What’s The Weather Forecast?

This past weekend the forecast called for 90s and humid. Then Friday night it changed to rain early and continuing to rain throughout the day. Very disappointing for someone who was looking forward to floating on a pontoon boat Saturday afternoon.

As the day progressed the clouds gave way to sun. Before noon it was a beautiful day. I guess this time my grandpa was right when he said ‘rain before seven, sunshine by 11’. Thanks grandpa!! Will I rely on grandpa’s saying in the future? He has been right in the past however there have been times when he was wrong. So, the short answer is no.

By the way we had a great time on the boat, swimming and just hanging out with great friends.

Given the past performance of weather forecasters why does everyone, myself included, continue to watch the forecasts? It seems to me the weather forecasters are wrong more than they are right. Yet every day we watch for that days’ weather forecast.

WHY?? Because we want to plan our day. What we don’t know is that there are thousands of variables that must align for the forecast to become reality.

The same holds true for those that forecast future stock market moves. There are thousands of variables that must perfectly align to repeat past stock market moves.

Yet, investors continue to search for the ‘guru’ who will tell them what to do with their investment dollars. These investors are all caught up in short term volatility. If it’s raining right now we must assume it will continue to rain. And if the sun is shining we must assume it will continue to shine.

If the equity markets only went up there would be no or less reward.

I just read a forecast, ‘Fed may cause a full blown correction’. The key words are ‘may cause’. Many investors see this and react by selling their stocks. These investors are looking for a reason to sell and the big brokerage firms give them the reason.

Don’t forget these huge brokerage firms make money on every trade, whether you make money or not.

Investors would be better served by working with an investor coach/fiduciary adviser. Your coach will help you build a prudent, globally diversified portfolio. Your portfolio will be at the right level of risk for you and your goals.

Any adviser that cannot tell you in numerical terms your expected return and your expected volatility is speculating with your money.

This is followed by periodically rebalancing back to the original allocation.

Most importantly your coach will help you remain disciplined.

Your coach may even show you that downturns are a GOOD thing. If there were no downturns there would be little or no reward.

Patience is rewarded over the long term.

Too Many 401(k) Options Could Hurt You

The Wall Street bullies make money when money moves. Therefore these bullies have a vested interest in keeping you trading. Consequently 401(k) plans have been sold with many options to facilitate trading. By providing a more pension fund like plan employers will reduce employee anxiety and improve results.

Studying… (Photo credit: fanz)

Investment Options and 401(k) PlansIyengar found the same phenomenon applies to investing in retirement plans. Many people don’t participate in their company 401(k) plans. She conducted a study and concluded that once variables like age, income and company were controlled, the biggest reason for a decline in 401(k) enrollment was the over-abundance of choices.

When a 401(k) plan offered only two investment options, 75% of employees participated. When 59 investment options were available, however, the participation rate dropped to 61%.

Expanding on this study, Iyengar examined the impact that more investment options had on the 401(k) participants’ asset allocation. For every additional 10 investment options available, the average 401(k) participant’s equity allocation fell by 3.28%. Some neglected equities altogether.

This is significant because stocks usually generate better returns than bonds or cash over long periods. Lower equity allocations can be the difference between a well-funded retirement and a 401(k) plan that comes up short.

How to Combat Choice Overload

One of the easiest ways for companies to combat choice overload is to avoid offering too many different options. Procter & Gamble increased sales of Head & Shoulders shampoo by 10% when it reduced the number varieties available from 26 to 15

The best alternative for employers is to offer a more pension fund like plan to their employees. By providing an age appropriate portfolio you will not only improve participation but also improve results.

Please comment or call to discuss how this affects you and your investments.

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Are Young Workers On Track For Retirement–Or Smoking Something?

Younger employees may benefit from watching the over spending baby boomer generation struggle with their finances. The boomers over spending and debt is prevednting many from retiring at 65. The younger generation realizes that they and they alone are responsible for their own financial future.

retirement (Photo credit: 401(K) 2013)

Yet for all their interest in a social media savings message, 50% of young workers (compared to 39% of all workers) said one approach that would likely work is: “Stop trying to communicate. Instead, automatically enroll me with a high enough savings rate so I don’t have to think about it.’’  Of course if employers did ramp 401(k) withholding up to that  level, young workers might be shocked at how much it reduced their take home pay and find it hard to save outside their retirement accounts—which takes you right back to the HelloWallet identified problem of workers lacking emergency funds and draining their retirement accounts. Plus,  let’s not forget the student debt many young workers carry or the fact that if the AARP has its way, these kids will be paying through the nose for the baby boomers’ retirement,  too.  Bottom line: To stay on track for retirement, Gen Y is going to have to run a marathon. 

