Retirement Savings

54% of workers would switch jobs to get a better DC plan – Pensions & Investments

May 18, 2012 By admin Leave a Comment

Employment Exhibition (Photo credit: Modern_Language_Center)

There will continue to be more and more interest in retirement plan which allow employees to save without stress and anxiety. Most plan participants realize they need help. The rest don’t know they don’t know.

The report said 44% of all workers expect to rely on 401(k) plans, other DC plans or IRAs as their primary source of retirement income. When analyzed by age group, the report said the highest reliance (55%) on these plans was among workers in their 30s, followed by 46% for workers in their 40s.Participation rates were highest (83%) for people in their 30s and those in their 40s, the report said. Median annual deferral rates were highest (10%) among people in their 60s, followed by 8% for people in their 50s.

The reported said 62% of workers either strongly agreed or somewhat agreed that they would want to receive more information and advice from their employers about how to reach retirement goals. The age group most interested in getting additional information (71%) was workers in their 20s.

via pionline.com

Employees realize that they cannot rely on the government to fund their retirement years. These same employees will seek out employers who offer the best retirement plan solution. Will your company retireemtn plan attract and retain talented employees?

Please comment or call to discuss how your company retirement plan compares to your competitors.

Posted via email from Curated 401k Plan Content

401(k) Plan Sponsors: Workers Can’t Afford to Retire (money.usnews.com)
The Takeaway: Future 401(k)s Will Look More Like Old-School Pensions (aarp.org)
5 Reasons to Shop Your 401(k) NOW (401kplanadvisors.com)

Filed Under: 401k Solutions, Retirement Savings Tagged With: 401(k), Pension, Retirement

The “Sandwich Generation” and the Changing Family Dynamic

May 14, 2012 By admin 2 Comments

The “Sandwich Generation” is becoming a more commonly used term as more and more individuals begin caring for not only their aging parents, but their children as well, all the while planning for their own personal retirement. According to an April 2010 Merrill Lynch Affluent Insights Quarterly survey, more than one-third of affluent Americans financially support their children and parents while trying to maintain and build upon what they have set aside for retirement. According to the Pew Research Center, 1 of every 8 Americans aged 40 to 60 is both raising a child and caring for a parent, in addition to between 7 to 10 million adults caring for their aging parents from a long distance. The US Census Bureau statistics indicate that the number of older Americans aged 65 or older will double by the year 2030, to over 70 million.

With the complex equation of most individuals within the sandwich generation being baby boomers, added to the intricate family dynamics, financial advisors are finding themselves advising over three generations. What is the family dynamic like? Many boomers work full time jobs while raising a family or supporting children in college, in addition to serving as the primary caregiver to one or both parents. How do these families cope with the changing dynamic? Most consider trade-offs, such as significantly cutting back on personal luxuries, making lifestyle sacrifices to support their family’s needs, and even cutting back on their own personal retirement.

So, what kind of help can advisors give to those facing the pending or already existent sandwich generation? First and foremost, ease the stress of competing demands by identifying core values and priorities to find balance in life. Always keep open lines of communication – of course it’s difficult to discuss the financial impact of diminishing health and the eventual loss of a loved one, but putting off that conversation can leave you unprepared for the consequences. Implementing a plan of affairs for aging parents can off-set the negative consequences of a life-changing event. Be sure to know where your family members keep important financial and medical documents, as well as the contact information of doctors, lawyers and advisors. Always know the type of long term care, and how much it will cost.

When it comes to financing children’s education, only 12% of the sandwich generation said they were cutting back on contributions. What’s the biggest tip for parents? Start saving early. Teach your children early on the skills necessary to embrace financial independence, budgeting, and the importance of credit and planning for retirement. You can even bring your kids with you to an advisor meeting to discuss all these great education finance tips.

