Press coverage of year-end 2008 EBRI/ICI 401(k) results

Average 401(k) Balance Fell 24% in 2008

BankInvestmentConsultant.com - ‎28 minutes ago‎

By Money Management Executive Workers who had already been investing in their 401(k) for at least five years through 2008 saw their balances drop an average ...

Average 401(k) Balance Fell 24% in 2008

Financial-Planning.com - ‎32 minutes ago‎

By Money Management Executive Workers who had already been investing in their 401(k) for at least five years through 2008 saw their balances drop an average ...

Average 401(k) Balance Fell 24% in 2008

On Wall Street - ‎33 minutes ago‎

By Money Management Executive Workers who had already been investing in their 401(k) for at least five years through 2008 saw their balances drop an average ...

Don't be scared away from 401(k) investments

Jackson Clarion Ledger - ‎1 hour ago‎

If you are wondering if it's still worth the worry to invest in a 401(k) or similar workplace retirement plan, stop your hand-wringing. It is. ...

Your retirement plan is still valuable

OCRegister - ‎3 hours ago‎

If you are wondering if it's still worth the worry to invest in a 401(k) or similar workplace retirement plan, stop your hand-wringing. ...

Right time to invest in a 401(k) plan? Absolutely

HeraldNet - Michelle Singletary - ‎5 hours ago‎

If you are wondering if it's still worth the worry to invest in a 401(k) or similar workplace retirement plan, ...

Is investing worth the worry?

Daily Press - ‎6 hours ago‎

WASHINGTON — If you are wondering if it's still worth the worry to invest in a 401(k) or similar workplace retirement plan, stop your hand-wringing. ...

The Forecast Is Sunny if You Weather the 401(k) Storm

Washington Post - Michelle Singletary - ‎12 hours ago‎

If you are wondering whether it's still worth the worry to invest in a 401(k) or similar workplace retirement plan, ...

Market Meltdown Costs 401(k) Participants One-Third of Their Retirement Savings

Workforce Management - ‎16 hours ago‎

The average 401(k) participant lost nearly one-third of his or her retirement account assets in 2008 because of the market downturn, according to a report ...

Long-Term 401(k) Balances Up Despite Recession

Planadviser.com - Rebecca Moore - ‎16 hours ago‎

October 07, 2009 --- After rising for five years, the average 401(k) retirement account fell 24.3% in 2008, according to an analysis of participants in the ...

How Your 401(k) Investments Stack Up

U.S. News & World Report - Emily Brandon - ‎16 hours ago‎

The bulk of 401(k) assets are invested in stocks. At the end of 2008, 56 percent of 401(k) participants' savings was invested in the stock ...

401(k) Assets Fell 30.5% in 2008

Financial Advisor Magazine - ‎17 hours ago‎

A new report has quantified the damage the 2008 bear market inflicted upon Americans' 401(k) savings and, as expected, it was severe. ...

401(k) balances fall sharply in 2008: Study

Business Insurance - Jerry Geisel - ‎19 hours ago‎

Employees' 401(k) plan account balances fell sharply in 2008 as equities markets plunged, but the account balances remain significantly higher than a few ...

401(k) investors: Hit hard in '08, doing better now

CNNMoney.com - Jeanne Sahadi - ‎21 hours ago‎

The financial crisis pounded investors, and a new report details just how badly. But 401(k) participants have since prevailed over the most punishing market ...

Detroit Free Press Susan Tompor Column: 401(K) Savers Took Beating During ...

istockAnalyst.com (press release) - ‎Oct 7, 2009‎

Pretty bad. So bad that most savers probably don't need a study to confirm it. --Many American workers suffered an average 24.3% decline in their 401(k) ...

For Consistent Savers, 401k Balances Shrunk 24 Percent in '08

MutualFundWire.com (subscription) - Adam Kommel - ‎Oct 7, 2009‎

The average 401(k) account balance consistently held since 2003 fell 24.3 percent in 2008, a report authored jointly by the Employee Benefit Research ...

