't changed just because the market has — they still need to retire and put their kids through college. Sure, the conversations are more difficult now that everyone's problems are magnified, but financial consultants must man up, said Heywood Sloane, managing director of the Bank Insurance and Securities Association. "Advisers can either do these people a service or they can run and hide," he said. "Those advisers who choose to help will be remembered when all this is over."In the meantime, advisers can add value to client conversations by explaining the problem as it evolves. For example, Sloane said, market volatility unseen since the Great Depression is driven partly by the fact that no one knows what anything is supposed to cost at the moment, and so every purchase is an emotional response that makes the markets unpredictable.Sloane said housing will eventually lead the country out of this recession. Current and anticipated foreclosures are forcing housing prices down, and eventually the cost of a house will get low enough that a prospective homeowner will buy."Until we get a net decline in population, there will always be an increase in demand for resources, so the housing market will stabilize at some point," Sloane said. "You can help clients understand their options by helping them gain knowledge."Chip Roame, a managing principal of Tiburon Advisors in Tiburon, Calif., said banks "will definitely hire more financial advisers."But advisers who were planning their own retirements have to drink the same poison as their clients. Retirement just isn't an option right now. Even independent advisers who sold their books to banks in order to retire and live off the proceeds are suffering. Now that their assets are reduced and clients might be a flight risk, their books hold less value.

Thanks to an independent effort by New York insurance regulators, MetLife expects to reduce by about $1.8 billion, or more than 30%, the amount it must post to back up its variable annuity living benefit guarantees, The Wall Street Journal reports.

Fidelity Investments has released New Year’s retirement savings resolutions for people in three different age brackets—those 25-35 who are just getting started; those 36-54 who are in the midst, or should be in the midst, of saving; and those 55 and older, who are heading into retirement.

Relief for retired seniors may come too late if the Treasury Department doesn’t change the rules on mandatory withdrawals from 401(k) plans this year.

In a speech this week at the National Press Club in Washington, Investment Company Institute President Paul Schott Stevens reported that only 3% of 401(k) plan participants stopped contributing to their plans in the first 10 months of 2008, despite a staggering 40% decline in the stock market. The ICI based its figures on an analysis of the records of 22.5 million plan participants.

One-quarter of 401(k) participants have money invested in a lifecycle fund, but, on average, only 7% of DC plan assets are invested in such funds, according to a joint report from the Employee Benefit Research Institute and Investment Company Institute.

Fidelity Investments has been taking advantage of new changes to 403(b) regulations to expand its presence in the higher education retirement business, adding more than 50 new plans this year.

The U.S. could see a 70% decline in the number of mutual fund families over the next five years unless regulations are changed to put them on a more equal footing with hedge funds, according to a new report by the Boston research firm Celent, titled: “The Global Credit Crisis: Implications for North American Wealth Management.”

Ready or not, the deadline to update 403(b) plans is here.

Existing risk tolerance models have done nothing to help investors with any equity exposure this year, and with so many clients’ assets depleted by the market downturn, advisers are trying to find a new way to assess risk. That was one of the key findings of this year’s Retirement Indicator survey, of 212 financial advisers, sponsored by Brinker Capital.

Fidelity Investments has created a credit card in partnership with American Express that allows customers to transfer rewards from retail purchases to their individual retirement accounts.

Buttressed by favorable interest rates and investors looking for shelter from falling equity prices, U.S. fixed annuity sales set a new quarterly record. Total U.S. sales of fixed annuities rose to an estimated $27.1 billion for the third quarter, according to a Beacon Research study of 51 insurance companies representing 87% of the market. Sales were up 54% from last year's third quarter, and up 10% from the previous quarter, marking the highest sales since the study began in 2003.

The unprecedented financial crisis of 2008 has redefined everyone's perception of risk, sending private wealth managers back to the drawing board to make sure clients really understand how risky complicated products can be.

Everywhere you look these days, people are talking about green cars, green energy, greenhouse gases and even green mutual funds. This new demand for all things green is enough to make some money managers green with envy.

Faced with economic difficulties, almost one out of every five, or 18%, of Americans are dipping into their 401(k) savings, Bank of America found in its annual Retirement Savings Survey.