Retirement planning

As Baby Boomers head toward retirement, they will likely decrease the number of relationships they have with financial institutions and reshape the entire industry, according to new research from the Retirement Income Industry Association.

Rather than fixate on contributions and current 401(k) balance, a new website, ReviewMy401k.com, gauges investors’ risk tolerance, asks them for a complete list of the choices available in their 401(k) plan and how they are currently invested, and, from that, suggests a portfolio mix of the best funds available to them based upon their needs. It also provides quarterly reviews and updates of the investment mix.

Vanguard has introduced a new, broad market bond fund to be used exclusively by its Target Retirement and LifeStrategy families. The Vanguard Total Bond Market II Index Fund will be benchmarked against the Barclays Capital U.S. Aggregate Bond Index and is a clone of the $65 billion Vanguard Total Bond Market Index Fund.

Mistakes, bad luck and unexpected events can happen to any firm during good times and bad, but tackling misfortune in a forthright, brutally honest manner rather than trying to sidestep unpleasant truths can mean the difference between a small crisis and a full-blown public relations nightmare.

Fair value reporting seemed anything but fair last October when prices fell off a cliff.

In light of the recent market downturn and the difficult position that has left millions of near-retirees, Charles Schwab has launched a new suite of advice and tools specifically geared to investors within 10 years of retirement, called Real Life Retirement Services. Built as a type of social network, the accompanying website gives investors a place to ask questions and share their own experiences, including a survey that shows them how their retirement expectations compare with their peers.

Reflecting current financial turmoil, most investors are more attuned to whether a company is viable than to its performance, according to the 2009 Investor Brandscape report from Cogent Research.

The events that occurred in the financial services industry over the past year were once thought inconceivable. At this point, regulators are chomping at the bit to reverse how Wall Street does business, and investors are downright spooked. The editors of SourceMedia's business publications offer their views on how these dramatic shifts on Wall Street and in corporate America will impact businesses and investors this year.

Millionaires and affluent investors suffered steep losses in 2008, and most, particularly Baby Boomers, are rolling their remaining assets into cash and stable-value investments for the foreseeable future.

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.