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Category: Retirement

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Small investors still counting on stocks for retirement

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Maybe individual investors haven't given up on stocks after all.

That's the thesis of a new study, which says Americans still have faith in the stock market's long-term potential even though they have reduced their equity investments in recent years.

The study analyzed more than 23 million 401(k) retirement accounts nationwide. It was done by the Investment Company Institute, a mutual-fund trade group, and the Employee Benefit Research Institute, a research organization.

The study showed that 62% of 401(k) participants had money in stocks last year (defined as either stock mutual funds or company stock).

Four in 10 people had more than 80% of their 401(k) money in stocks in 2010. That's down from 54.1% of people who had such a large helping of stocks a decade earlier, but it still represents a significant amount.

The percentage of 401(k) investors who are out of the market entirely dropped to 11.8% from 12.7%.

Heavy stock concentration declined markedly among older Americans. The percentage of sixtysomethings with at least four-fifths of their portfolios in equities declined to 21.4% last year from 39.7% in 2010.

But among twentysomethings, the percentage rose to 60.4% from 55.3%, according to the study.

Overall, the reduction in stock holdings illustrates the fear and frustration that many feel toward stocks after a very disappointing decade. But the report nonetheless appears to undermine the notion that Americans are dumping stocks en masse.

That's due in part, the study says, to the popularity of so-called target-date funds, which automatically redistribute assets among stocks, bonds and other investments as participants get older.

“Growing use of target date funds appears to be helping to keep younger 401(k) participants invested in balanced portfolios, with equity exposure to help their assets grow over the long term,” said Sarah Holden, Investment Company Institute senior director of retirement and investor research. “While our surveys and others have shown that investors are less willing to take on stock market risk, 401(k) plan features are countering that trend for plan participants.”

Still, the study underscored the touchy economic straits that many Americans are suffering through. In 2010, 21% of all 401(k) participants who were eligible to borrow money from their accounts had done so, the same as in 2009 and up 18% from 2008.


Use of 'target-date' funds grows in 401(k) plans

Americans are saving more in 401(k) retirement plans

401(k) 'education' by provider may be a sales pitch

-- Walter Hamilton

Photo: The New York Stock Exchange. Credit: Getty Images


Many Americans say they will have to work until they're 80

Forget about retiring at age 55. Or 65. Or perhaps even 75.

One-quarter of middle-class Americans fear they will have to work until they're at least 80 years old to afford a comfortable retirement (if "retirement" is even the right word, given that many of these people may never actually retire).

That conclusion, in a survey released Wednesday by Wells Fargo & Co., found that nearly three-quarters of Americans expect to continue working into what long has been retirement age. A little more than half of those said they'll need to work to pay their bills, while the rest said they want to keep working.

The survey was the latest of many showing that Americans are dangerously unprepared for retirement. With only limited savings, many people are realizing they must work much longer, must dramatically scale back their lifestyles, or both.

More than half of middle-class Americans in the Wells Fargo survey said say they must slash their current spending "significantly."

The average person has squirreled away a mere 7% of their hoped-for retirement savings -- a median of just $25,000 versus a desired goal of $350,000, according to the survey. Three in 10 people in their 60s have less than $25,000, suggesting they'll have no choice but to live on Social Security.

The Wells Fargo survey painted a more dire picture than most other polls, which typically pin the worst-case retirement age in the mid-to-late 60s.

But pessimism may be a sign of the times. A new survey by Yahoo Finance found that 41% of people ages 18 to 64 feel the American Dream is "out of reach." The poll found that 37% of people have no retirement savings, and more than half of them have socked away nothing for their children's college educations.

The specter of having to work until age 80 raises a host of issues, including the risk that illness could force many people to drop out of the workforce. And in an era of corporate cutbacks, even healthy  people could be pushed out of their jobs through layoffs or buyouts.

“The fact that the vast majority of middle-class Americans expect to work well past the traditional retirement age has significant societal and economic implications,” said Joe Ready, director of Wells Fargo's institutional retirement and trust unit.

The survey of 1,500 Americans was conducted from early August to late September.


Nest egg should be 10 times your annual salary, study says

Workers are more pessimistic about retirement, study finds

Baby boomers prize financial certainty above all else, survey shows

-- Walter Hamilton

Photo: Americans may not have much time to lounge in hammocks in old age.Credit: Spencer Weiner/Los Angeles Times


Use of 'target-date' funds grows in 401(k) plans


There is a bit of good news in the world of retirement investing.

