Retirement Fitness Survey

Wells Fargo & Company has produced a Retirement Fitness Survey. In the Survey, nearly 67 percent of those over 50 say their expectations for retirement have changed in the past year. Fifty-six percent now expect to work longer by an average of three additional years.

Women in Retirement

Pre-retired women have saved less toward retirement and are less likely than men to know how much they will need to save before retiring, according to Wells Fargo. Women in retirement will have saved a median $250,000 toward retirement as compared to a median $300,000 for men. The survey also showed that 37 percent of pre-retired women can't even estimate how much they'll need before retiring making retirement fitness for women difficult.

A Holistic Retirement System

• Ensure full participation and sufficient funding by enrolling employees automatically on their first day of work.
• Offer incentives for employers and employees that encourage total contributions between 10 and 14 percent of pay – about double today’s savings - helping individuals reach a target of replacing 70 percent of their pre-retirement income.
• Help workers manage risk by offering a menu of 15 to 20 investment options to provide sufficient diversification without presenting an overwhelming number of choices.
• Give workers financial education and objective, noncommissioned advice to help them build a portfolio that reflects their goals and risk tolerances.
• Provide opportunities and incentives to save for retirement medical expenses.
• Provide lifetime income through an affordable fixed annuity option.

401(k) Confidence

In late 2009-having weathered a bear market in stocks that started in late 2007 and continued through early 2009-a large majority of Americans had confidence in their 401(k)s. According to new research released by the Investment Company Institute (ICI), a majority of Americans have confidence in their 401(k)s, overall 73 percent of households surveyed.

All-Powers Language

A deeply divided Pennsylvania State Supreme Court has ruled that the "all-powers" language found in the Durable Power of Attorney Act allows an agent to change the beneficiaries listed on a person's retirement plan. The decision, which was reached by a 4-3 majority, holds that such a change in beneficiaries does not constitute a gift and, therefore, allows an agent to make the change without a specific directive in the power of attorney.

National Press Club

The National Press Club Newsmaker Program has held a discussion on "Showing How 401(k) Participants Are Behaving and Faring One Year after the Market Calamity of 2008."

Savings Gaps

Research from McKinsey & Co. finds that the average American family will face a savings gap of $250,000 at the time of retirement. The average family will have only about two-thirds of the income it will need.

A Warning about Retirement Planning Calculators

The Society of Actuaries and Actuarial Foundation (SOA) has issued a warning against the retirement-planning calculators sponsored by financial services firms. SOA warns that most such tools neglect one or more significant retirement risks.

Neglected risks include the following:

• Longevity:

The handling of longevity risk varies considerably among the programs with some apparent inconsistencies. This is an important planning factor because the range of lifetimes between users can be significant with different probabilities of living beyond a given age.

• Unexpected events and risks:

Financial-planning software under-represents extreme events, such as the current financial crisis. The examined retirement programs generally were unable to analyze the risks of variable-rate mortgages or large declines in housing prices. The majority of software surveyed did not consider the possibility of a large stock market and housing market decline occurring at the same time that a person nearing retirement has lost a job.

• Housing:

There is inconsistent treatment of housing as an asset for use in financing retirement. Some programs allow users to specify whether they are willing to sell their home to meet retirement expenses.

• Social Security:

Software programs inadequately estimated the level of Social Security benefits users are entitled to, and did not direct consumers to the Social Security Administration Web site to obtain an accurate benefit estimate at no charge.

• Annuities:

Software programs usually did not evaluate the possibility of annuitization -- converting assets into lifetime income annuities -- as an option to reduce risk. There was also a lack of consideration of different options for timing of payouts.

Sticking to Their Guns

A Wells Fargo Survey has found that during the recent economic recession, only 15 percent of retirement-savers took assets out of the stock market and placed them into more conservative investments such as CDs, savings, or fixed-income bonds. Only 49 percent expressed any hope of getting back on track by leaving their assets in the stock market with no change in allocation strategy.

Virginia Retirement System Under Audit

The Virginia Retirement System is tightening up its handling of confidential personal information in the aftermath of a state audit.