For Consistent Savers, 401k Balances Shrunk 24 Percent in '08

MutualFundWire.com - Adam Kommel - ‎Oct 7, 2009‎

The average 401(k) account balance consistently held since 2003 fell 24.3 percent in 2008, a report authored jointly by the Employee Benefit Research ...

401(k) accounts took a beating in '08

Chicago Sun-Times - Francine Knowles - ‎Oct 7, 2009‎

The Employee Benefit Research Institute's database of 24 million 401(k) plan participants showed the average ...

401(k) savers took beating during meltdown of '08

Detroit Free Press - Susan Tompor - ‎Oct 7, 2009‎

Pretty bad. So bad that most savers probably don't need a study to confirm it. • Many American workers suffered an average 24.3% decline in ...

A Post-Mortem on Your 401(k)s in 2008

Wall Street Journal - Andrea Coombes - ‎Oct 6, 2009‎

Maybe the best that can be said about the effect of last year's market crash on average 401(k) balances is: It could have been worse. ...

401(k) asset gain seen despite market meltdown

Pensions & Investments - Jeff Nash - ‎Oct 6, 2009‎

“Consistent” 401(k) participants — those who have held accounts with the same employer every year from January 2004 through December 2008 ...

New Research from EBRI/ICI: 401(k) Balances Fell in 2008 Bear Market

PR Newswire (press release) - ‎Oct 6, 2009‎

WASHINGTON, Oct. 6 /PRNewswire-USNewswire/ -- American workers who held 401(k) accounts consistently from 2003 through 2008 suffered a 24.3 percent average ...

New Research from EBRI/ICI: 401(k) Balances Fell in 2008 Bear Market

Webnewswire.com - ‎Oct 6, 2009‎

prnewswire-usnewswire/ -- American workers who held 401(k) accounts consistently from 2003 through 2008 suffered a 24.3 percent average drop in their ...

New Research from EBRI/ICI: 401(k) Balances Fell in 2008 Bear Market

SunHerald.com (press release) - ‎Oct 6, 2009‎

Despite Losses, Ongoing Contributions Pay Off in 5-Year Account Growth WASHINGTON, Oct. 6 /PRNewswire-USNewswire/ -- American workers who held 401(k) ...

Retirement Funds Fell Less than Broader Market in 2008, Study Says

Wall Street Journal - Andrea Coombes - ‎Oct 6, 2009‎

Maybe the best that can be said about the effect of last year's market crash on average 401(k) balances is: It could have been worse. ...

New Research from EBRI/ICI: 401(k) Balances Fell in 2008 Bear Market

Earthtimes (press release) - ‎Oct 6, 2009‎

WASHINGTON, Oct. 6 /PRNewswire-USNewswire/ -- American workers who held 401(k) accounts consistently from 2003 through 2008 suffered a 24.3 percent average ...

New Research from EBRI/ICI: 401(k) Balances Fell in 2008 Bear Market

SYS-CON Media (press release) - ‎Oct 6, 2009‎

WASHINGTON, Oct. 6 /PRNewswire-USNewswire/ -- American workers who held 401(k) accounts consistently from 2003 through 2008 suffered a 24.3 percent average ...

Typical US Worker Saw 401(k) Lose 24.3% in 2008

BusinessWeek - Lauren Young - ‎Oct 6, 2009‎

The average 401(k) account balance was $86513 at year-end 2008. (At the end of 2007, the average investor had an account balance of $114337. ...

Average 401(k) loss at 24.3%

Detroit Free Press - Susan Tompor - ‎Oct 6, 2009‎

Pretty bad. So bad that most savers probably don't need a study to confirm it. • Many American workers suffered an average 24.3% decline in ...

In the balance: 401(k) participants lose one-third of their assets

InvestmentNews - Sara Hansard - ‎Oct 6, 2009‎

The average 401(k) participant lost nearly one-third of their retirement account assets last year because of the market downturn, ...

US Workers' 401(k)s Fell 30% Last Year - Report

Wall Street Journal - ‎Oct 6, 2009‎

American workers with 401(k) accounts saw their savings ravaged during 2008's bear market, though people with accounts for at least five years saw smaller ...