According to a new study, Americans are increasing their use of so-called target-date mutual funds in 401(k) plans, and most people report being satisfied with them.

Among active and knowledgeable investors, use of target funds has nearly doubled to 41% today from 22% in 2005, according to the survey of more than 1,000 people by investment firm AllianceBernstein.

Among neophytes -- what the firm terms "accidental" investors, who handle their own 401(k) investing only because they must -- 1 in 4 people use target funds, up from 16%.

Target funds typically buy a variety of underlying mutual funds to create a diversified portfolio based primarily on a person's age and expected retirement date. Though target funds have shortcomings and risks, they're generally considered to be a wise choice for unsophisticated 401(k) investors because they handle much of the decision-making, such as which individual funds to buy and how much.

Employees seem to be happy with target funds: 81% of those surveyed said they're as satisfied or more so with them as with the other funds in their plans. Most people understood that the funds are designed to become more conservative as participants near retirement age, according to AllianceBernstein.

Still, Americans feel disillusioned overall about their retirement prospects.

The percentage of people who feel confident in their ability to achieve a comfortable retirement has risen to 26% from 18% in 2009, according to the survey. but that's down from 41% in 2007, prior to the global financial crisis. And even then, only 2 in 5 people feeling upbeat about their retirement prospects was nothing to crow about.


Bill would remove penalty for tapping 401(k) to avoid foreclosure

Solo 401(k) lets self-employed shelter more of their income

401(k) 'education' by provider may be a sales pitch

-- Walter Hamilton

Photo credit: Mark Boster/Los Angeles Times

Consumer Confidential: Cellphone taxes, 401(k) matches, beer sales


Here's your watching-the-detectives Wednesday roundup of consumer news from around the Web:

--At least your cellphone bill may hold steady. The House has approved a five-year freeze on any new state and local taxes imposed on cellphones and other wireless services, including wireless broadband access. The voice vote reflected a consensus that new taxes on wireless mobile services have far outpaced average sales taxes on other items and have become a deterrent to the spread of wireless broadband technology. Wireless customers reportedly now pay 16.3% in taxes and fees, more than double the average rate of 7.4% on other goods and services. The bill prohibits state and local governments from imposing so-called discriminatory taxes on mobile services, providers or cellphones for five years.

--Some more good news: Most of the companies that either suspended or reduced their 401(k) matches during the economic downturn have reinstated them, according to business consultant Towers Watson. An analysis of 260 mid- to large-sized companies shows that 75% of those that took the step to cut costs have restored their match. Among those, about 74% are continuing the match at the previous level. About 23% brought matches back at a lower rate. Among these companies, the reinstated match was slightly more than half of their original contribution. Just 3% restored matches at a higher rate. I wonder what companies those are.

--But here's a sign that times are still tough: We're not chugging as much brewski. MillerCoors, the country's second-largest brewer, says its third-quarter net income fell 14.1% due to a weak economy, low consumer spending and higher commodity costs. The combined U.S. operations of SABMiller and Molson Coors Brewing, which make Miller and Coors brand beers, said underlying net income in the July-September quarter slipped to $286.9 million, while net sales were down 2.5% at $1.965 billion. The brewer has a U.S. beer market share of nearly 30%, behind Budweiser brewer Anheuser-Busch InBev's share of almost 50%. So do your bit for the economy and hoist a few.

-- David Lazarus

Photo: Lawmakers want to hold cellphone taxes steady for five years. Credit: Jason Alden / Bloomberg

Americans are saving more in 401(k) retirement plans

If there's a bright side to the troubled economy and ever-rising medical costs, perhaps this is it: A new survey shows American workers are saving more in their 401(k)s to fortify themselves against the financial gloom they see around them.

Over the last year, 41% of people with 401(k) retirement accounts have boosted their contribution rates (up from 31% last year), while 11% expect to stash away the maximum $16,500 allowed under federal tax law (it was 8% a year ago), according to an annual survey by Mercer, a unit of Marsh & McLennan Cos.

The change is driven largely by deepening concerns about the economy.

Of those surveyed, 45% fear losing their jobs (up from 36% a year ago) while 44% expect to delay retirement (it was 35% last year). And the seemingly unstoppable rise in retiree health costs is registering with American workers: 36% said saving for healthcare is a major goal, up from 24% a year earlier.