I’m sure you’re thinking: but what about me? Get with an advisor and review your investment strategy, as well as home financing, asset allocation, insurance, securities, your portfolio, and your general retirement strategy in general. This way, advisors can help shift financial securities based on the family’s specific dynamic. According to the survey, 54% of the members of the sandwich generation work with an adviser, and among them, 32% wish that they had started working with one sooner. Among the remaining 46% who don’t work with an adviser, 83% think that they would benefit from such a relationship.

Photo courtesy of: http://i.telegraph.co.uk

Filed Under: Asset Protection, Managing Risk, Retirement Savings, Weekly Blog Series Tagged With: Finance, Merrill Lynch, Parent, Pew Research Center, Retirement, Sandwich generation, United States, United States Census Bureau

5 Steps You Can Take Now to Improve Your Retirement Income

May 7, 2012 By admin Leave a Comment

If you’re a working American born anytime between 1946 and 1991, the research, analysis and more importantly, the five straightforward actions you can take now to ensure your retirement income doesn’t take a dive revealed in the Fidelity Investments‘ “Retirement Savings Assessment” might be of particular interest to you.

The first-of-its-kind analysis by Fidelity Investments, a financial services provider with a focus on helping Americans save and plan for retirement, found that many working American households could face a 28-percent loss of income during retirement. Perhaps even more frightening is the 38 percent of retiree households already reporting that their monthly income isn’t enough to cover their monthly expenses. In addition to these sobering statistics, however, Fidelity also provided a number of actionable steps individuals could take in order to narrow or entirely close a potentially uncomfortable gap between their retirement income and their monthly living expenses.

Whether you’re a working member of the Baby Boomer generation, Generation X or even Gen Y, these are five steps you can begin exploring with your advisor today, and perhaps even incorporate into your retirement plan. They’re well worth checking out, as many of these strategies can apply regardless of whether you’re just getting started in your career, are at the top of your of your working years, or are already retired.

Bolstering Savings
While respondents indicated that they did save an average of $3,500 last year, most Americans are not taking full advantage of tax-favorable workplace-sponsored retirement savings plans or individual retirement accounts (IRAs). This is perhaps the easiest place to begin plugging the holes in your savings plan, so consider contributing as much as you can to your employer’s 401(k) plan. If your employer matches your contribution, try to put away as much as your company will match to; doing anything less is akin to turning down free money. Matching contributions are not the only reason why 401(k)s or IRAs are wise investments, however; for example, if your company doesn’t offer to match your 401(k) contribution, you still profit from tax-deferred savings. The same is true of IRAs, so if your employer doesn’t offer a retirement contribution plan, funding an IRA is an effective alternative. If both courses of action are available to you, talk to an advisor about which plan — or combination thereof — is most appropriate to meet your needs and goals. While maintaining a savings strategy is imperative for investors of all ages, it’s particularly crucial for younger workers, as their money will have more time and opportunity to grow.

Reevaluating Retirement Age
It seems as though despite one’s age, the average age at which most Americans plan to retire is the ever-popular 65. However, as the Boomers are discovering (indeed, the Fidelity research found that many Boomers are facing a worrisome drop in income), putting off full retirement by a few years can help shore up assets to ensure you don’t suffer a decline in their income and standard of living. What’s more, Fidelity also cited that even working part time after age 65 can be a powerful way to stretch your retirement assets.

Adjusting Asset Allocation
While it’s certainly understandable that investors of all ages may be a little skittish when it comes to the stock market these days, the Fidelity Assessment found that 21 percent of survey respondents are invested too conservatively in the equities market with what the report describes as “limited exposure to stocks, based on their current age and planned retirement date.” This underscores the importance of working with an advisor to ensure your plan is properly allocated with the right amount of exposure to the long-term earnings opportunities only stocks present.

Annuitizing Retirement Assets
Investors of all ages could benefit from having a guaranteed stream of income for life, yet the study found that only 17 percent of those surveyed have an annuity. Working with an advisor to explore adding an annuity to your retirement plan can ensure you have enough money to cover your expenses throughout your retirement, especially as more and more Americans can expect to live well into their 80s and even beyond.