401(k) investors: Hit hard in '08, doing better now

CNNMoney.com - Jeanne Sahadi - ‎Oct 6, 2009‎

The financial crisis pounded investors, and a new report details just how badly. But 401(k) participants have since prevailed over the most punishing market ...

But average 401(k) balance among consistent savers fell 24% in 2008

MarketWatch - Andrea Coombes - ‎Oct 5, 2009‎

By Andrea Coombes, marketwatch SAN FRANCISCO (marketwatch) -- Maybe the best that can be said about the effect of last year's market crash on average 401(k) ...

Washington Post: The Forecast Is Sunny if You Weather the 401(k) Storm

http://www.washingtonpost.com/wp-dyn/content/article/2009/10/07/AR2009100703684_pf.html

Weather the 401(k) Storm

Washington Post

A Post-Mortem on Your 401(k)s in 2008 Andrea Coombes. Wall Street Journal (Eastern edition). New York, N.Y.: Oct 7, 2009. p. D.2

How Long Will It Take to Recover Your Investment Losses?

http://www.usnews.com/money/personal-finance/investing/articles/2009/10/01/how-long-will-it-take-to-recover-your-investment-losses.html

How Long Will It Take to Recover Your Investment Losses?
Rebuilding may not take as long as you think

U.S. News and World Report, October 1, 2009

Given Up Hope on Retirement? Newsweek

Given Up Hope on Retirement?
Newsweek

An Evaluation of the Adequacy and Structure of Current U.S. Voluntary Retirement Plans, with Special Emphasis on 401(K) Plans

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1474865

Abstract:
This paper reviews the results of many empirical and simulation studies EBRI has undertaken to determine whether future cohorts of retirees in the US are likely to have retirement income adequacy and the extent to which the voluntary retirement system is contributing to this objective in its current form as well as possible modifications that may increase its efficiency.

The new 'retirement' plan: Just keep working msnbc.com - USA

The new 'retirement' plan: Just keep working msnbc.com - USA

What Does Consistent Participation in 401(k) Plans Generate?

This Issue Brief presents recently available longitudinal data from the EBRI/ICI 401(k) database on consistent participation in a 401(k) plan, through year-end 2007. Looking at consistent participants in the EBRI/ICI 401(k) database over the eight-year period from 1999 to 2007, the average 401(k) account balance increased at an annual growth rate of 9.5 percent over the period, to $137,430 at year-end 2007. The median 401(k) account balance (half above, half below) increased at an annual growth rate of 15.2 percent over the period, to $76,946 at year-end 2007. Data for 2008 are currently being analyzed and are expected to be published later this year.

http://ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=4315

Your 401(k): Getting back what you lost CNNMoney.com - USA

Your 401(k): Getting back what you lost
CNNMoney.com - USA
http://money.cnn.com/2009/07/14/retirement/401k_recovery/

DOL/SEC Target-Date Hearing Webcast Now Online

Excerpt: "The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) has posted on its Web site the archived Webcast of the June 18, 2009, joint target-date fund hearing with the Securities and Exchange Commission (SEC). The hearing received testimony from 36 witnesses on issues relating to target-date funds and other similar investment options. According to EBSA, the Webcast archive is broken down by witness panels to make it easier to view. It can be viewed at http://www.dol.gov/dol/media/webcast/hearing/."

How Would Target-Date Funds Likely Impact Future 401(K) Accumulations?

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1422726

Abstract:
As part of EBRI’s 2008 analysis of the likely impact of the Pension Protection Act’s safe harbor automatic enrollment and automatic escalation provisions, we developed a stochastic simulation model to project future 401(k) balances as a function of various plan design variables as well as assumptions with respect to various employee behavioral responses. In this paper I report on the results I obtained using the EBRI simulation model to determine how target-date funds (TDFs) would likely impact 401(k) participants assumed to be automatically enrolled. I realize that TDF use in 401(k) plans is not limited to those automatically enrolled; however, based on our simulation results, it appears that this 401(k) auto-enrollment will represent the majority of TDF use in the future and hence I will concentrate my analysis on those results. Results are reported both at the time of retirement as well as at the time of job change for those who are assumed to cash out. Several scenarios are presented in terms of alternative rates of return as well as several different types of target date funds.