All employees are looking for automatic, no decision, retirement plans. This includes automatically enrolled into an age appropriate portfolio. This makes your 401(k) plan more like a pension plan. This will reduce anxiety and improve results.

Please comment or call to discuss how to improve your company 401(k) plan.

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Bad and Good Advice About the “Fiscal Cliff”

CNBC.com - 1996
CNBC.com – 1996 (Photo credit: Wikipedia)

The Wall Street bullies want you to trade in and out of stocks based on financial pornography in the media. They create hype to encourage trading because they make money when money is on the move. A fiduciary adviser would discourage this kind of behavior, which is in your best interest.

If I hear “fiscal cliff” one more time, I will consider jumping off a real cliff. The financial media is in hyperactive overdrive, breathlessly dispensing what passes for investment advice. Here are some typical examples:Over at CNBC, Jim Cramer told his viewers to buy Cisco Systems (CSCO), Home Depot (HD) and PetSmart (PETM). He believes these stocks, among others, would be trading higher if the fiscal cliff was resolved. His logic is simplistic: These stocks are “recession proofers” and “big yielders.”

Yahoo!’s Breakout had Todd Schoenberger, managing principal of The BlackBay Group, as a guest on its Nov. 16 show. Mr. Schoenberger commented on the recent decline of Apple stock. He noted ominously that “[A]pple is a true proxy of the global economy.”

Sam Collins, the “Chief Technical Analyst” at InvestorPlace, believes “fiscal cliff confusion” creates a “buying opportunity” for CVR Partners LP (UAN). He notes the stock may be “… a temporary victim of fiscal cliff negotiations.”

I am sure you get the drift. Unfortunately, many investors will act on this advice, which is unfortunate.

In stark contrast to the musings of these pundits, Allan Roth provides sound advice in his Nov. 12, 2012 CBS MoneyWatch blog. Roth correctly notes that the approaching fiscal cliff is “not exactly a secret” and “thus the possibility is already priced into the market.” There is no reason to believe that stocks are mispriced or that self-styled “experts” could identify them even if they were.

Next, he observes that the market often acts in a way that is contrary to conventional wisdom. He uses the downgrade of U.S. debt in 2011 as an example. You would think lower-rated U.S. Treasury bonds would make it more expensive for the government to raise funds. In fact, bonds “soared” making it “much cheaper” for the government to borrow.

If you are really worried about what it going to happen in the stock market in the next month or two (or even over the next several years), you have no business owning any stocks.

The “fiscal cliff” is being used by the financial media and many brokers and advisers to justify short-term recommendations based on their purported ability to predict the future, time the market and pick stocks to buy or sell. Neither they nor anyone else has this expertise. Relying on their advice is not responsible investing. Don’t let the “fiscal cliff” turn into a financial disaster for you and your family.

Trying to pick stocks or market time is ok if you want to gamble and speculate with your money. However, if you are saving for retirement or any long term goal ignore the financial media and the Wall Street bullies. Your best strategy is to design a prudent portfolio and remain disciplined to that strategy.

Please comment or call to discuss how this affects you and your financial future.

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The 401(k) On Steroids

When the demographics of a business are right the defined benefit hybrid plan is a great option for many small business owners as well as professional service firms. Assets in a qualified retirement plan provide asset protection from creditors and an accelerated saving rate, up to $250,000 deduction. Many small business owners and professionals are guilty of not saving enough for retirement. This option gives them the opportunity to catch up.

English: Retirement savings for various period...
English: Retirement savings for various periods with squirrel and nut analogy (Photo credit: Wikipedia)

Would an extra $2.5 million come in handy at retirement? Would you like to defer taxes on over $200,000 of current income each year? Would you like to see a higher proportion of your retirement plan expense go to yourself, or your key people if you own a business?Whether you are a realtor, consultant, physician, attorney, independent contractor, sole proprietor, owner or a partner in a small or large business, you can turbo-charge your retirement with a cash balance plan on top of your existing 401(k) plan. You can be a one person shop, or highly paid executive or professional in a large firm.

While not for everyone, the cash balance plan or other hybrid plans are a great way to accelerate your retirement savings

Please comment or call to discuss how this might be a great solution for you and you company..

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Is Your 401(k) Up To Par?

Logo of the Internal Revenue Service
Logo of the Internal Revenue Service (Photo credit: Wikipedia)

The quality of 401(k) plans offered needs to improve or plan participants will leave the plan. These plans need to convert to a more pension fund like approach.

Here are some of the other key design features and the percent of plans surveyed with that feature, according to the IRS survey:No age requirement to sign up (20%)

No service requirement (minimum time on the job) needed to make contributions (13%)

Employees can change deferral elections at any time (41%)

Catch-up contributions allowed for employees at age 50 (96%)

Employer matching contributions program in place (68%)

Permit after-tax contributions (4%)

Hardship distributions permitted (76%)

Employee loans permitted (65%)

For a look at the “crucial” role that 401(k) plans will play in the future of Americans’ retirement readiness, check out this speech The Investment Company Institute President/CEO Paul Stevens gave earlier this month at Town Hall Los Angeles.

