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Protecting Your Future, Today |
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May 2008 |
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Andrew E. Sweeny, Jr.
Vice President
Registered Representative
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Thank you for your continued business. If you know of anyone that could benefit from my services, please feel free to forward this newsletter on to them.
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More Info |
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If you would like more information about these
topics or about
HORAN
please contact
Andy Sweeny at
(513) 745-0707.
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Important News for you about Social Security and your Retirement Savings Future |
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Americans are becoming increasingly worried about saving for their retirement, especially as the countries economic outlook continues to get worse, according to a new survey of workers and retirees. Only 18% of workers polled were very confident about saving enough money for a comfortable retirement, according to the Employee Benefit Research Institute's 2008 Retirement Confidence Survey down from 27% the year before.
Many Americans feel they can depend on Social Security to see them through their retirement years. While Social Security has played a large role in the past, the future, without changes, looks to be different. In 2017, the cost starts to exceed the income and Social Security will have to tap the interest on trust fund assets to cover benefits. In 2027, taxes and interest will fall short of annual benefit payments, so the government will be required to draw down trust fund assets to meet benefit commitments. The trust fund will be exhausted in 2041.
There are three primary ways to fix Social Security: increase taxes, cut future benefits or raise the return on Social Security's investments.
The biggest challenge in retirement is paying for healthcare. The survey showed that only 34% of workers expect to collect employer-paid health insurance after they stop working, down from 42% last year, as more employers eliminate health care for future retirees. That percentage will probably continue to drop. See full story , by Scott Thole, HORAN. |
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The Best New Features of a Rich 401(k) |
Here are the 5 best features right now - and the most promising approach to getting your plan to adopt them.
Feature: A Roth option
401(k)s offering it: About 25% of employers
Unlike a regular 401(k), the Roth version - permanently greenlighted by Congress in 2006 - lets you make contributions only after the money is taxed. But withdrawals are tax-free.
Feature: An automatic rebalancing service
401(k)s offering it: More than half
Once you've settled on an appropriate mix of stock and bond mutual funds within your 401(k), this service automatically rebalances your holdings back to your desired allocation (by buying and selling funds in your account) once a quarter, typically. And it's usually free. |
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Feature: Target-date funds
401(k)s offering it: About two-thirds
Also known as life-cycle funds, they maintain a mix of stocks, bonds and cash that gradually grows more conservative as you draw close to the year you plan to retire (hence the "target date").
Feature: Advice for your entire portfolio
401(k)s offering it: About 25%
A professional investment adviser will recommend a portfolio of funds that's right not just for your 401(k) but for your investments outside it as well.
Feature: More free money
Employers offering it: About 75% of those that have cut their defined-benefit pension plans in the past decade.
The average mid-size to large company offers a 401(k) match equal to 3% of an employee's pay.
See full story, located at CNNMoney.
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Borrowing from 401(k) accounts can be a bad deal all around.
The credit crunch has come home to roost in many unlikely places, from the student-loan market to the municipal-bond arena. Here's another improbable victim: your human resources department. The subprime crisis and its many ripple effects are prompting more financially strapped homeowners to borrow from their 401(k) plans. That not only puts their long-term fiscal health in jeopardy, but also places a large burden on their employers.
Loan programs may be the single most disliked and burdensome administrative difficulty associated with operating 401(k)s. Too often discrepancies between the amortization schedule created for the loan and the repayment schedule created by a company's payroll vendor go undetected until a retirement plan is audited by the Internal Revenue Service, whereupon the employer must scramble to set things right.
It's no picnic for employees, either; they face a raft of difficult calculations when deciding whether to tap a 401(k), and often don't understand the potential long-term (or even short-term) impact of such a move.
Plan sponsors aren't required to offer loan programs, but a majority do. Companies routinely add a loan feature to their 401(k) plans in the belief that more employees will participate if they know they can access the funds in an emergency. But many experts say that view is misguided, and some finance chiefs agree.
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Fiduciary Fitness |
Although you already may have given up on your New Year's resolution to get fit, you still can follow through with your resolution to make sure all of your fiduciary ducks are in a row for this year. Below are some important steps that you should consider.
1. Appointments to Fiduciary or Investment Committees. It is appropriate to appoint the senior corporate officers to your plan's fiduciary or investment committees consistent with (1) knowledge and understanding of financial matters, (2) ability to devote appropriate time and resources to serving on the committee, and (3) a need to avoid "conflicts" with company responsibilities (typically more important for companies with significant insider information concerns).
2. Board of Directors' Role. Generally, we prefer that the members of the board of directors not serve in a fiduciary capacity, with the one exception being that the board appoint the named fiduciary of the plan (to the extent that the appointment is not "hard-wired" in the governing documents).
3. Implement an Investment Policy Statement (IPS). Nothing in ERISA requires that plans have an IPS, but the Department of Labor (DoL) and some courts have suggested that it is a good practice.
4. Appoint an Investment Committee Liaison. Investment committees generally meet only periodically but, for larger plans, there typically are decisions that must be made or carried out on an ongoing basis.
See full story, located at PlanSponsor. (free registration may be required)
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Do you have a question you would like addressed in our next issue?
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Striving to educate our clients in the ever-changing face of the
insurance & financial industry.
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Horan Securities, Inc., doing business since 1996.
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