"Participants seem to be saying that they can no longer rely on market performance, their employer or the government to build their retirement savings for them, but must take control of every aspect they can in order to provide for a successful retirement," said Suzanne Nolan, marketing and communications director for Mercer’s U.S. outsourcing business.

It's positive that people are taking greater control of their finances -- even if for depressing reasons -- but it's only part of the story.

The survey depicts Americans who already participate in 401(k) plans -- i.e., a self-selected group that tends to be financially aware and motivated. And to contribute to a 401(k), you have to have a job in the first place.

The bigger risk is for the millions of Americans who have little retirement savings, or who have lost their jobs and are raiding their nest eggs to buy food or pay the mortgage.

For them, their retirement hopes may rest on the ability of the economy to turn around.


Second quarter economic growth revised up as jobless claims fall

Typical 30-year mortgage in U.S. back above 4%, Freddie Mac says 

Smart money is a rare positive for the stock market 

-- Walter Hamilton

Photo: Golf course at Homestead Resort in Midway, Utah.

Selling by baby boomers could depress stocks for years


As if investors don’t have enough to worry about these days, a new study says that selling by baby boomers in coming years could be a persistent wet blanket on the stock market.

The report by the Federal Reserve Bank of San Francisco predicts that stock prices could fall 13% over the next decade solely because of baby boomers dumping stocks to branch into more conservative investments as they retire.

It could take an additional six years, until 2027, for share prices to return to the level they reached last year, according to the analysis by researchers Zheng Liu and Mark M. Spiegel.

In the typically understated language of a government report, the researchers describe this scenario as “quite bearish.”

The report’s basic premise is that stock prices “have been closely related to demographic trends in the past half century" -- in other words, that baby boomers pushed up stock prices in earlier years as they hit their prime earning and saving years.

This isn’t a new hypothesis -– and some analysts have disputed it in the past –- but the timing of the report is unsettlng in itself given that the market has slumped again.

Indeed, aside from being a longer-term depressant, selling by baby boomers -– the post-War contingent born between 1946 and 1964 –- could forestall any current-day recovery in the market from the global financial crisis.

“It is disconcerting that the retirement of the baby-boom generation, which has long been expected to place downward pressure on U.S. equity values, is beginning in earnest just as the stock market is recovering from the recent financial crisis, potentially slowing down the pace of that recovery,” the report says.

The only encouraging tidbit –- if it could be called that -– is that stock values could rise solidly in later years as the boomer generation ages. Stock prices should begin rising strongly starting in 2025, and by 2030 should be about 20% higher than in 2010, according to the report.

Good news -– provided, of course, that you can wait that long.


Workers are more pessimistic about retirement, study finds

Don't panic in reaction to stock market swings

Investor flight from stock funds accelerates

-- Walter Hamilton

Photo: Getty Images


Social Security Administration employee accused of stealing from beneficiaries


Add this to the list of concerns about receiving Social Security benefits.

A federal grand jury has indicted an employee at the Social Security Administration’s Whittier office on charges that she stole money from beneficiaries.

Gezal Rebbecca Duran, 32, of Pomona was indicted Tuesday on four counts of theft by a government employee.

Duran, who worked as a claims representative, allegedly told benefit recipients that they had received overpayments and needed to pay her in order to bring their accounts current. Investigators believe she stole more than $17,000 from at least 15 benefit recipients, said Thom Mrozek, a spokesman for the U.S. attorney’s office in Los Angeles.

The investigation is continuing, Mrozek said.

Duran, who is free on bond, is scheduled to be arraigned Aug. 29. The charges she faces carry a maximum sentence of 40 years in prison.


Investment advisor sentenced to prison for defrauding retirees

Golden years take on new meaning: Americans expect to work

Boomers prize financial certainty over all else

-- Stuart Pfeifer

Photo: Social Security Administration sign. Credit: Associated Press



Investment advisor sentenced to prison for defrauding retirees

A financial advisor from Topanga has been sentenced to nine years in federal prison for running an "audacious" Ponzi scheme that defrauded investors, many of them retired bus drivers, out of more than $7 million.

Thomas L. Mitchell, 64, was sentenced Monday at the federal courthouse in Los Angeles. U.S. District Judge Gary A. Feess also ordered him to pay more than $7 million in restitution to about 60 victims.

Mitchell, who pleaded guilty in April to mail fraud, established several companies to target retirees, many of them former transit operators for the Los Angeles County Metropolitan Transportation Authority, prosecutors said. He operated the scheme from 1995 to 2010 and cost many victims most or all of their retirement savings, said Thom Mrozek, a spokesman for the U.S. attorney’s office in L.A.

