Retirement

How far the 401(k) has come since employers first introduced the savings plan in 1981. And how far it has yet to go. 401(k)s, I predict, will become universal in our lifetimes, supplanting all forms of pension plans.

Citing the vast disparity in the performance of target-date funds, Morningstar by year-end will begin rating and researching target-date funds to make them more transparent and more easily comparable, for professional and retail investors alike, the research firm announced Thursday.

Despite all of the personal pain and economic havoc of the financial crisis, at least it is teaching people to be responsible, once again, about their money, said Ken Dychtwald, CEO of Age Wave.“People have been frightened. People have lost money. But in some ways, there is great hopefulness,” he said. “The fact that people are sobering up and learning important lessons and being more responsible for their money—that’s extremely positive.”People are learning how to get back to basics and live within their means, and planning for retirement is uppermost among their concerns, Dychtwald said.A survey that his firm conducted with Harris Interactive among 2,082 Americans between the ages of 21 and 84 found that 60% lost money in mutual funds, stocks or 401(k) plans in the past year, and, on average, they think it will take seven years to recoup those losses.Eighty percent said they have learned important lessons about financial responsibility, and 70% plan to continue working in retirement.

Companies are finding that pension plans are far too expensive to offer, despite the tax breaks, USA Today reports. Since the beginning of the year, at least 20 companies have frozen their pension plans; by comparison, that many companies did so throughout all of 2008.

John Hancock Financial has named James R. Boyle president, in charge of all of the company’s core businesses, including long-term care insurance, variable annuities, 401(k)s, fixed products and mutual funds. He had been president of U.S. insurance.

Americans plan to continue cutting back on their spending, a survey by financial consulting firm AlixPartners found. Once the recession is over, they plan to spend only 86% of what they did before the crisis began. And their No. 1 goal is replenishing their 401(k) and other retirement savings.

A significant number of 401(k) assets held by workers who leave their jobs has been left behind in the old plans, Charles Schwab found in an analysis of the activity of workers since the first quarter of 2008.

People investing for retirement in mutual funds should not pay capital gains taxes until those shares are sold, according to Senators Mike Crapo (R-Idaho) and Tim Johnson (D-South Dakota). To keep retirement savings earning more money for a longer period of time, the senators have introduced the GROWTH (Generating Retirement Ownership Through Long-Term Holding) Act, which the Investment Company Institute supports.

The financial downturn has prompted Americans to make some improvements where their finances are concerned, namely to reduce spending and increase savings, but when it comes to revolving debt outside of their mortgages, they are doing little to improve their situations.

Few investors changed their saving or investing habits in 2008, Hewitt Associates reports, citing data from 2.7 million participants. However, equity fund allocations reached record lows.

The investment community is hopeful that with a little tweaking, target-date funds could be the ideal solution for getting apathetic investors into an age-appropriate asset allocation.

With pension plans headed for virtual extinction, the 401(k) will inevitably become the sole qualified retirement savings vehicle in the nation, and as such, the defined contribution model must be vastly improved, speakers at the Investment Company Institute's General Membership Meeting in Washington said.

Those hoping for a return to the good old days of self-regulated, self-correcting markets need to face reality: Those days are over.

Investors’ general inertia has caused most of them to stick with their 401(k)s. On the one hand, it’s a good thing they aren’t trading in and out of their retirement funds, but their lack of interest is hurting them, Dow Jones reports.

As the financial crisis continues, employers are beginning to take action with regards to their pension or 401(k) plans, according to the International Foundation of Employee Benefit Plans.

Few investors changed their saving or investing habits in 2008, Hewitt Associates reports, citing data from 2.7 million participants. However, equity fund allocations reached record lows.

The overwhelming majority of investors continued to fund their 401(k)s in the first quarter, Fidelity reports, citing an analysis of the 11.3 million participants it serves through 17,500 defined contribution plans.

The Securities and Exchange Commission and the Department of Labor will hold a joint hearing on June 18 at DOL headquarters examining target-date funds.

For the first time, the majority, 55%, of Fortune 100 companies now offer new salaried employees only a defined contribution plan, according to Watson Wyatt. This is up from 46% at the end of 2007.

An article in The Dallas Morning News warns investors against the wide discrepancies in the glide paths, or asset allocations, of target-date funds. As a result of too much risk, it says, some target-date funds are “missing the bull’s-eye.”