Target-date Funds Under The Microscope

Target-date Funds Under The Microscope
FOXBusiness - USA

Robert Powell

MarketWatch

BOSTON -- Target-date funds, once considered the be-all, end-all mutual-fund product for investors who don't have the time or inclination to build their own retirement portfolios, are about to be scrutinized by federal regulators. Given the rising popularity of these funds and their dismal performance last year, that's a good thing.

Regulators from the Labor Department's Employee Benefits Securities Administration and the Securities and Exchange Commission will hold a public hearing on June 18 "to examine the need for additional guidance given the importance of these investments to the retirement savings of investors."

The witnesses, who must submit requests to testify by June 5, will address how target-date fund managers determine asset allocation; how they select and monitor underlying investments; the extent to which risks are disclosed to investors and the adequacy of that disclosure; and the approaches or factors to compare and evaluate target-date funds.

In short, EBSA and the SEC want to learn what's working with these funds, what's not and what, if anything, needs to be changed. They want to figure out what new regulations or laws might be needed to protect investors who think they're buying one thing -- safe asset allocation -- but get something entirely different -- volatile funds that declined in value anywhere from 4% to 41% last year.

Target-date funds are mutual funds that invest in a pre-arranged mix of stock, bond, and money-market mutual funds, usually from the same fund family. Target-date fund managers typically use time horizon rather than risk tolerance or investment objective to determine the fund's asset allocation. Typically, the longer the target date, the more the manager invests in stock funds. As the fund gets closer to its target date, managers adjust downward -- based on a pre-arranged "glide path" -- the percent invested in stock funds.

But what do the experts who will likely testify at the upcoming hearing have to say about target-date funds? Some say it's too soon to say anything conclusive about these products. Others say the funds' overall performance proves a one-size-fits-all product simply won't work, and still others say a nip here and a tuck there could make these funds work. Read comments on Labor Department site from those who are requesting time to testify at the hearing.

What's working?

Under the Pension Protection Act of 2006, 401(k) plan sponsors -- that is, employers -- can automatically enroll employees into qualified default investment alternatives or QDIAs, including target-date funds. For those workers who weren't contributing to their 401(k), automatic enrollment and contributions to target-date funds are better than not investing, say some experts.

Ditto for older workers who invest in target-date funds of their own volition. Before target-date funds came along, many plan participants, especially those within 10 years of retirement, typically invested too much of their money in stock, said Jack VanDerhei, research director at the Employee Benefit Research Institute.

In fact, VanDerhei said some studies showed older plan participants investing anywhere from 70% to 90% of their money in equities. By contrast, the average 2020 target-date fund today might have about 50% invested in stocks, a much more prudent allocation for someone on the cusp of retirement, he said.

"Target-date funds seem to do a good job of taking plan participants away from extreme equity positions, of having either too little or too much invested in stocks," he said.

Others agree. "Target date funds improve the performance grade of most investors from an 'F' to a 'C,'" said Aaron Skloff, a chartered financial analyst and chief executive of Skloff Financial Group.

Still, he and others said much is not working when it comes to these funds.

Perception is not reality

One big problem with target-date funds: You typically buy a fund whose target date most closely matches your projected year of retirement. If you plan to retire in 10 years, you would buy a fund with 2020 in its name. But even though these funds might have the same date in their name, few fund managers take the same approach when it comes to asset allocation and glide path. One fund might have 20% in stocks while another with the same target date might have 40%.

That problem came home to roost last year. Folks on the cusp of retirement who purchased 2010 funds apparently assumed that such funds would have little or no assets invested in stocks, but they got a rude awakening: The average 2010 fund fell 23% in 2008, according to Ibbotson Associates, and things haven't been much better this year, with the average 2010 fund losing 4.7% in the first quarter.