Tapping into Home Equity
At 72 percent, the tremendous majority of respondents are homeowners, and a full 32 percent own their homes outright and pay no mortgage. The home equity you may have accrued can be used in a number of ways to help stabilize your retirement income, including downsizing your home and pocketing the profits, drawing on that equity to pay off debt or expenses, or using those funds to invest in income generating products.

“Most Americans have the potential to get significantly closer to achieving their retirement goals, but they have to take action and consider implementing a mix of these five steps,” says Kathleen A. Murphy, president of Personal Investing at Fidelity Investments. “Whether you’re a younger investor deciding to save a little more in a 401(k) or an older investor adjusting investment plans, it’s never too early or too late to impact your personal economy and take steps to improve your retirement readiness.”

Indeed, anything you can do to improve your financial position in retirement is worth exploring, so discuss these five strategies with your advisor. Together, you should be able to determine the most appropriate steps you can take in order to ensure a positive retirement lifestyle.

Photo courtesy of: http://www.retirementplanning.net

Filed Under: Retirement Savings, Weekly Blog Series Tagged With: Baby boomer, Fidelity, Fidelity Investments, Individual Retirement Account, Kathleen Murphy, Retirement, Saving, United States

Cause & Effect: Household Numbers on the Rise

April 30, 2012 By admin Leave a Comment

It may not be what you think – according to the Census Bureau, the number of individuals and families living together have taken a big jump in the past several years – and it’s not because grandma and grandpa are living with their grandkids. The report found that 69.2 million, or 30% of families were “doubled-up” (households that include at least one person 18 or older who isn’t enrolled in school and isn’t the householder, spouse or cohabiting partner of the householder) in 2011, up from 61.7 million adults, or 27.7%, in 2007. The surprising part? The biggest increase comes from young people, ages 25-34, living with their parents. Some 5.9 million, or 14.2% of 25-to-34 year olds, lived with their parents in 2011, up from 4.7 million before the recession.

The Cause: With high unemployment rates, a meek economy and a surplus of students graduating from college with a laundry list of student loans to pay off, it’s not surprising that more and more young adults are living or moving back in with their parents. What better way to save some money, look for a job and improve their financial standing? Another interesting cause I read the other day was that unlike the past, many young adults find it quite pleasant to live with their parents these days. With child-rearing strategies changing, more parents and their children are nurturing lasting relationships together.

The Effect: The Census Bureau is having a tough time in figuring out the actual poverty rate of the United States: “These young adults who lived with their parents had an official poverty rate of only 8.4%, since the income of their entire family is compared with the poverty threshold,” David Johnson chief of the Housing and Household Economic Statistics Division at the U.S. Census Bureau said. “If their poverty status were determined by their own income, 45.3% would have had income falling below the poverty threshold for a single person under age 65.”

Another effect that affects the economy is a smaller number of households. A reduced number of overall households leads to a reduction of consumers, including those in the housing market, which puts a huge drag on the economy. Regardless of the misleading statistics, the biggest impact can be felt much closer to home. While young adults living with their folks may be reaping the benefits, parents supporting adult children have less money to spend on themselves, not to mention less income to save for retirement.
Some experts say that there is a silver lining. They believe that these young adults “doubling up” will eventually become financially stable and be able to move out, enter the housing market and start consuming again. This boost in consumption would lead to an improvement in the broader economy.

Unfortunately, there’s no telling when that will happen, and in the meantime it’s not fair to many retirement-saving parents to allow their children to hurt their futures. If you’re going to provide a home and various necessities for your post-graduates or financially-unstable children, make sure you set parameters that keep them from getting to comfortable in your house. Don’t feel bad charging them some sort of rental fee and giving them a timeline in which they must move out or find a job. Without structure the situation could get worse and put too much pressure on your financial future.

