11/11/2011 2:50 PM ET|
401k advice? Workers say no, thanks
An increasing number of plans offer outside help, typically for a fee. But so far, only about 1 in 4 participants offered the expertise is buying in.
Amid volatile markets and concerns about how workers are investing their retirement savings, more 401k plans are offering participants specific investment advice and even automatic account management to make investing decisions easier.
That should be a good thing: Surveys show that formal advice leads investors to increase their savings, diversify their holdings and continue holding stocks even when the market takes a plunge.
But here's the problem: Only about a quarter of the people who have access to advice through their retirement plans actually take advantage of it, according to retirement-plan providers and firms that provide advice services. And most workers who do use advisory services neglect to provide the personal details that would make the advice more valuable.
For many years, 401k and similar plans offered mostly education and "guidance," such as brochures, seminars and worksheets that gave employees generic suggestions about how to manage their accounts. Providing advice goes much further, offering specific recommendations about how much to invest in specific funds in the employer's plan.
It also carries a fiduciary responsibility, or a requirement to put investors' interests first. Because of that, most advice services are offered by companies other than the investment firm that provides the 401k plan's fund offerings.
A recent survey of 820 profit-sharing and 401k plans by the nonprofit Plan Sponsor Council of America found that 58% offered investment advice in 2010, most commonly online services, one-on-one counseling and telephone hotlines. That was up from 47% of companies surveyed in 2005. Just over a third of the plans offered professional account management, up from 24% in 2005.
Among large companies, 74% now offer advice or managed accounts to plan participants, up from 50% in 2009, says benefits consultant Aon Hewitt.
Consultants and advice providers say more retirement plans are offering such services in part because recent market volatility has left many people unsure of what to do. "When times are tough, there's a bigger demand for advice," says Chris Lyon, partner at Rocaton Investment Advisors, a Norwalk, Conn., investment-consulting company.
In addition, as companies shift to 401k plans from pension plans, it has become apparent that many employees are ill-equipped to manage their investments. They may make costly decisions, such as moving out of stocks only after the market has tanked. Many older investors are too heavily invested in stocks or, worse, their own company's stock, while some young workers avoid stocks altogether.
Poor investment decisions aren't tied to specific jobs or salaries, says Sue Walton, senior investment consultant for Towers Watson, a consulting company. She says she's seen manufacturing companies where "some of the folks on the line make more savvy decisions than those in the executive suite."
If you are comfortable studying the various funds in your company plan, assessing the funds' expenses, building a diversified mix of choices and tweaking your choices once a year or so, you probably don't need advice. But for those who are less sure, here's a rundown of what's available:
In most managed accounts, a professional money manager creates and monitors a customized investment portfolio for clients, usually wealthy investors, often for a fee of 1% or more of the assets under management. A managed account for a 401k, by contrast, is limited to the investment options offered in the plan.
Typically, a sophisticated computer program considers your age and pay, expected retirement date, size of your 401k and your contributions and then selects an appropriate allocation. The account is regularly rebalanced and adjusted as you age or when plan choices or market conditions change.
While a few plans pick up the cost of managed accounts, most people will pay fees of 0.2% to 0.6% of assets a year, or $20 to $60 for every $10,000 invested, depending on how much is invested and what the company has negotiated. It's basically the equivalent of a personal trainer or a medically monitored diet for your retirement plan.
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A well-known Washington lobbying firm with links to the financial industry has proposed an $850,000 plan to take on Occupy Wall Street and politicians who might express sympathy for the protests, according to a memo obtained by the MSNBC program “Up w/ Chris Hayes.”
The proposal was written on the letterhead of the lobbying firm Clark Lytle Geduldig & Cranford and addressed to one of CLGC’s clients, the American Bankers Association.
CLGC’s memo proposes that the ABA pay CLGC $850,000 to conduct “opposition research” on Occupy Wall Street in order to construct “negative narratives” about the protests and allied politicians. The memo also asserts that Democratic victories in 2012 would be detrimental for Wall Street and targets specific races in which it says Wall Street would benefit by electing Republicans instead.
According to the memo, if Democrats embrace OWS, “This would mean more than just short-term political discomfort for Wall Street. … It has the potential to have very long-lasting political, policy and financial impacts on the companies in the center of the bullseye.”
The memo also suggests that Democratic victories in 2012 should not be the ABA’s biggest concern. “… (T)he bigger concern,” the memo says, “should be that Republicans will no longer defend Wall Street companies.”
Two of the memo’s authors, partners Sam Geduldig and Jay Cranford, previously worked for House Speaker John Boehner, R-Ohio. Geduldig joined CLGC before Boehner became speaker; Cranford joined CLGC this year after serving as the speaker’s assistant for policy. A third partner, Steve Clark, is reportedly “tight” with Boehner, according to a story by Roll Call that CLGC features on its website.
Jeff Sigmund, an ABA spokesperson, confirmed that the association got the memo. “Our Government Relations staff did receive the proposal – it was unsolicited and we chose not to act on it in any way,” he said in a statement to "Up."
CLGC did not return calls seeking comment.
Remember the Leman and Brothers bankrupt, Murdock fraud this will give you the clue educate yourself your invested money is buying their CEO a Manson and fancy cars.
