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5 Ways Retirement Savers are Reacting to 401(k) Declines
Tweet Share on Facebook November 25, 2008 Comment (1)We call our retirement savings a nest egg because we are emotionally attached to that money. That account is earmarked for comfort and security. And that's why watching retirement account balances decline is particularly heartbreaking.
Here are five ways investors are currently reacting to this emotional rollercoaster.
Assessing losses. Some people are able to put declining retirement accounts out of their mind and focus on the long term. But other retirement savers feel compelled to dwell on their gruesomely declining account balance. The average 401(k) plan balance has dropped 14 percent in 2008 to $68,000, down from $79,000 in 2007, according to an analysis of 2.7 million U.S. employees released yesterday by the human resources consulting firm Hewitt Associates. In the past two months, employees lost an average of approximately 18 percent of their 401(k) plan savings, and some lost more than 30 percent.
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GM Pensions Are Fully Funded
Tweet Share on Facebook November 25, 2008 Comment (30)Even during a financial downturn it may be possible for companies to continue to provide workers traditional pensions. General Motors, a company that recently asked for taxpayer funds, appears to have enough money in the pension fund to pay its more than 400,000 retirees their promised benefits for many years.
"G.M. says it will be paying retirees about $7 billion a year for the next 10 years," the New York Times reports. "The fund's assets were worth $104 billion at the end of 2007, more than enough to cover its obligations of $85 billion."
To produce adequate investment returns while also preserving the pension fund's surplus, only 26 percent of G.M.'s pension fund is invested in stocks — well below the typical pension fund’s allocation.
Health care for retirees is another story. The Times reports: “The total cost of these benefits in today’s dollars was estimated at $60 billion at the end of 2007, and G.M. had set aside only about $16 billion to cover the cost.”
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Target Date Funds: Retirement Timing Is Everything
Tweet Share on Facebook November 24, 2008 Comment (1)For an individual planning to retire, the 15-year period leading up to retirement has the biggest impact on financial security. Stock returns have varied from negative numbers in 1920 and 1980 to annual returns in excess of 12 percent for 15-year periods ending in the mid-1930s, the 1960s, and the 1990s, according to a recent paper from the Center for Retirement Research at Boston College.
The calculations were made using a hypothetical person—let's call him Joe Retirement Saver—who did everything that retirement experts say you should do to prepare for retirement:
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Where Old and Young People Voted Differently
Tweet Share on Facebook November 24, 2008 CommentPresident-elect Barack Obama won 28 states and Washington, D.C., in the presidential contest. Among voters age 50 and older, Obama and Sen. John McCain carried 25 states each, with D.C. going to Obama, according to AARP, an advocacy organization for those 50 and up. The three states where the majority of older voters went for McCain while the rest of the population didn't: Indiana, Nevada, and North Carolina.
Check out this AARP map of how the 50-plus vote compares with that of the general population. And here's a look at how baby boomers and seniors voted.
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President Bush Jokes About His ‘Forced Retirement’
Tweet Share on Facebook November 24, 2008 CommentPresident Bush was in Lima, Peru, over the weekend, attending the 21-nation Asia-Pacific Economic Cooperation forum. This is likely to be his last global summit before leaving office.
On Saturday, Bush spoke with Canadian Prime Minister Stephen Harper. "Laureen and I certainly wish Laura and you all the best if I don't see you again before the 20th of January," Harper said to Bush, the Agence France-Presse, a global news agency, reports. In response, Bush quipped: "Before forced retirement."
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3 Reasons Baby Boomers Are the Richest Generation in History
Tweet Share on Facebook November 21, 2008 Comment (6)Baby boomers may not feel rich right now, but they're still the wealthiest generation in U.S. history. Boomers have collectively earned $3.7 trillion, more than twice as much as the $1.6 trillion that members of the silent generation did at the same age, according to a new McKinsey Global Institute report. The researchers found that only 20 percent of that difference was due to economic growth. A whopping 80 percent of the increased earnings were due to three factors specific to the baby boomer generation:
Size. The exceptional size of the baby boomer generation—which is made up of 79 million people born between 1945 and 1964—raised output and growth rates. The baby boomer cohort is 50 percent larger than the preceding silent generation, and at birth, they represented a larger share of the population than generation X and the millennials did at their birth.
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The Best Places to Find a Retirement Plan
Tweet Share on Facebook November 20, 2008 CommentJust over half of full-time workers participated in an employer's retirement plan last year. But where you live could play an important role in the likelihood that you will be offered and participate in a retirement plan.
Employees in the upper Midwest and Northeast had the highest levels of participation in retirement plans in 2007, according to an Employee Benefit Research Institute analysis released today. Wisconsin topped the list with approximately 68 percent of full-time workers preparing for retirement. Workers in the South, West, and Southwest had the lowest participation levels. Florida bottomed out the list with 42 percent of workers partaking in an employer's plan.
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Who Is Targeting Your 401(k)?
Tweet Share on Facebook November 19, 2008 Comment (7)A Wall Street Journal editorial published Friday suggests that congressional Democrats have plans to eliminate 401(k) tax breaks and are "entertaining dreams of state-managed retirement accounts."
Rep. George Miller, the California Democrat who chairs of the House Education and Labor Committee, shot back with a statement the same day. "The Wall Street Journal is needlessly creating fear among Americans rightly worried about their retirement security by misrepresenting my efforts to strengthen workers' retirement savings—attacks that have no basis in fact. I do not support 'abolishing' 401(k)'s, moving these plans, or changing their tax status, plain and simple," Miller said.
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IRA Debit Cards Offer Convenience With Hefty Fees
Tweet Share on Facebook November 18, 2008 Comment (2)The highly criticized 401(k) debit card now welcomes a new member of the family: the IRA debit card. This new form of plastic also allows quick access to your retirement stash but, unlike the 401(k) debit card, this card prohibits loans from retirement accounts.
The IRA debit card, launched yesterday by the Entrust Group, an administrator of self-directed retirement plans, allows cardholders to take required minimum distributions from their retirement accounts or purchase IRA assets. But, like any financial product, fine print applies. Here are some things to consider about the IRA debit card.
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How the Wealthy Are Allocating Their Portfolios Now
Tweet Share on Facebook November 17, 2008 CommentEven wealthy Americans are feeling gloomy about the future. More than half of affluent investors say they are pessimistic about stock market performance over the next year, according to a new survey.
Specific worries include a recession (61 percent), inflation exceeding portfolio returns (59 percent), having enough money to support their desired lifestyle (50 percent), and affording family healthcare costs (47 percent), an online survey by PNC Wealth Management and Harris Interactive found. Respondents included 781 workers with at least $150,000 of annual income and $500,000 or more in investable assets and 482 retirees with at least $1 million in investable assets.
