Marketing Target-Date Funds

The Securities and Exchange Commission is proposing amendments to rule 482 under the Securities Act of 1933 and rule 34b-1 under the Investment Company Act of 1940 that, if adopted, would require a target date retirement fund that includes the target date in its name to disclose the fund's asset allocation at the target date immediately adjacent to the first use of the fund's name in marketing materials. The Commission is also proposing amendments to rule 482 and rule 34b-1 that, if adopted, would require marketing materials for target date retirement funds to include a table, chart, or graph depicting the fund's asset allocation over time, together with a statement that would highlight the fund's final asset allocation.

False Optimism?

As the country continues to recover from the recent recession, new research has found that almost half of U.S. employers are optimistic about the U.S. economy and their own company’s financial situation. However, the 11(th) Annual Transamerica Retirement Survey – conducted among a nationally representative sample of 601 U.S. employers – found that despite this optimism, most companies continue to be reluctant to make significant changes to their retirement plans such as adding or enhancing key plan features.

Marking a significant shift from the year prior, many employers are optimistic about their financial situations and the U.S. economy. Nearly half of employers (49 percent) expect their company’s financial situation to improve over the next 12 months, compared to only 29 percent in the year prior. Forty-five percent of companies surveyed indicated they expect the economy to improve in the next 12 months, compared to 27 percent in the year prior. Relatively few companies expect their financial situation to worsen (13 percent) or the economy to worsen (19 percent) in the next 12 months.

Increases in Retirement Plan Investments

More than one-third (38%) of retirement plan participants have increased the amount they are saving for retirement. In addition, 20% of participants have moved into more aggressive investment options, according to a recent survey conducted by Diversified Investment Advisors.

As Canada and Australia Go So Should Go the United States

An article published in Investment News advises Americans to model retirement after the Canadians and Australians, whose economies and standards of living, among all countries, are the most similar to the United States.

As an example to watch: The Canadian government may allow banks and insurance companies to offer broad-based defined-contribution pension plans to multiple employers, all employees, and the self-employed. The proposal is aimed at cutting costs, and improving retirement savings and pension coverage.

Australians have come up with a solution to savings adequacy by making a 9% employer contribution to individual-retirement-account-like plans compulsory. The mandated high rate of saving has had the effect of providing Australians with a much thicker asset cushion than that of most Americans.

A Speech by Steny Hoyer

Lacking

In a recent survey, firm Ipsos found that more than half (60%) of 1,082 adults aged 25 and older were trying to meet basic financial needs and savings goals while only one in five were actively building savings and investments for added financial security and to improve their lifestyles.

When discussing their retirement outlook, a majority of respondents said they expect to retire between the ages of 62 and 70 and anticipate being in retirement for 19.6 years on average. Eight out of ten said they believe that Social Security will not provide enough income to live in retirement. Thirty-eight percent of those surveyed feel unlikely they will have enough money to cover basic monthly expenses in retirement. Half feel they will be unable to maintain their standard of living.

Assumptions behind FERS

The Board of Actuaries of the Civil Service Retirement System has concluded that there should be no change to the set of economic assumptions used in the dynamic actuarial valuations of the Federal Employees Retirement System (FERS).

 Assumptions that the Board will continue include:

• A rate of investment return of 6.25 percent
• A continued inflation rate of 3.50 percent
• A continued projected rate of General Schedule salary increases at 4.25 percent.
• The annual rate of investment return will exceed inflation by 2.75 percent
• General Schedule salary increases will exceed long-term inflation by .75 percent a year.

The Automatic IRA

J. Mark Iwry, deputy assistant Treasury secretary for retirement and health policy, is pushing for the Automatic IRA. Under his proposal, employers with at least 10 employees would be required to offer workers a retirement saving option through payroll deductions, and those who didn’t sign up would be enrolled automatically.

Congress is working on a draft of auto-IRA legislation, which was introduced in President Barack Obama’s fiscal-2010 budget. Insiders do not expect it to be approved until next year at the earliest.

No Savings

Seventy percent of Gen Y workers don't participate in employer- sponsored accounts, and more than 20% of workers 45 and older have stopped contributing to their 401(k)s.

Saving from Early Retirement

Cobb County, Georgia, is spending now in order to save in the long run, spending on an early retirement buyout. The buyout offer is currently in effect. It will cost the county $9.2 million in 2010 and save nearly $6 million next year.