"The market's recent upheaval is a potent reminder that target-date funds for retirees or near-retirees are neither risk-free nor a guaranteed source of income, no matter how conservatively they may be positioned," Morningstar analyst Michael Herbst wrote in a recent report.

Others say that many target-date funds, not solely those dated 2010, are investing far too much in stocks because underlying investment theories are flawed.

"The 2008 failure is primarily attributable to the flawed investment theories much more so than failure of asset allocation," Louis Harvey of Dalbar wrote in a report that he plans to submit to EBSA.

Mediocre funds

Another problem, Skloff said, is that "many mutual fund companies load their target-date funds with mediocre offerings," he said. "Something they might not like you to know is [their] lack of need to place their best-performing mutual funds inside of a target-date fund, as the best-performing funds are already attracting plenty of assets. The mediocre funds need to attract assets to make them more profitable."

The list of things that are wrong with target-date funds is much, much longer.

But experts also say there are ways to change things for the better.

More education required

VanDerhei suggests that much more education is needed for plan participants who invest in target-date funds. According to VanDerhei, plan participants seem to getting much of their information from co-workers rather than fund managers.

Customized funds

Ideally, Skloff said, plan sponsors should be customizing target-date funds so that plan participants can use the best-of-breed funds from many different fund families. "This would avoid the conflict of interest the mutual-fund company would have in loading its TDF with mediocre, proprietary selections," he said.

Managed accounts

Jason C. Roberts, a partner with Reish Luftman Reicher & Cohen, said one-size-fits-all funds serve no one well. "We have come a long way to come back to what we knew at the start," he said. "Investment decisions require a great deal of unique input."

Roberts is calling for the increased use of what he calls independent "asset allocators," advisers who can custom-build 401(k) and IRA portfolios to the unique needs of each person.

On June 18, watch a live Webcast of the hearing at this site.

Copyright © 2009 MarketWatch, Inc.

Investors approaching IRAs with caution

Investors approaching IRAs with caution
Chicago Tribune - ‎May 24, 2009‎


Investors approaching IRAs with caution
By Andrew Leckey
May 24, 2009
It is the year of living cautiously for investors with individual retirement accounts.The economic problems that felled investments and job security have turned many formerly eager IRA investors into tentative souls."We've seen a slight increase of a few hundred dollars per account in the IRA contributions made in 2009 compared to last year, which is the good news," said Ken Hevert, vice president of retirement savings products for Fidelity Investments. "However, we've also seen an overall decrease in the number of people actually making those IRA contributions."Although some investors see discounted investment prices as an opportunity as they sock away IRA money, many others are unsure.Investing in an IRA is discretionary, and this is a time of significant financial challenge, Hevert said. The one thing that didn't change was that many investors found motivation in the April 15 tax-filing and contribution deadlines and chose that as the time to invest, he said.Employment trends are pushing money into IRAs."Because the financial crisis has significantly increased the number of layoffs throughout industries, we're seeing a lot of people doing rollover IRAs from their company 401(k) accounts," said Petra Campos, director of retirement products for Charles Schwab. "They can leave that money with their former employer, but a great many have been choosing to roll it over to IRAs."Diversification of asset classes and investments based on how many years you have left until retirement always has made sense for IRAs, but the past year dramatized this, Campos said. As a result, investors want to put their money where they have the most flexibility on how to invest it."With so much change in the workforce, 401(k) investors leaving their companies are faced with the choice of leaving their money where it is, rolling it over to a new employer, rolling it over into an IRA or cashing it in and spending it," said Jack VanDerhei, research director for the Employee Benefit Research Institute. "That last choice, cashing it in, is the worst possible because you'll be taxed on the money as regular income and pay a 10 percent penalty on the distribution if you're not 59 1/2."Besides age, other ways to avoid the 10 percent withdrawal penalty are if you use the money as a first-time home buyer, for higher education for your immediate family, for unreimbursed medical expenses over 7.5 percent of adjusted gross income or for health insurance if you've been unemployed for a certain period. You'll still have to pay the taxes.In the case of a new employer's 401(k), check to see if it offers investment options that suit you, VanDerhei said. That shouldn't be a problem if you roll it over to an IRA at most brokerage and mutual fund companies, but compare the overall performance of several firms."There's a big disconnect about IRAs in 2009, with a lot of investors stopping their contributions because they're worried about losing more money in the stock market," said IRA expert Ed Slott, whose Web site is at irahelp.com.What many fail to realize is that they don't have to put the money in stocks but can instead choose certificates of deposits or bonds or money-market accounts, he said. There is no one IRA strategy right for all investors, because each individual's situation is different."I like to use an analogy of the IRA as a wine glass: You can put in either water or straight vodka," Slott said. "It all depends on how aggressive you really want to be."Slott, a presenter at many consumer investment seminars, has noticed some gradual erosion in the negative attitude toward stocks and mutual funds. "I hear a lot of people talk about going back into the stock market now because they figure it is down so low they can't lose much," Slott said. "But they're approaching it much like going into a cold swimming pool, dipping their toes because no one really wants to dive in."Hevert, Campos and Slott recommend Roth IRAs. These don't give a tax deduction for investment like a traditional IRA, but they do grow tax-free and don't require that you take minimum distributions at age 70 1/2, as traditional IRAs do.When converting to a Roth from a traditional IRA, you'll pay tax on the entire amount being converted. But many investment values are down significantly, which means paying less tax on gains. The potential of tax rates being higher in future years provides further reason to convert, some experts say.In 2010, investors of any income level (rather than the current $100,000 or less in modified adjusted gross income required for Roth eligibility) will be able to make the conversion to a Roth IRA and also spread the tax hit over 2011 and 2012."There's no question that if you're putting money into an IRA, you should do it in a Roth," Slott said. "Some experts argue there's an advantage to a traditional IRA because it helps with your current tax refund, but I don't know anybody who invests a tax refund."

