Canadians
More Confident than Americans
Canadian workers are feeling
more confident than their American neighbors about the economy, personal
finances, health, employer, and government benefits according to findings
recently released from Sun Life Financial's Canadian and American
Unretirement(TM) Index surveys.
"We asked Canadian and
American workers about the key drivers impacting their retirement and in every
category, Canadians had a more positive outlook," said Dean Connor, President,
Sun Life Financial Canada.
As an example of the contrast,
37% of Canadians feel very confident that they would be able to handle medical
expenses at the age they retire, compared to 23% of Americans even though less
than half of Canadians polled have checked to see what health or dental benefits
are available to them once they retire.
Retirement
Benefits in the Public Sector
New data from the U.S. Bureau
of Labor Statistics (BLS) show that 84% have access to a traditional defined
benefit pension plan.
The transition from retirement
plans that provide a guaranteed stream of income for life--defined benefit
plans--to those that put the risk on employees to contribute, invest prudently,
and produce a sufficient account balance for retirement--defined contribution
plans--has been well-documented among private companies. Now, BLS’ National
Compensation Survey reveals that government workers are more likely to be part
of plans that offer guaranteed retirement income than their private-sector
counterparts and more often have multiple plans available to them.
Just as the structure of
retirement plans differs between public and private sector workers, so too has
the pace of change in retirement plans differed between the two sectors. From
1986 to 2008, participation in defined benefit plans among full-time workers in
private industry declined from 76% to 24%. Over the same period, state and local
government employee participation in defined benefit plans declined
modestly--from 93% of full-time workers to 88% of full-time workers in 2008.
About 60% of job switchers
with a 401(k) plan cash it out. They would do better to roll it over into
another retirement plan.
What 401(k)s Cost the
Government
The tax breaks for 401(k)
contributions will cost the U.S. Government $51 billion in 2009 Add in the break
for IRAs, which are largely funded by 401(k) rollovers, and the cost to the
Government is $63 billion.
In recent years, there has
been a boom in “target-date” mutual funds. These plans offer a range of stocks,
bonds, and other investments, and then shift the mix as you approach retirement.
The closer you get, the more conservative the fund becomes.
For investors closer to
retirement, portfolios hold higher levels of bonds and cash in order to minimize
the potential for losses that will be difficult to recover. A typical fund for
an investor aiming to retire 20 years from now might have at least 80% in
stocks. By the time the retirement date approaches, most funds typically have
less than 40% in stocks.
The recent market has not been
kind to these portfolios, even some supposedly cautious ones. Consider what
happened to funds aimed at investors who are either retired or retiring next
year: Over the past twelve months, their losses ranged from 7% to 46% with an
average decline among this group of 29%.
Contrast
target-date funds with the world of college-savings plans. In many of these
state-run programs, known as 529 plans, fund companies combine the concept of
age-tailored investing with portfolios offering different levels of risk:
conservative, moderate, and aggressive. Last year, they usually delivered about
what you'd expect in a turbulent market. Investors in many "conservative"
portfolios for those about to enter college or already in college enjoyed small
gains on their investments, while those willing to take more risk generally
suffered double-digit losses. |
According to a recent survey
by the Transamerica Center for Retirement Studies, 56% of workers are less
confident in their ability to achieve a financially secure retirement than
twelve months ago. As a result, 29% expect to work longer and retire at an older
age.
The long and winding road to
retirement is getting longer and, in some cases, may never end for many
Americans, according to a revealing survey commissioned by ING DIRECT, the
nation’s largest direct bank
According to the results, four
in ten Americans believe the current economic climate will force them to retire
up to ten years later than originally expected or not at all. The survey also
revealed that over 60% of Americans are significantly more concerned about
saving enough money for retirement and having the right type of retirement plan
than they were six months ago.
Federal judges hold their
positions for life. The law does not subject them to mandatory retirement. In
contrast, most states inflict mandatory retirement on its judiciary upon
reaching a specific age, for example, seventy. Because of the mandatory
retirement age, courts around the states are constantly losing judges with
plenty of experience.
The U.S. House of
Representatives Committee on Small Businesses held a hearing Feb. 25 to discuss
the "Drop in Retirement Savings: The Challenges Small Business Face Funding and
Maintaining Retirement Plans in a Struggling Economy."
The Committee suggested
capping the amount of losses that small business owners are responsible for
paying during market downturns. Another approach they considered would allow
small businesses to look further ahead for pension values when calculating how
much they must pay to employee's retirement funds.
Witnesses provided data on the
importance of small businesses in America. According to the U.S. Census Bureau,
small businesses—those with fewer than five-hundred employees represent 99.7% of
the total firms and 50.9% of the work force in the United States. Approximately
39% of small business workers expect their 401(k) and IRAs to be their primary
source of income after retirement.
In challenging economic times,
investors need to assess their financial situation and take back control of
their retirement savings strategy. Recognizing this growing need, Transamerica
Retirement Services has launched a program to help retirement plan participants
weather the current financial storm and regain confidence in their financial
future. This new program is named “RECOVER,” an acronym meaning:
Recognize the
events that led us to this economic situation and understand that financial
markets are cyclical.
Evaluate your current situation.
Calculate your retirement income goals and determine how much you need to
save for retirement.
Organize your budget to determine how much you can save.
Verify that your investment strategy corresponds to your risk tolerance.
Execute any necessary changes.
Regain control of your Retirement Dreams.
The RECOVER Plan by
Transamerica is action oriented and guides participants through the process with
the help of a workbook and video presentation. The workbook walks participants
through a process to understand and assess their current financial situation,
identify how much they are actually able to save towards retirement, and the
types of investment choices to consider. It also includes simple instructions on
how to make account contributions and investment changes quickly and easily. The
accompanying video presentation works in tandem with the workbook to help guide
participants through the program.
RECOVER is available on the
Transamerica Web site
www.transamerica.com as a Flash file and downloadable PDF. A DVD and
workbook are available as well.
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