Photo courtesy of: http://3.bp.blogspot.com

Filed Under: Asset Protection, Managing Risk, Retirement Savings, Weekly Blog Series Tagged With: Census Bureau, Family, Parent, Poverty, Poverty threshold, U.S. Census Bureau, United States, United States Census Bureau

Roth 401(k)s vs. Traditional 401(k)s

April 23, 2012 By admin Leave a Comment

By now, most Americans understand that at the very least, they should be participating in their employer’s defined contribution plan, most commonly offered in the form of a 401(k). But some companies offer two forms of these plans: the traditional 401(k) and the Roth 401(k). You thought deciding how much to allocate to your plan and then researching and electing the investment funds to support it was confusing enough, but here you are, faced with yet another option for safeguarding some retirement funds. Let’s break it down just a bit more.

What’s the difference?
The primary difference between a traditional and a Roth 401(k) is simple but significant. With a traditional 401(k) plan, your contributions grow tax free, and you pay taxes on the withdrawals; Roth 401(k)s, on the other hand, work in precisely the opposite way, as you pay taxes on your contributions but not on your withdrawals.

Additionally, Roth 401(k)s tend to be seen as more of an estate planning tool, since they do not necessitate that you to take required minimum withdrawals (RMDs) once you reach age 70 ½, as you must do with traditional 401(k)s. This allows you to leave your funds untouched for as long as you want after retirement, letting your investment grow tax free all the while.

Which is right for you?
This is a conversation best held with your financial advisor, as you must determine whether the back-end payoff of a Roth 401(k) outweighs the benefits of traditional tax deferral on the front end, but generally speaking, it depends largely on where you are in life and into which tax bracket you fall.

If you’re relatively young with an eye toward saving for retirement and you don’t earn a great deal of money, a Roth 401(k) may be worth exploring, as the upfront tax-savings benefits wouldn’t be as significant to you as a tax-free payout in retirement. Conversely, if you’re an established earner in a higher tax bracket, getting up-front tax-advantaged treatment is probably best, making the traditional 401(k) your most likely option. This is especially true for individuals who expect to be in a significantly lower tax bracket when they retire.

You can even double-dip.
If your employer does offer both types of 401(k) plan, you can split your contributions between the two if you so choose, as long as your combined annual contributions do not exceed 2012′s annual limit of $17,000. If you’re 55 or older, that limit jumps to $22,500.

With so many options, there is a 401(k) plan, or a combination of the two, that is ideal for your current situation. But before you make your decisions, be sure to weigh these considerations carefully, especially if you don’t speak with a financial advisor regularly.

Photo courtesy of: http://1.bp.blogspot.com

Filed Under: 401k Solutions, Managing Risk, Retirement Savings, Weekly Blog Series Tagged With: 401(k), Employment, Retirement, Roth 401, Roth IRA, Tax, Tax bracket, United States

401(k) Loans: Avoid Problems for Your Plan

April 16, 2012 By admin Leave a Comment

This is a hot topic today since many Americans are strapped for cash. Taking a loan from your 401(k) plan must be a strategy of last resort. The loan provision in a 401(k) plan is optional for the plan sponsor. Most include it to boost participation. I believe education must be the strategy of choice. Please protect the future you from the current you.

Loans (Photo credit: jferzoco)

On top of that, consider a couple other suggestions. Maybe your plan should only permit one loan at a time or there should be a limit on the size and scope of the loans. You should also consider your procedures for monitoring and collecting loans from participants after they have terminated employment and establish a procedure for keeping track of whether those loans have been satisfied. Since non-conforming loansare clearly a component of the IRS’s audit package for 401(k) plans, it pays to know more about loans, better manage them and accurately report them before you face an audit. So don’t simply assume plan loans are being handled properly. Look into them now and fix your mistakes. If you need assistance, your attorney at Fox Rothschild can help you sort it out..

via employeebenefits.foxrothschild.com

A loan from a 401(k) plan must be your last resort. Prior to taking this loan consult with a professional to determine if the loan is necessary and if it will solve your problem. Remember even if you must file bankruptcy your 401(k) plan can not be touched by creditors.