Time's the best answer for restoring nest egg

Time's the best answer for restoring nest egg
Cherry Hill Courier Post - ‎May 8, 2009‎

Time's the best answer for restoring nest egg

"Visit courierpostonline.com/recession for all the tips on how to deal with the 'great recession.' "

By ANDREW EDER
Gannett

The 2008 stock market plunge has inspired jokes, bumper stickers and offhand quips to the following effect: My 401(k) is now a 201(k).

Behind the gallows humor is an uncomfortable truth: The bear market, as of March, wiped out an estimated $2 trillion in value from 401(k)s and individual retirement accounts.

The losses have reset retirement expectations for many older workers and exposed the dangers of a retirement-savings system that has shifted responsibility and risk onto the workers themselves.

In 1980, 60 percent of private-sector workers were covered by a defined-benefit pension plan, while 17 percent were offered a 401(k) -- then a new investment vehicle that allowed workers to stash away income tax-free, often supplemented by matching funds from the employer.

By 2006, those numbers were reversed: Now only 10 percent of workers have a defined-benefit plan, while 65 percent are offered a 401(k). The number of workers who were offered both types of plans stayed flat.

The rising share of workers with 401(k)s means that individuals need to make decisions about how to invest a big chunk of their retirement savings. Advocates say that's not always a good thing.

"People are not ready to take care of themselves, quite honestly," said Jean Setzfand, director of financial security for AARP, the 40 million-member advocacy group for Americans age 50 and older.

For those close to or already in retirement who have seen their accounts decimated, there may be no option but to work longer or rejoin the work force. But everyone who manages a retirement account can benefit by following a few pieces of advice.

Keep contributing: The temptations to cut 401(k) contributions can be myriad. Workers are weary from market losses. Financial pressures on families are mounting, making the extra income a tantalizing target. Some companies have stopped providing matching funds.

But those who cut off the flow of funds to their retirement accounts miss the opportunity to buy into the market at a discount.

"The biggest mistake is not continuing to contribute," said Carol Arnott, a certified financial planner with Greenville Financial Group. "When the market is in such a decline, it's a great place for us to be buying in with our long-term money."