The 401(k) plan has become the sole source of retirement of most Americans. If plan sponsors do not take their 401(k) plan seriously someone else will.

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

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Families That Cheat Investors Together, Stay Together

Financial author William Bernstein said it best: “…there is a third type of investor – the investment professional, who indeed knows that he or she doesn’t know, but whose livelihood depends upon appearing to know.”

Actually, there is a fourth type of “investment professional.” They definitely know they don’t know. They make a living conning you out of your money by offering you the lure of outsized returns without meaningful risk. Their con is more blatant and despicable than the conduct of your typical retail broker, but both have the same goal: Enriching themselves at your expense.

The debate on the fiduciary standard for all recommending investments will continue because many in the financial industry benefit fro the conflicts of interest. Investors must come first if we are to regain the trust of the American public. There is a successful business model which puts the interest of the investor first.

Please comment or call to discuss.

Posted via email from Curated 401k Plan Content

Are You Ready for a DOL Audit? 401(k) and Pensions Plans are in the Crosshairs

A recent report of U.S. Department of Labor (DOL) audit results contained some surprising statistics: almost 3 out of 4 audits find violations of the Employee Retirement Income Security Act of 1974 (ERISA) and the average cost for a plan to correct them, including fines and penalties, is $450,000. The DOL’s ERISA audit force will expand to include over 1000 investigators and audit activity will be increasing.

Plan administrators often prepare for IRS audits by doing their own plan compliance audits to identify problems to correct. However, we hear less frequently about clients preparing for a possible DOL audit, even though these audits are becoming more common. DOL audits could be triggered by answers on Form 5500 or employee complaints, or be the result of random selection.

Many plan sponsors have been busy managing their business, with little time for their company retirement plan. As regulations continue to increase and DOL audits increasing now is not the time to ignore this important employee benefit.

Please comment or call to discuss.

The End of Human Resources as We Know It

A Polycom Soundstation. Users can use it to bo...
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The competition for skilled employees will continue to challenge growing companies. Talent will find top organizations.

HR can’t be well managed without thoughtful criteria for assessing talent. The best HR leaders today are doing the math.A New Kind of HR Leader

The rise of the CHRO — Chief HR Officers, participating in the highest levels of decision-making — confirms the seriousness of boards of directors in elevating the role and capabilities of HR leadership. While historically CHROs were added to boards as a way to add diversity, companies in recent years have begun to add top-notch CHROs to broaden their perspective on organizational issues and expertise in talent matters.

The trend has accelerated this year and will continue to do so.

The pressures in this new HR world are enormous. A few of the current crop of HR superstars — Kevin Cox of American Express, Laszlo Bock of Google, Jeff Smith of BlackRock, Tracy Keoch of HP, Matt Schuyler of Hilton Hotels, Ashley Goldsmith of Polycom — are carrying the weight of their organizations on their shoulders.

Leaders like these won’t be caught short when asked for a realistic assessment of their organizations’ critical assets.

The best HR leaders welcome the challenge and in the process are strengthening the role of HR. They understand that talent is the competitive edge and the core of any organization — and that talent development is the most important responsibility of their job.

Organizations will find attracting and retaining top talent their main challenge going forward. This, I believe, is relevant to all organizations looking for skilled employees.

Please comment or call to discuss.

  • Vice President, Human Resources (executiveleadershipllc.wordpress.com)
  • Senior Vice President, Talent Management Director (executiveleadershipllc.wordpress.com)
  • Assessing the Real Value of ‘Me’ (pretzellogic.org)
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Worker morale still needs a boost

Image by mhartford via Flickr

Talk is not cheap

Perhaps the most important thing you can do to help morale is “acknowledging the stresses and circumstances that your employees are feeling,” says Arlene Vernon, president of HRx Inc, an Eden Prairie, Minn.-based HR consultancy.

That may sound familiar, because it’s the sort of advice consultants were giving out during the financial crisis. They suggested company owners walk around the office, factory or selling floor and talk to workers. Ask them how things are going. Listen to them vent about the economy. See if they have questions about the company.

These chats may not seem important, but they do go a long way toward helping employees feel better. If workers have to sit on their feelings and just put on a bright face all the time, they’re just bottling up unhappiness and that can be a big morale-buster.

Employees also need to feel that they’re really being listened to, not patronized. That means you need to take in what your workers are saying, and if they are upset about their jobs, see what the problem is and what you can do to help.

via benefitspro.com

Your employees are your most valuable asset.

Please comment or call to discuss.

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