From EBN's sister publication Money Management Executive: 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.
"While it may be too late for those who already have suffered substantial and irreversible financial losses, it is vital that aggressive and timely action be taken to protect the retirement income of all Americans," said Chairman Herb Kohl (D-Wisc.), in letters to Securities and Exchange Commission Chairman Mary Schapiro and U.S. Labor Secretary Hilda Solis.
Target-date funds are meant to automatically rebalance an investor's portfolio to more conservative asset allocations as they approach retirement. In theory, 2010 funds should be very conservative, yet one 2010 fund lost 41% last year, Kohl said.
Because taking excessive risk can be devastating to investors who are close to retirement, he said new regulation or legislation may be needed to make investors more aware of the risk of these funds.
Showing posts with label MME. Show all posts
Showing posts with label MME. Show all posts
Thursday, March 5, 2009
Wednesday, December 31, 2008
Tip of the Day: Pass along Fidelity's retirement resolutions
Fidelity has released new year’s retirement savings resolutions for people in three different age brackets— 25-35, 36-54 and those 55 and older, reports EBN sister title Money Management Executive.
As the New York Lottery slogan goes, “You have to be in it to win it,” and this, certainly, is the foremost message for young investors age 25-35: Enroll and contribute to your workplace savings plan. Underscoring how important this is, Fidelty found that only 47% of those polled are investing in their 401(k).
Second, Fidelity calls upon young people to develop a plan to reach their goals. Only 25% of those polled had done so.
Third, Fidelity calls upon people to open and contribute to an IRA (20% of responding workers have done this).
For those age 36 to 54, Fidelity advises monitoring and rebalancing portfolios at least once a year. (Only 25% have done so.) Following this, it’s wise to catch up and/or max out on retirement savings vehicles, particularly as income rises, but only 19% are doing so, the firm reports. In 2009, workers age 50 and older will be able to contribute an additional $5,500 a year to their 401(k) and an additional $1,000 to their IRA.
Third for middle-aged people, Fidelity suggests simplifying and consolidating rollover assets into one IRA, although only 11% of respondents have done this.
Lastly, for those people age 55 and over who are nearing retirement, Fidelity’s first guideline is to plan to wait until at least age 62 to begin taking out Social Security payments and Medicare. This age group also needs to focus on creating a retirement income plan (only 26% have done this) and researching long-term care insurance needs (a mere 15% have).
“Creating an income plan that manages risks, such as longevity, market volatility and rising healthcare costs, is critical, as the median retirement savings of an American household is $22,500 and is on track to replace only 58% of pre-retirement income,” Fidelity said.
“The New Year offers investors an opportunity to take better control of their finances and stay on track throughout 2009,” suggested Fidelity Executive Vice President Carolyn Clancy. “These resolutions offer investors very specific steps to consider that can provide more financial discipline and better prepare them for retirement.”
As the New York Lottery slogan goes, “You have to be in it to win it,” and this, certainly, is the foremost message for young investors age 25-35: Enroll and contribute to your workplace savings plan. Underscoring how important this is, Fidelty found that only 47% of those polled are investing in their 401(k).
Second, Fidelity calls upon young people to develop a plan to reach their goals. Only 25% of those polled had done so.
Third, Fidelity calls upon people to open and contribute to an IRA (20% of responding workers have done this).
For those age 36 to 54, Fidelity advises monitoring and rebalancing portfolios at least once a year. (Only 25% have done so.) Following this, it’s wise to catch up and/or max out on retirement savings vehicles, particularly as income rises, but only 19% are doing so, the firm reports. In 2009, workers age 50 and older will be able to contribute an additional $5,500 a year to their 401(k) and an additional $1,000 to their IRA.
Third for middle-aged people, Fidelity suggests simplifying and consolidating rollover assets into one IRA, although only 11% of respondents have done this.
Lastly, for those people age 55 and over who are nearing retirement, Fidelity’s first guideline is to plan to wait until at least age 62 to begin taking out Social Security payments and Medicare. This age group also needs to focus on creating a retirement income plan (only 26% have done this) and researching long-term care insurance needs (a mere 15% have).
“Creating an income plan that manages risks, such as longevity, market volatility and rising healthcare costs, is critical, as the median retirement savings of an American household is $22,500 and is on track to replace only 58% of pre-retirement income,” Fidelity said.
“The New Year offers investors an opportunity to take better control of their finances and stay on track throughout 2009,” suggested Fidelity Executive Vice President Carolyn Clancy. “These resolutions offer investors very specific steps to consider that can provide more financial discipline and better prepare them for retirement.”
Thursday, December 11, 2008
Tip of the Day
Keep an eye on your retirement plan fees.
"It’s easy these days to forget about fees when your fund might have lost 40% or more in the past year,” writes the Baltimore Sun. “But fees matter over the long run, and you can end up with a lot less money, even if you’re paying what seems to be only slightly more for a fund.”
As higher fund fees can siphon even more money from employee-investors who have seen their assets battered by the downturned economy and stock market, such fee increases are something for plan sponsors to watch.
Lipper senior analyst Jeff Tjornehoj told EBN sister publication Money Management Executive that fund fees could rise 10% next year. Added to that, he warned, service providers are likely to increase their fees as well.
"It’s easy these days to forget about fees when your fund might have lost 40% or more in the past year,” writes the Baltimore Sun. “But fees matter over the long run, and you can end up with a lot less money, even if you’re paying what seems to be only slightly more for a fund.”
As higher fund fees can siphon even more money from employee-investors who have seen their assets battered by the downturned economy and stock market, such fee increases are something for plan sponsors to watch.
Lipper senior analyst Jeff Tjornehoj told EBN sister publication Money Management Executive that fund fees could rise 10% next year. Added to that, he warned, service providers are likely to increase their fees as well.
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