I have always been a good saver. I learned to save at an early age. I had a part time job when I was fifteen and when I turned sixteen I had my own checking account with the help of my parents. I learned very early how to budget my finances; but is was not until I was in my thirties that I learned how to invest my money. My parents grew up in the depression and my father was very against investing in the stock market. I always respected my parents, so for a very long time I only put my money in bank accounts, savings bonds, and CD’s. When I was in my thirties I started looking at other alternatives. I finally took the plunge, and upon the recommendation of a co-worker I bought my first shares of stock. I wound up loses my shirt on that investment but I was not turned off on the stock market. I stared doing my own research and began investing in the market. I found out I was pretty good at stock picking.
I am basically a value investor. I buy good companies and for the most part I reinvest the dividends. I am a believer of dollar cost averaging and like Warren Buffet I invest in the company; not the stock. My only regret is that I did not start earlier investing in the stock market. I have investments with my 401K plans at two companies I have worked for. At both companies you are only given a choice of mutual funds to invest in and the only stock you can hold is in the company I worked for. I make sure I was diversified in the mutual funds I have in those plans and I always try to look for the low cost funds. Both of the companies I worked for also contributed some dollar matching to the funds I put in. I feel strongly that you should take advantage of contributing to a 401K plan if you can diversify your investments and your company matches some or all of your contributions.
I also feel strongly that you should do your homework and monitor what you are investing in. When I first started investing in the market we did not have personal computers, the Internet, or a lot of financial programs on television to research the companies you wanted to invest in. It is a lot easier today to get information and make wise investment choices. Even though I go to the company seminars for our 401K plan and listen to the plans advisors, I still do all my own research. It is your money and you have a personal interest to your own success. My advice to anyone that is thinking about investing in the stock market or a 401K plan is do your own research, investing earlier in life is better than investing later, be diversified, take advantage of dollar matching plans, and try to reinvest the dividends in the companies you buy.
After my first layoff in 2001 I transferred all my 401K to a Self Directed IRA with the exception of $80K which I allowed an "expert" to manage at A.G Edwards (now Wells Fargo). I had regular consultations with him where I explained my risk theory but for the most part I allowed him to diversify as he felt necessary. In 2 years he managed to loose 30% including the contributions I was making and when I finally got tired of the losses it took another 3 days to stop the bleeding. During that period of time his fees were never clearly delineated on any report and even though my funds were tanking, he still collected his fees. Most of these financial advisors are idiots using an antiquated set of guidelines that haven't changed for the last 50 years and that are no longer applicable in the current market. I took what was left and did some strategic short term trades on Scot trade and managed to recover the losses in a mater of 3 month. My advise is: do you own homework and manage your own money. No one cares more about your money than you do and financial advisors haven't got a clue. Also, you must be able to liquidate on a minutes notice and that will not work when you have to go through a broker. When the market tanks they will cover their a$$ with your money before they liquidate so their landing is softer. It is nothing but a racket.
leela that has been posted so many times. Work for the banks or Wall St.?
CONSUMER PARTICIPATION RECOVERY ACT, 2011 (CPR)
As a recent retiree I have been disappointed in the response to the financial crisis that arose in 2008. The actions taken by the government, in my opinion, did little by way of establishing consumer confidence and as a retiree I personally felt the impact with the loss of value in my retirement account and no one bailed me or the other millions of Americans who saw the value of their accounts diminish. I have spoken with our congressional delegation and have received little by way of a response from them.
With consumer confidence at an all time low I would propose to establish what I have come to think of as "The Consumer Participation Recovery Act, 2011”, (CPR). Very simply, it would provide a tax holiday by allowing each taxpayer, aged 65 years or over to withdraw $25,000 from their retirement account prior to October 31, 2012 with no federal tax liability, and $25,000 for individuals 55 years to 59 ½ with no penalty for early withdrawal or federal tax liability. The funds for example could be used in several ways such as disaster relief or education expenses for the children or grandchildren. An additional consideration would be to allow any tax payer to withdraw an additional $50,000 prior to October 31, 2012 from their "tax sheltered retirement account" to buy residential real estate or pay for energy retrofits without regard to the early withdrawal tax penalty or federal tax liability.
There are an estimated 76 million baby boomers over the age of 55 and 41 million of them are over the age of 65. Using these figures one can guesstimate that the spending level created by the $25,000 drawdown initiated by only 10 per cent of the baby boomers would be in excess of 200 billion dollars. The real estate potential revenue at 10 percent of the baby boomer population would be in excess of 400 billion dollars. This represents a significant “righting” of the ship and should be considered and initiated immediately.
I would welcome comments in regard to this "concept".
Clifford Gordon Morris, Ph.D.
1375 Beaverhead Road
Helena, Montana 59602
406 422 5381
406 439 5209
Unles you have over $1 million in your account, your broker isn't going to actively manage your account where you can sit back and expect then to make sure your investmets are safe. So, why pay them to do what you can do as well and still have to do to protect your investments even with a broker.
1) If you can't manage your own money you can expect to reduce it by fees charged by someone who is guessing like yourself.
2) Interest rates are keep low to help our economy according to news reports. To make our Banks stronger the government set interest rates low yet banks still charge high loan rates. In th past the stock holders paid for mismanagement but now it's the customers.
3) With #2 said, do you really want the people who created this economic mess to give you advise.
This is a win-win situation for wall street bankers.
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