Retirement planning

Over the past year, as the S&P 500 has hit 1997 levels, the U.S. gross domestic product shrank 6.2% in the fourth quarter of 2008 and investors' retirement savings have been severed in half, we have hailed the resilience of investors' faith in the markets. Our customers have continued to believe in the soundness of investing in mutual funds, the premise of long-term investing and modern portfolio theory, and the overall wisdom of saving for retirement.

In response to the market downturn and wide confusion among investors about what they should do, Charles Schwab has published a number of articles on its website offering guidance. Schwab is also holding seminars at its branches, town hall discussions and webcasts.

Nearly 30% of long-term care costs are paid for out-of-pocket, according to research by Avalere Health, far higher than the 10% widely estimated previously. One of the reasons for the discrepancy, according to the public policy and research firm, is that Avalere has included assisted living costs.

The chairman of the Senate Special Committee on Aging has called for more scrutiny of target-date retirement funds after several 2010 target-date funds posted huge losses in 2008.

For all the education the asset management industry has on the importance of saving for retirement, it doesn't appear to have gotten through to the younger crowd, many of whom have completely unrealistic expectations for their golden years.

Reports of the death of stocks and equity mutual funds have been greatly exaggerated.

Putnam Investments will waste no time reinvigorating its defined contribution business, and its long-struggling equity funds will have to earn their way into the mix, according to Robert Reynolds, its president and chief executive."We're going to run an open platform," he said. "Yes, it would be great if Putnam was part of the choices, but if not, for whatever reason, that's fine."Reynolds, who took over the company in July, started Fidelity Investments' 401(k) business from scratch and turned it into an industry giant. He is now trying to work quickly to create similar magic at Putnam."Competing for Fortune 100 companies may not be a goal right out of the chute, but we definitely want to be out there this year with a competitive product offering," he said. "This is not a five-year game plan; I think we can be a player in a relatively short period of time."Leading the charge will be Edmund Murphy, a Fidelity veteran Reynolds hired early last month as the head of defined contribution. He will report to Putnam's global marketing and products head, Jeffrey Carney, a Fidelity and Bank of America Corp. veteran Reynolds hired in October. "I think the team we've put together thus far is pretty impressive," Reynolds said.Success in defined contributions would give Putnam some badly needed good news. On Feb. 11 it announced plans to cut 260 jobs, or 11% of its work force, as part of a changed distribution strategy. Its assets have dropped more than 60% in the past six years, to $101 billion as Jan. 31. A 2003 market-timing scandal, several years of poor equity mutual fund performance, and last year's market meltdown have left it battered.Marsh & McLennan Cos. Inc. sold Putnam in 2007 to Canada's Great West Lifeco Inc. for $3.9 billion.Reynolds' earliest initiatives at Putnam were aimed at reversing the losses in its equity funds, which he admits were performing "to no one's satisfaction." A restructuring of the equity investment division announced in November put responsibility for each fund in the hands of a specific manager and created a pay-for-performance system.Putnam has also hired dozens of fund managers, analysts, and others on the investment side.It also pruned its fund lineup, and early this year it announced the industry's first suite of target absolute return mutual funds. The funds, which Reynolds said he envisions as a component of Putnam's 401(k) offering, are designed to provide positive returns over time in rising or falling markets.Tom Modestino, a senior analyst with Cerulli Associates Inc. in Boston, said in-house management of a large number of 401(k) assets is increasingly important in the 401(k) business, since asset management, not record keeping, drives profits. "Record keeping in the 401(k) industry is expensive, and it never gets cheaper," he said.A spokesman for Putnam said it will target plans with $1 million to over $500 million in assets. It was a power in the 401(k) market in the 1980s and 1990s, but Mr. Reynolds said after the dot-com bust, it backed away from the administrative side of the business to focus more on distribution of its funds.The sinking stock market does not change the fact that 70 million baby boomers are set to retire, he said, and the number of 401(k) administrators is poised to shrink.Reynolds said Putnam wants to be a major player in asset management and product development, plan administration and education, and service delivery for sponsors and participants. "If you are going be a player in the 401(k) business, you have to have a commitment to all three legs of the stool," he said.

Older Baby Boomers appear to be doing a better job of preparing for retirement than younger Boomers, though both groups are sorely underprepared for their golden years, MetLife found in a survey.

Investment Company Institute President Paul Schott Stevens testified before the U.S. House of Representatives Education and Labor Committee on Tuesday to avow that the 401(k) model is working, in spite of the market’s downturn.

With vastly lowered expectations for retirement, investors appear more amenable to annuities and other income-generating investments whose scaled-down returns they might not have considered before, NAVA found in a survey of 1,500 financial advisers.

Morningstar has developed a series of 18 asset allocation indexes for investors and advisers to use as benchmarks for target-date and target-risk funds.

MIAMI - With the average equity mutual fund portfolio down more than 38% in 2008, money market mutual funds are quickly becoming one of the only safe havens for risk-averse investors. Money market fund assets recently topped $4 trillion for the first time, making money funds the single largest mutual fund group, according to the Investment Company Institute.

Morningstar has developed a series of 18 asset allocation indexes for investors and advisers to use as benchmarks for target-date and target-risk funds.

BOSTON - For decades, annuities were shunned by money managers for their high cost and lack of liquidity.

BOSTON - Like gambling addicts who just need one more big win before they cash out, millions of Baby Boomers on the verge of retirement took extremely risky bets with their life savings, hoping to score that big jackpot that would make up for all their past mistakes.

The economic turmoil has prompted smaller employers who previously hadn’t considered setting up a 401(k) plan to do so in light of the beaten down values, The Wall Street Journal reports.

Financial planners are spending a lot of time these days trying to allay their clients' fears. Anyone who works with a financial adviser most likely has money in the stock market and, therefore, has experienced steep losses in the past year.

Defined contribution plans have been hammered by dropping equity markets, and this chain of losses has caused a ripple effect throughout the fund management industry.

With other safe investments paying so little these days, it's hard to ignore the glowing rates that some insurance companies are guaranteeing on long-term fixed deferred annuities.

Judging from the actions of the 11 million participants Fidelity Investment serves through their 401(k)s, investors remain faithful about retirement savings.