Majority of Plan Participants Lost on Retirement Planning, Seek Direction From Employers

The most efficient solution for plan participants is a professionally managed risk adjusted globally diversified portfolio. This portfolio is best when it is automatically assigned based on age. Each employee can then determine the correct level of risk for their particular circumstance and make a change to the appropriate portfolio.. The final alternative would be allowing the employee to opt out of the managed portfolio and choose their own fund mix. I believe most employees will stay within the model portfolios and will experience better results with less anxiety.

The findings from the survey emphasize four areas of focus for employers and their participants: attitudes toward saving for retirement, awareness of automatic features in DC plans, awareness of long-term investment risks and nuances among age groups that impact likeliness to save.”Plan participants communicated loud and clear about what they need: simple steps and automated features,” said Kristi Mitchem, senior managing director and head of Global Defined Contribution for SSgA. “One of the most surprising and encouraging findings is the willingness of participants to take 401k direction from their employers. The ongoing volatility in the financial markets has increased anxiety amongst plan participants and a significant percentage want simplified and prescriptive guidance in order to make progress toward their retirement goals.”

Attitudes towards saving are changing, with 75 percent of survey respondents indicating they would be willing to be automatically enrolled in a 10 percent savings “boot camp” for six months. The survey concluded that 54 percent of participants say they are “very” or “somewhat confident” that their savings are on track to fund their planned retirement lifestyle. Other participants have a much less optimistic outlook. Most place the blame on themselves, with 55 percent indicating they lack confidence because their rate of savings is not high enough and 52 percent indicating they did not start saving early enough. Others blame the economy or the financial markets, and only a few blame their employer.

Plan sponsors(employers) will benefit from providing the proper guidance to their employees. If provided with a pension fund like plan stress and anxiety levels will drop. The result will be a more productive work force as well as their retirement plan viewed as a real employee benefit.

Please comment or call to discuss how your company plan can be improved.

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401(k) study: Help can improve performance by 3 pct.

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The real secret to investing for a successful retirement is a globally diverisifed portfolio and disciplined rebalancing. Your retirement account should be managed much like a pension fund. Exclusively providing professionally managed portfolios will increase results and reduce anxiety.

REBALANCINGFailure to periodically rebalance a portfolio can also hurt returns. By rebalancing, investors adjust the allocation between stocks and bonds in their portfolios to ensure their investments reflect their appetite for risk. For instance, in a market where stocks surge, a portfolio can become too heavily invested in stocks unless the accountholder moves some of that money from stock funds into bonds or other assets.

Failure to rebalance after a market surge or drop leaves a portfolio at risk to underperform.


A large segment of 401(k) accountholders have historically been complacent about their investments, failing to do anything with their account for years.

“Rather than do something wrong they’re just not doing anything,” said Pamela Hess, director of retirement research at Aon Hewitt. “With all the volatility in the last few years, I think folks don’t know what to do and a lot are just doing nothing.”

More workers with 401(k) accounts are using some form of help, Hess said. An earlier study of 401(k) accounts indicated about 25 percent of workers used help with their investments in 2009. As of the end of 2010, about 30 percent of workers were using help.

Hess points out it, however, that still means about 70 percent of workers don’t get help.

“This study really quantifies the fact that he gap between doing things on your own and what you can get with professional help does in fact get substantially wider during periods of volatility and economic stress,” Jones said.

While acknowledging that some forms of help including managed accounts carry higher costs, Jones said the difference in performance outweighs the increased cost.

Managed account fees typically range from 0.20 percent to more than 1 percent of the account balance. Target-date fund fees can range from around 0.18 percent to more than 1.5 percent of assets.

Professionally managed accounts provide most employees with the best opportunity to successfully retire. This assumes the employees remains disciplined and consistently contributes to their account.

Please comment or call to discuss how this would affect you and your employees.

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