Please comment or call to discuss.

Pulling funds from 401(k) may hurt later (usatoday.com)
Is the Recession Causing Small Retirement Plans to Skimp on Compliance Efforts? (401kplanadvisors.com)
Eight suggestions for improving your 401(k) plan (401kplanadvisors.com)

Filed Under: 401k Solutions, Retirement Savings Tagged With: 401(k), Pension, Tax

What is a 401K?

April 16, 2012 By admin Leave a Comment

Of course you’ve heard of a 401k, but what exactly is it, and how do you manage one successfully? 401k plans are an excellent addition to your retirement planning and serve as a dual-feeding investment between you and your employer. And even though there is an equal monetary deposit between both you and your employer, there are other aspects of the 401k plan that may or may not bode well for your financial plan. In the very least, we will break down the nuts and bolts behind the 401k and give you the tools you need to decide whether it is right for you.

First and foremost, what is a 401k, and how does it work? 401k plans are retirement savings plans sponsored by your employer. It allows employees to invest and save a portion of their paycheck before taxes are deducted. Taxes are then taken out once the money is removed from the account. With a 401k, you decide how your money is invested. Most plans offer a spread of mutual funds composed of stocks, bonds, and money market investments. The most popular option tends to be a combination of stocks and bonds, which gradually become more moderate as you reach retirement.

Next comes the question of how much you should invest. If your employer is matching your timely investment percentage each paycheck it would benefit you greatly to keep your 401k contribution at a feasible amount. Obviously, manage your finances and ensure that you have enough to live and enjoy life, but keep in mind that retirement planning is important. If your employer is offering a 50-50 contribution you should take advantage of the plan; don’t leave cash on the table. The most popular contribution is 3% of your salary. So, if you earn $50,000 a year and contribute 3%, your personal contribution will be $1,500 and your company’s contribution will be $1,500. Although you can contribute over 3%, your company cannot, and this is where the possible drawbacks begin.

The IRS mandates contribution limits for 401k accounts. As noted, your company will not contribute over 3%, and the total dollar amount that can be contributed—including both your contributions and your employers’—cannot exceed 100% of your salary. In most cases, you can’t tap into your employer’s contributions immediately. There are complex rules about when you can withdraw your money and costly penalties for pulling funds out before retirement age. This is why most employers hire investment administrators to oversee your account. It is their job to inform you of updates about your plan and its performance, manage the paperwork and assist you with requests. You can also go to your administrator’s web site or call their help center if you need further assistance.

The final question is which type of 401k you should invest in. Most companies offer a traditional 401k, where the less common plan is a Roth 401k.

Traditional 401k:

Wages are contributed before taxes from each paycheck, like a deferred salary.
Taxable income drops by the amount you contribute.
You pay income taxes on contributions and earnings upon withdrawal.
No access to your funds before age 59 ½ or if you leave your employer at age 55 or older.
If you dip in early, expect a 10% penalty — on top of the usual tax bill.

Roth 401k:

Contributions are made with money that’s already been taxed.
No taxes paid upon withdrawal.
Better flexibility: free access to your money as long as you’ve held the account for 5 years.

As you can see, there are benefits and drawbacks to both 401k retirement plans. It is essential to survey your finances and what types of savings plans are right for you. 401k plans are great because of the contributions made by your employer, and the flexibility of deciding how much you’d like to contribute. Don’t hesitate to ask if you have any further questions or comments regarding 401k plans or financial management in general.

