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How does your 401(k) balance compare?
Average 401(k) Account Balance by plan member’s age and years of work (as of 12/31/2013) Age Years worked Average 401k Balance (in $) 20s 5-10 $18,351 30s 10-20 $66,139 40s 20-30 $154,228 50s Greater than 30 $252,418 60s Greater than 30 $248.397 Source: Employee Benefits Research Institute -
Institutional Plan Sponsors Investment Decisions
A recent study using a dataset of 80,000 yearly observations of institutional investment product assets, accounts, and returns for 24 years (1984−2007) indicate that that plan sponsors may not be acting in their stakeholders’ best interests when they make rebalancing or reallocation decisions. Investment products that receive contributions subsequently underperform products experiencing withdrawals over one, three, and five years. For investment decisions among equity, fixed-income, and balanced products, most of... -
White House Memo Makes Case for Fiduciary Standards for Brokers Advising 401(k) Plans
If a White House memo from Jason Furman, Chairman of President Obama’s Council of Economic Advisors is any indication, brokers advising 401(k) plans will soon be under a fiduciary standard, which would require them to act in the Plan’s best interest, and not a “suitability” standard, which currently exists. If such a plan were implemented, then revenue sharing or payments received for selling certain funds will no longer be permissible. ... -
Unnallocated Deferred Annuities in Retirement Plans
One of the trends in the retirement space is to get participants focused on “income replacement” rather than “asset accumulation”. After all, once workers retire, the assets that they have must generate a sufficient income for them to maintain their desired lifestyle. Guidance from the Treasury Department and the Department of Labor within the past week has generated a lot of news on adding deferred annuities within Target Date Funds.... -
Use of Liquid Alts Growing in Self-Directed IRAs
A recent article at WealthManagement.com discussed that interest in self-directed IRAs is growing. A few reasons for this are that more people have begun to accumulate sizeable assets in their retirement plans. and are looking to diversify their portfolios beyond stocks, bonds and mutual funds. As such, there tends to be a greater appetite for alternative assets such as real estate, precious metals, commodities, limited liability corporations and hedge funds. A... -
Why have some target date funds recently increased their equity allocation?
Blackrock, Fidelity and Pacific Investment Management Co have increased their equity allocation within their target date funds in the past year. These shifts have consultants, advisors and analysts questioning not only the reasons behind the move, but the potential consequences, especially if the recent market correction would expand. A few excerpts: “The shared characteristic these funds have is they have not been doing so well since 2008. The question is... -
Citigroup 401(k) Plan participants suit allowed to move forward
Suit alleges plan fiduciaries violated ERISA by offering affiliated funds that charged higher fees. A U.S. District Court judge in New York is allowing a participant lawsuit against plan fiduciaries of the Citigroup 401(k) plan. The case is another instance of an affiliated product that charges higher fees than funds with comparable performance. A copy of the article, titled “Court Moves Forward Citigroup 401(k) Excessive Fee Suit” appeared on PlanAdvisor... -
Business Owners and Plan Sponsors: You need to be more engaged in your Plan (its the law)
Business owners and plan sponsors: When it comes to the 401(k) retirement plan that you’ve established for your company, you need to know one thing: You (the fiduciary or plan sponsor) are working for the employees and their beneficiaries. Your main focus is them, not the company. Therefore, you want to make sure that you are paying reasonable costs for the plan, you need to make sure the... -
5 Ways Participants Can Make Their Lousy 401(k) Plan Better
A recent article titled “5 ways to make your lousy 401(k) plan stellar” suggests actions that a 401(k) plan participant might take to improve if they are in a less-than-desirable 401(k) plan. In summary, the five options are: 1. Self-directed accounts. While not offered by all plans, some of them do, and it lets you range outside the fixed menu of investment options. Tread carefully here though. As the Dalbar studies show, most “go-it-alone”... -
Endowment IndexTM Asset Allocation and 10 Year Returns Compared to the Nation’s Largest Pension Fund
The nation’s largest pension fund, the California Public Employees Retirement System, better known as CalPERS has been in the news this week with an announcement that they are going to be liquidating their $4B hedge fund allocation over the next year. Apparently, the high costs and complexities, combined with their ability to scale the asset class relative to their $300B portfolio just isn’t worth the effort. While on the surface this...
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