Don't jump around: Another temptation is to move 401(k) money away from battered stock funds to safer investments like money market funds. Doing so locks in losses from the bear market and ruins the chance of benefiting from the rebound.

It's simply impossible to time the market, Arnott said. Another mistake she sees is investors who jump in and out of investment funds based on their performance in the previous year.

"It's like barreling down I-95 and looking in the rearview mirror," Arnott said. "You are destined to crash."

And for those who want to cash out a 401(k) when leaving a job, beware -- it will cost you 20 percent of the account's value in federal taxes, and 10 percent in early withdrawal penalties.

Watch asset allocation: It's not smart to hop from fund to fund -- but inertia can also be dangerous. Workers need to rebalance their retirement accounts as they age to adjust risk levels and find the proper mix of equity and fixed-income investments.

"When you leave people to their own devices, a large percentage of people close to retirement ended up betting way too heavily on equities," said Jack VanDerhei, research director at the Employee Benefits Research Institute.

One answer to the problem of asset allocation is target-date, or lifecycle funds, where fund managers choose an investment mix based on an individual's expected retirement date, although the management of these funds has recently come under increased scrutiny.

Reconsider expectations: Younger workers have the benefit of having many more years to return their retirement accounts to health. For those closer to retirement, big 401(k) losses may require fundamental adjustments in their plans.

One strategy is to extend the time frame in which workers plan to tap their 401(k)s. For some, that may mean postponing retirement, or even finding a job in retirement to keep some income flowing.

"Stay in the work force as long as you can," advised AARP's Setzfand. "Only time can help resolve this matter."

Survey: Calculating a comfortable retirement
Philadelphia Inquirer 

Survey: Calculating a comfortable retirement By David Pitt ASSOCIATED PRESS DES MOINES, Iowa - Rising costs and uncertainty about the economy have workers less confident in their ability to save enough money to retire comfortably, say the authors of a new study released last month. Even though workers are saving more and expecting to work longer to improve their chances of a happy retirement, there's still a disconnect. The survey shows that many are failing to plan appropriately and making incorrect assumptions about retirement income. The new survey by the nonpartisan Employee Benefit Research Institute finds that only 13 percent of U.S. workers say they're very confident they'll have enough money to retire comfortably. "Concerns about the poor economy coupled with the losses that have recently been experienced in the stock market have resulted in the lowest percentage [of a confident outlook] since the start of the survey 19 years ago," said Jack VanDerhei, one of the survey's authors and the EBRI research director. "But the good news is, I really do think this will be a wake up call for many people who had false optimism in the past." And 41 percent more workers said they're somewhat confident of having enough savings for retirement, down two percentage points from the year before. Only 20 percent of people already retired say they're very confident they'll be financially secure. That's just half of the 40 percent from the survey a year earlier. It's no surprise that most survey respondents said the economy was largely behind their pessimism. Change in behavior. With the dour mood about retirement prospects comes some behavioral changes that advisers and retirement planners say may be one of the positives coming out of the economic downturn. The survey shows that 81 percent of those who have lost confidence in having enough money to retire say they are spending less. The survey also shows 65 percent of workers say they are currently saving money for retirement. "One strategy would have been to roll up into a ball and somehow put your head in the sand and ignore this is happening," said Dan Houston, president of retirement and investor services at Principal Financial Group Inc., an underwriter of the survey. Workers have not done that, however. He said people are beginning to understand a secure retirement means saving much more than they have been. The average worker with an employer-sponsored retirement plan puts aside 7 percent, which is about half of what today's worker would need to live a comparable lifestyle in retirement, Houston said. Estimating how much money it will take to live a good retirement is one of the largest miscalculations among workers, VanDerhei said. About half the workers in the survey say their household savings and investments total less than $25,000, excluding the value of their home. A surprising 20 percent say they have less than $1,000 in savings. This signals a tremendous problem ahead. Consider that a woman earning $40,000 at retirement would need to have $203,134 in savings by age 65 to ensure she could replace 80 percent of her income in retirement, VanDerhei said. The calculation assumes she has purchased an annuity with a nominal guaranteed income and receives Social Security. A man under the same circumstances would need $190,138. Sources of retirement income. Another point of confusion for many workers is the source of their retirement income. Among workers without a defined benefit retirement plan at work, 41 percent believe they have such a pension plan. A defined benefit plan is one in which an employer pays into but the worker does not. "I'm just afraid you still have a situation where these are people who don't understand the difference between defined benefit and defined contribution plans," VanDerhei said. "They think they'll magically end up with what mom and dad had." The U.S. Bureau of Labor Statistics said in a March report that just 20 percent of private industry workers have a defined benefit plan. About 43 percent have a defined contribution plan such as a 401(k). A disturbing factor for many investment advisers and retirement planners from the EBRI survey is that only 44 percent of workers say they have tried to calculate how much money they'll need to have saved for retirement. Another 44 percent said they simply guess at how much they'll need. Fewer than a quarter say they've tried to approximate how much they'll need and fewer than a fifth say they've checked with a financial adviser. Nine percent say they read or heard about how much they should have, 7 percent have used an Internet calculator and 5 percent filled out a worksheet. The survey is based on random telephone calls to 1,257 people age 25 and older in January. It included a cell phone supplement to encompass a broader selection of people. The survey's statistical margin of error is plus or minus 3 percentage points. The was sponsored by EBRI and Washington-based market research company Mathew Greenwald & Associates Inc.