Photo courtesy of http://reviewfound.com

Filed Under: Managing Risk, Retirement Savings, Weekly Blog Series Tagged With: 401(k), Employment, Internal Revenue Service, Mutual fund, Pension, Retirement, Roth 401(k), Tax

5 Reasons Why You Should Take Advantage of that 401(k)

April 2, 2012 By admin Leave a Comment

When it comes to planning and saving for retirement, it’s not uncommon to feel overwhelmed by the mere thought of the notion. While we all want to bask in the glory of an eternally comfortable golden era, getting there does require an investment of time and, of course, money. But the road to retirement is long and paved with detours.
Fortunately, most working Americans already have access to an easy-to-understand and even easier to buy retirement product, the staple of almost every employer’s defined contribution plan — the 401(k). Appropriate at nearly every age and every point in your career, investing in a 401(k) is a smart way either to begin or supplement your retirement savings plan. Below are five simple reasons why you should absolutely take advantage of that company-offered 401(k).

It’s one of the easiest and fastest investments to purchase

Setting up your 401(k) is one of the easiest investment experiences you’re likely to have. This is because in most cases, you simply ask your company’s human resources guru to enroll you in the company’s defined contribution plan. Some companies require you to have worked for the organization for a certain period of time before you’re eligible to participate in the company 401(k), but once you’re ready to contribute, all you need to do is tell HR how much you’d like to contribute and how you’d like them to invest your funds — they handle all the details and take the contribution from your paycheck.

Your savings accrues tax deferred

One extraordinarily appealing aspect to 401(k)s is that all the money you invest grows at a compounded, tax-deferred rate. You continue to earn tax-advantaged benefits until you start withdrawing your funds, at which point you must pay taxes on that money. Furthermore, anything you contribute to your 401(k) in a given tax year can be taken as a deduction, lowering your taxable income. And because of its tax-deferred status, increasing your contributions even by a little bit can lead to dramatic 401(k) growth over time.

You can choose how much you want to invest, and how you’d like it invested

With a 401(k), you get to decide how much money you can contribute to your plan; not your employer or the company managing your funds. There is, however, a yearly maximum to what you can contribute, but it’s still more than how much you can put into an IRA. Your annual maximum contribution depends on your age: This year’s maximum is $17,000 if you are younger than age 50, and $22,500 if you’re age 50 or older. As for the investment itself, your employer uses either a brokerage firm, insurance or mutual fund company to manage your retirement plan, but you get to choose how that company invests your money based on your risk tolerance and investment preferences. Most 401(k) plans allow you to choose from at least five different mutual funds, bonds or money markets representing different market sectors and degrees of risk. A few organizations even allow their employees to add company stock to their 401(k)s.

If your company matches a portion of your contributions, it’s like a free bonus check

Many companies offer an incentive to encourage their employees to save for retirement by way of matching a portion of your own contribution to your 401(k) plan. The match can vary, but 50 cents to the dollar is a common employer contribution. Employers also have a set maximum of how much they’ll match your contribution, basing it either on a percentage of your annual salary, generally from three percent to six percent, or less commonly, on a predetermined dollar amount. This company match is like a bonus, for all intents and purposes, so make every attempt to contribute what’s necessary to get the highest match possible.

A simple way to make saving for retirement automatic

Once you’ve elected your contribution amount and investment options and communicated those choices to your HR department, that’s pretty much all you have to do. After that, your employer automatically deducts the percentage of income you’ve allocated to your 401(k) directly from your paycheck. You’ll most likely receive quarterly earnings statements from your employer’s plan manager, and some companies also make this information available to employees on a secure website.
When all is said and done, you’ll have a solidly structured and properly managed 401(k) working quietly yet constantly in the background, generating retirement savings.

Photo courtesy of http://reviewfound.com

Filed Under: 401k Solutions, Asset Protection, Managing Risk, Retirement Savings Tagged With: 401(k), Defined contribution plan, Human Resources, Individual Retirement Account, Investment, Mutual fund, Pension, Retirement

The high cost of 401(k) hardship withdrawals

April 2, 2012 By admin Leave a Comment

A hardship withdrawal must always be your last resort. Remember, if things are really bad and you are required to file for bankruptcy your money in a qualified retirement plan are protected from creditors. Seek professional help before you make a mistake which cannot be reversed.

