Reuters Money

So many funds, so little time: The case for simplicity

January 13, 2011

In life, as the saying goes, you can have too much of a good thing. It’s the same principle whether you’re talking about bowls of Ben & Jerry’s Chunky Monkey, or the investment options in your 401(k).

Index funds: They’re not all equal

January 12, 2011
David Gaffen REUTERS/Handout

David Gaffen REUTERS/Handout

The following is an edited excerpt from Never Buy Another Stock Again: The Investing Portfolio that Will Preserve Your Wealth and Your Sanity, written by David Gaffen, who is the Reuters markets editor. It was printed with permission of FT Press, an imprint of Pearson.

Another year. Another 500 personal finance surveys?

January 4, 2011

I have often said that I would be a rich woman if had $1,000 for every retirement survey that crossed my desk.

6 top financial trends for 2011

January 3, 2011

Trader Theodore Weisberg smiles as he wears a hat from March 1999, the first time the Dow rose above 10,000, on the floor of the New York Stock Exchange, October 14, 2009. REUTERS/Brendan McDermid  Although the old Chinese curse “may you live in interesting times” has a certain irony about it, this year will certainly not be dull for investors.

Get on the ball: Advice for rolling over your 401(k)

October 22, 2010

Dan Greenshields is president of ShareBuilder Securities Corporation, a subsidiary of ING Bank, fsb. The opinions expressed here are his own.

Mandatory IRA withdrawals are back in 2010

October 21, 2010

USA-FORECLOSURE/HEARINGSRetirement account holders who avoided minimum distributions in 2009 won’t have the same break in 2010. By December 31, anyone born before July 1, 1939 will have to pull money out of their IRAs and other tax-deferred retirement accounts.

Fidelity leads in retirement plan assets

October 5, 2010

When it comes to managing retirement plans, Fidelity Investments is still America’s biggest asset manager, according to Brightscope, which independently rates retirement plans. In an exclusive ranking for Reuters, Brightscope looked at retirement plan managers by the total value of assets in their funds in the corporate retirement market.

More employers offer retirement saving advice, but workers aren’t signing on

September 15, 2010

The numbers of workplace retirement plans providing free investing guidance to employees is rising quickly, but very few workers are taking them up on the offer.

Why younger investors are avoiding stocks

September 3, 2010
The shift away from stocks isn’t limited to young investors. ICI reports an overall net outflow of $18.4 billion from domestic equity funds in 2010 through the end of July. That outflow was offset by $27.3 billion that flowed into international equity funds—a pattern that’s been in place since 2006, according to Brian Reid, ICI’s chief economist. But during the same period, a whopping $155.7 billion flowed into the relative safety of bond funds. Reid isn’t surprised that younger investors are losing faith in stocks. “Investors in their thirties who have been in equities over the past decade have seen the stock market return essentially zero percent. And they didn’t experience the previous two big bull runs.” It’s not clear that the exodus from stocks is permanent. But if young investors really do remain risk-averse for the long haul, they’re likely to face a different kind of risk down the road: less money to spend in retirement. A 30-year-old investor who starts putting away 15 percent of salary today likely will have 35 percent more to spend in retirement if 70 percent of her portfolio is in equities compared with a portfolio containing no equities, according to T. Rowe Price. In fact, the firm’s Monte Carlo-style probability analysis—driven by long-term historical market returns—suggests precisely a 70 percent likelihood that this outcome will occur. But that message isn’t getting through to young investors. “It’s important to understand the purpose of having part of your portfolio in stocks,” says Charles Royer, a principal of Harvest Capital Advisors in Bellevue, Washington. “Stocks will be down or flat for long periods, and then there will be periods of economic prosperity when they get all their growth. So an investor needs to be in equities for the long term.” “This age group is the least likely to be getting good advice, either from a professional or another resource,” adds Royer. “Absent that, fear becomes the basis for decision-making. The trend I see with younger investors isn’t unlike some older ones – it’s not just the meltdown in 2008 but a whole set of economic issues that are terribly frightening, and the media coverage exacerbates it.” Royer thinks young investors should have no less than half their portfolio in equities, and perhaps as much as 75 percent. But stocks aren’t his starting point. “We first want to look at your liquidity and your overall savings. Then, we look at putting a percentage into stocks for the very long term—this is money you’re not going to touch for at least 10 years, so you won’t worry about it.” I spoke with Marketplace Money last weekend for a feature story on risk-averse young investors; click here to listen to my interview with host Tess Vigeland. Mark Miller is a journalist and author who writes about trends in retirement and aging. He is the author of The Hard Times Guide to Retirement Security: Practical Strategies for Money, Work and Living and edits RetirementRevised.com.

