Retirement planning

WASHINGTON—Rather than looking toward a recovery, Richard Davis, chairman, president and CEO of U.S. Bancorp, is “looking for a new direction.”

WASHINGTON—At a separate summit on 401(k) reform during last weeks General Membership Meeting of the Investment Company Institute, Putnam Investments CEO Robert L. Reynolds called for sweeping retirement reform, beginning with mandatory automatic enrollment in qualified default options, savings escalation, the inclusion of retirement income options and full advice on asset allocation and retirement planning.

Asking investors to properly maneuver their 401(k) plans in a market like this is akin to an airline pilot stepping aside and telling passengers to take the controls mid-flight. Workers never asked for so much responsibility in controlling their own retirement future, and most have no idea what to do now that the plane is losing altitude. In fact, most investors seem to be in shock and are doing nothing at all. A persistent problem with the mutual fund industry is the lack of education among its customers about how to manage their own retirement savings. Ignorance was bliss when equities were historically delivering 10% average returns, but the tide has turned. The first wave of Baby Boomers realized they did not have enough savings and decided to bet on risky equities to make up for the shortfall. That gamble backfired when equities in nearly every asset class plummeted last year. Now vastly underfunded as they approach retirement, most Boomers are skeptical they will ever get it back. Financial information is very confusing to the uninitiated. The vocabulary is difficult, the products are complicated, and the professional advice isn't always right. If the fund industry can encourage its customers to become more financially savvy, without stepping on any conflict-of-interest tripwires, its investors will be able to shop for the best products at the lowest cost and keep more assets under management. Younger workers-particularly those in my generation-are getting an early and valuable lesson about market volatility. Buy-and-hold investing is obsolete in an era where one bad year can wipe out 20 years of gains. Younger workers still have plenty of time to more than make up for losses, but will be wary going forward of future bear markets. These investors are plugged in to a myriad of information available instantly at their fingertips. As technology continues to advance, this will lead free-thinking investors who will be able to take responsibility for learning how to navigate their savings. Funds would be wise to become the source and the inspiration for that learning. (c) 2009 Money Management Executive and SourceMedia, Inc. All Rights Reserved. http://www.mmexecutive.com http://www.sourcemedia.com/

Market turmoil has spurred investors’ appetite for advice, and nowhere can this be seen more clearly than in mutual funds sold through brokerages or financial planners, according to Strategic Insight.

The Securities and Exchange Commission is considering better disclosures for target-date funds, particularly their glide paths and asset allocations, SEC Chairman Mary Schapiro told the Mutual Fund Directors Forum.

Despite their growing popularity in recent years, target-date funds are grossly misunderstood, according to a survey by Envestnet Asset Management.

Robert L. Reynolds loves a challenge. Without question, he certainly faces one. Trying to restore Putnam Investments' stature among America's top mutual fund companies after the firm's involvement in the trading scandal of 2003 and depletion of assets, now at $99 billion, a mere quarter of what they were in 2000-is a formidable task.

NEW YORK - Most financial transactions are dependent upon trust, but the last two decades of deregulation have eroded that trust and created a global crisis of confidence, according to experts who met last week at a global forum in the heart of New York's financial district.

Investors haven’t given up on retirement savings, but they aren’t expecting their portfolio balances to be restored anytime soon, Age Wave and Harris Interactive found in a survey of 2,082 investors they call “Retirement at the Tipping Point: The year That Changed Everything.”“A new era of cautious self-reliance is emerging from a truly unnerving fiscal dilemma," said Dr. Ken Dychtwald, founder and CEO of Age Wave. “For many people, their retirement dreams have vaporized. Each of the four generations polled is trying to alter its game plan in fascinating ways to seek peace of mind and to make the best of the years ahead.”Respondents, 60% of whom have lost money in the market over the past year, believe it will take seven years for their investments to return to their pre-crisis levels. The single-biggest worry among those age 55 or older, cited by 46% of respondents, is that they won’t be able to afford medical expenses. This is now a greater concern that lack of personal savings (18%) or uncertain entitlements (11%).Americans expect to delay retiring by an average of 4.2 years. Eighty-one percent said teaching children to live within their means is the most important financial advice parents could pass on to their children, up from 69% who said so a year ago. That was followed by 65% saying, begin saving at an early age.Ninety-five percent believe that financial management should be taught in high school and a standard subject, and 56% said the best thing about having money saved was security.However, 58% said having a loving family and relationships is the most important thing, but 33% cited being wealthy.Despite the dire outlook for the markets currently and what it has done to Americans’ savings, 60% said they view retirement as “a new, exciting chapter of life,” up from 52% last year. Seventy percent hope to work in some capacity in their retirement, not just to pay the bills but to remain stimulated and to continue to contribute to society.“While we discovered both disturbing and encouraging signs about retirement from each generation,” said David Baxter, SVP at Age Wave, “there are indications that of all cohorts, it’s the Millennials [Gen Y] that are coming out of this financial storm a wiser, more cautious and more responsible generation.”

Although their investments may have lost as much as 40% to 50% of their value, Canadians are resilient in their faith in mutual funds, PricewaterhouseCoopers found in a survey of 867 people who own mutual funds.

Prudential Retirement has entered into an agreement with Hewitt Associates to offer Prudential’s IncomeFlex Target to Hewitt’s retirement plan clients.

Only 18% of individuals between the ages of 28 to 53 seek out financial advice, even though they are in the prime savings and asset accumulation of life, according to a survey of 800 investors conducted by Sway Research and Mast Hill Consulting. Most of this group—younger Boomers between the ages of 43 and 53, and Generation X, aged 28 to 42—turn to family and friends for advice on key investing decisions.

Forty percent of high-net-worth investors, those with $1 million or more of investable assets, excluding their primary home, are worried about the risk of outliving their assets, The Phoenix Cos. found in a survey. In 2007, only 33% had this concern.

Thirty-six percent of financial advisers are less confident than they were a year about in their ability to manage reitrees’ assets—with most blaming the complexity of retirement income portfolios needing to both generate growth while guaranteeing income, GDC Research and Practical Perspectives found through a survey.

The House Education & Labor Committee last week proposed new rules for 401(k) disclosure that will give investors greater transparency into the fees they are paying, but some 401(k) advocates say the new rules are too aggressive and unnecessary.

NEW YORK - After suffering deep losses in their retirement savings accounts, most Americans appear to be in a state of shock, unsure where to move next.

The “Sixty Minutes” segment on 401(k)s that slammed them as being mediocre offerings with hidden fees is not the only shot being taken at the defined contribution model—not by a long shot.

Americans are growing increasingly worried about having enough money for retirement, but that fear is turning to paralysis, as fewer investors make changes to stem future losses, a new study found.

Suspending 401(k) matches for just one year can save most companies millions of dollars a year, but doing so can severely negatively impact participants' savings rates and long-term retirement outlook, and should be avoided, according to Hewitt Associates.

The number of Americans who believe they will live a comfortable retirement has fallen markedly to 41%, down from 59% who believed this in 2002, Gallup found in its annual economy and personal finance survey.