Humberto Cruz: Shape up your finances and retirement savings

Humberto Cruz: Shape up your finances and retirement savings
Sun-Sentinel.com

Humberto Cruz: Shape up your finances and retirement savings

May 4, 2009

 Exercising can be a pain when we're way out of shape (I know because I was 44 pounds overweight once). But that's exactly when we need to do it, starting slowly if we must, as part of an overall, well-thought-out plan to improve our health and fitness.

The same is true about our finances, as today's tough economic times are demanding — but not always receiving — a greater commitment to sound financial planning, even if we start with baby steps.

I thought about this after reading the 2009 Retirement Confidence Survey, the 19th in a series of annual studies about Americans' readiness and attitudes about retirement. The survey has been co-sponsored each year by the Employee Benefit Research Institute and research firm Mathew Greenwald and Associates.

This year's main findings are sobering: Just 13 percent of American workers, down from 18 percent last year and 27 percent in 2007, are "very" confident of having enough money for a comfortable retirement. That 13 percent is the lowest on record. Among retirees, confidence also fell to a new low, with only 20 percent saying they are very confident, down from 29 percent in 2008 and 41 percent in 2007.

"Our survey first picked up the drop in retirement confidence last year," said Jack VanDerhei, research director at the non-profit, non-partisan Employee Benefit Research Institute. "Given the uncertainties that exist about the economy, it is no surprise the downward trend has continued." Besides this drop in confidence, a less-noticed section of this year's study reveals an understandable but disquieting change in attitudes about financial planning.

For example, 21 percent of U.S. workers now say preparing for retirement "takes too much time and effort," up from 11 percent in 1998, when the stock market was going gangbusters. Just 48 percent say they enjoy financial planning now, compared with 62 percent in 2000, about the time the tech bubble began to burst.

Now, 63 percent believe that "anyone can have a comfortable retirement if they just plan and save," compared with 71 percent in 2002. I consider the drop significant, considering the 2000-02 period was a terrible time for the stock market.

As for good news, at least more Americans are recognizing reality. A recurring theme I found in many previous surveys, particularly during the late 1990s, was one of false confidence.

Besides cutting expenses, many workers expect to work longer, with 21 percent saying they'll be on the job until their 70s, and 72 percent planning to work for pay at least part time after retirement.

But one thing most American workers don't do — and it could help them tremendously — is at least estimate how much money they will need in retirement. In this year's survey, only 44 percent of workers said they or their spouse have tried to make the calculation, down from 47 percent last year. For help with the calculation and other savings tips, see choosetosave.org.

 

More Americans understand reality of what it takes to retire

More Americans understand reality of what it takes to retire
Chicago Tribune