Samantha Shintay won’t be retiring for quite some time. At age 23, she’s been in the workforce for all of one year as a chemist for Nike in Portland, Oregon.

How to conquer the retirement worry gap

September 1, 2010
/Could you read another report that shows how little Americans have saved for retirement in these troubled times? I know it’s difficult, so I came up with a simple formula for figuring out how much you need. Pencil in how much money it would take for you to live comfortably for 25 years. Include items that are not covered by insurance – deductibles, travel, home maintenance, taxes. Then project how much Social Security and retirement income you will have by the age in which you cast that not-so-longing last glance at your office door. The difference between your comfort zone amount and your retirement kitty is the worry gap. That’s the amount you need to make up by working longer, saving aggressively or downsizing your lifestyle. For millions, the worry gap is a pretty deep crevasse. It’s hard to fill it up with money when your 401(k) is underfunded and the bills keep arriving. In a job-losing, no-raise economy, it looks like a bottomless pit. A recent survey – one that I always take note of – showed that some two-thirds of those polled in the two lowest pre-retirement income levels will be running short only 10 years into retirement. These folks, as monitored by the annual Employee Benefit Research Institute’s (www.ebri.org) “Retirement Readiness” study, are saving the least for retirement. Yet even those in the highest-income groups are still going to be facing problems paying for basic expenses and uninsured medical bills. Remember that Medicare has co-pays for hospital and medical services and is in severe fiscal trouble. The EBRI study also broke down who was most at risk. “Early” boomers (those aged 56-62) had a 47 percent chance of running out of retirement funds. Their younger peers (ages 46-55) and “Generation Xers” (ages 36-45) are about 44 percent at risk. Where do you stand? If you are going to come up short, there are myriad ways of conquering the worry gap. Here are some options: • Downsize. Do you expect to live in the same space when you’re older? Can you live in half the square footage? A smaller home or apartment lowers your living costs. A move from a single-family home to a condo, co-op or townhouse can mean lower property taxes, maintenance and financing costs. This makes most sense for empty nesters. The key theme is that the American Dream shouldn’t be tied into the size of your shelter — it should revolve around what you can afford and how much you save. • Rethink Retirement. For many, completely retreating from the workforce completely is a bad idea. It may lead to poorer health, early death and annoying one’s spouse/partner full time. Being in the workforce longer means continued benefits and the ability to save. You may also get a free match in an employer savings plan. If you suffer from a disabling condition or chronic illness, this is not an option, so look at how you will cover medical expenses. • Automate Savings. If you’re in a 401(k), sign up for automatic enrollment and increases. If you don’t have to think about contributions, you’ll save more. Even if you don’t have an employer plan, you can set up auto-debits into Individual Retirement Accounts. • Fund Your Roth. Roth IRAs and 401(k)s are looking good right now. While your contributions are taxed, your withdrawals are not (subject to a few rules). Most retirement plan withdrawals are taxed at full marginal rates. I think income taxes are going up to cover Medicare’s shortfalls, so Roths rule. The best thing you can do is survey yourself, your family/spouse/partner and take a hard look at your comfort zone. You may have to throw out some preconceptions about retirement, but don’t ignore the possibility that some adjustments may be needed.

Could you read another report that shows how little Americans have saved for retirement in these troubled times? I know it’s difficult, so I came up with a simple formula for figuring out how much you need.