WASHINGTON - OCTOBER 26: Internal Revenue Service Commissioner Douglas Shulman addresses the American Institute of Certified Public Accountants' 35th Annual National Tax Conference October 26, 2010 in Washington, DC. Shulman addressed a new IRS program requiring that anyone making money from completing tax returns must register with the IRS, pay a fee and pass competency tests and eventually attend continuing education programs. (Image credit: Getty Images via @daylife)

Hardship requirements

There are two main requirements that need to be satisfied to qualify as a hardship. The first is that the hardship withdrawal must be due to an immediate and heavy financial need. The IRS uses the examples of buying a boat or a television as situations that would not qualify under this condition.³ The second requirement is that the amount distributed under the hardship be restricted to the necessary funds needed to satisfy the financial need.⁴ This means that a participant can’t receive a hardship withdrawal in the amount of $10,000 when only $2,000 is needed.

The amount available for distribution is generally restricted to the amount the participant has contributed to the plan (without earnings). Some plans do allow employer contributions to be available as well, but this is not as common. In addition, the hardship withdrawal is not rollover-eligible, meaning that the funds distributed cannot be placed in an IRA or another qualified retirement plan to keep its tax deferred status.

What qualifies as a hardship?

The determination of what qualifies as a hardship is usually, but not always, based on “safe harbor” standards. These standards are outlined by the IRS to help plan sponsors determine if a participant’s situation qualifies as a hardship event. The eligible hardship events under the safe harbors are:

Medical care expenses that have been incurred or for medical care that is needed

Costs associated with purchasing a principal residence (excluding mortgage payments)

Tuition payments, educational expenses, or room and board expenses that will be incurred during the next 12 months of postsecondary education

Payments to prevent either eviction or foreclosure on a principle residence

Funeral expenses

Certain expenses related to repairs of a principal residence that are due to damage

via insight.milliman.com

When you are considering a hardship withdrawal please seek the advice of a professional. This added expense may help avoid a costly mistake which cannot be reversed.

Please comment or call to discuss how this affect you and your retirement future.

Retirement Savings Tips for Contract Attorneys (justbelowthelaw.com)
On retirement, too many of us are fools (finance.fortune.cnn.com)
4 Questions to Ask Before Borrowing from Your 401(k) (money.usnews.com)

Filed Under: Asset Protection, Retirement Savings Tagged With: Tax, Withdrawal

Pension Funds Making Alternative Bets Struggle to Keep Up

April 2, 2012 By admin Leave a Comment

Pension plans are much like individuals when dealing with funding their retirement. Both try to reduce funding or lack of savings by taking more and more risks. This can be successful, however it is a matter of luck and not skill. The results many times end up being disasterous. Saving for retirment should include a prudent portfolio which is globally diversfied.

NEW YORK, NY - APRIL 12: Billionaire Galleon Group hedge fund cofounder Raj Rajaratnam (right) enters a Manhattan Federal Court with one of his lawyers on the second day of the defense phase of his trial for insider trading on April 12, 2011 in New York City. Prosecutors allege that Rajaratnam pocketed $45 million by illegally trading on insider stock tips. While Rajaratnam's lawyers contend that he made legal trades using public information, prosecutors have called it the largest-ever hedge fund insider trading case. (Image credit: Getty Images via @daylife)

An analysis of the sampling presents an unflattering portrait of the riskier bets: the funds with a third to more than half of their money in private equity, hedge funds and real estate had returns that were more than a percentage point lower than returns of the funds that largely avoided those assets. They also paid nearly four times as much in fees.

via nytimes.com

It is important to remember that pension funds are managed daily by ‘experts’ in the field. These ‘experts’ cannot find the right risky alternative investments. This debate will continue, however investors would be best served, long term, with prudently managed portfolios.

Please comment or call to discuss how this affects you and your company retiremnet plan.