Mitchell told investors that he would put their money in stocks, bonds and real estate but in fact used most of the funds he raised to finance a lavish lifestyle including a luxury apartment, high-end cars and expensive travel and entertainment, prosecutors said.

“Mr. Mitchell committed an audacious fraud that spanned many years and devastated many victims,” said U.S. Atty. André Birotte Jr. “He was able to lead a luxurious lifestyle by stealing the life savings of hard-working men and women who only sought a dignified retirement. For his criminal conduct, Mitchell richly deserves his nearly decade-long prison sentence.”


Barry Minkow gets 5 years in prison in Lennar fraud case

Bank emails, bogus lotteries: Your weekly ScamWatch

Ponzi, Ponzi, Ponzi: Your weekly ScamWatch

-- Stuart Pfeifer

Photo: Thomas L. Mitchell was ordered to pay more than $7 million in restitution. Credit: Bloomberg

Consumer Confidential: Outsourced meds, Social Security tool, Casey Anthony hoax

Pillpic Here's your to-thine-own-self-be-true Tuesday roundup of consumer news from around the Web:

--Where does our medicine come from? Increasingly, the answer is overseas, where safety standards can be lower. The Food and Drug Administration estimates that about 40% of finished drugs and 80% of active ingredients and bulk chemicals come from abroad. The Pew Health Group says in a new report that increased outsourcing of manufacturing, a complex and globalized supply chain, and occasionally criminal businesses create the potential for counterfeit or substandard medicines to enter the supply chain and reach patients. Industry and government agencies have failed to adapt to the changing environment, the report finds. Substandard or adulterated pharmaceutical materials from abroad have entered the U.S. on multiple occasions. In addition, the risks of domestic counterfeiting and diversion of stolen drugs are well documented.

--When should you start collecting your Social Security benefits? AARP has a new online tool to help you make that call -- and to encourage you to wait as long as possible. "It illustrates the benefits to claiming later," said Jean Setzfand, vice president of financial security for AARP. "The longer you are able to wait, the higher your monthly benefits will be." Users can customize their benefits, their economic expectations and their personal data to get clear, detailed estimates of their own monthly and lifelong benefits under different scenarios. The calculator allows planning for government workers, and those who are married, divorced, widowed or single. Definitely worth checking out.

--This didn't take long: A marketing ploy involving Casey Anthony is popping up on Facebook screens. "Breaking News!" it says. "Leaked Video of Casey Anthony Confessing to Lawyer!" Needless to say, there's no such video. If you click on the link, you'll be asked to take a survey that may (or may not) result in a $500 Toys R Us gift card. These sorts of surveys are everywhere online, offering a free iPad or other bait to get you to sign up for a slew of marketing pitches. Your best response? Walk away.

-- David Lazarus

Photo: Do you know where your meds come from? Credit: Kirk McKoy / Los Angeles Times


Golden years take on new meaning: Americans expect to work

Recession-weary Americans harbor no illusions of shuffleboard and daiquiris in retirement.

Instead, a growing number expect to spend their golden years toiling away at jobs and supporting adult children, according to a new survey.

Americans ages 55 and older predict they’ll have to work until they’re 69, five years longer than their expectation a decade ago, the study says. And 7 in 10 think they’ll have to provide financial assistance to their grown children.

Whether older Americans will be able to work into their late 60s is anyone’s guess. Almost half of the survey respondents said they retired sooner than planned, with 41% citing health problems and 19% saying they lost their jobs.

The survey of Americans ages 55 and older by SunAmerica Financial Group and research firm Age Wave underscores the tempered expectations and lingering bitterness in the face of a punchless economy and uncertain investment outlook.

Though it’s receded from 43% at the worst point in the recession, 28% of respondents say they’re “angry” about their financial situations today and 39% say they’re “worried” about it.

Three-quarters of respondents say the economic trauma of the last several years has provided a much-needed wake-up call, according to the study. More than 8 in 10 said securing “financial peace of mind” was their top financial goal -- easily trumping the 13% who chose “accumulating as much wealth as possible.”

As for financial peace of mind, Americans of all ages wish for that these days.

-- Walter Hamilton

Consumer Confidential: IKEA cuts prices, virtual sushi, Viking pays big fine

Chairpic Here's your wishin'-and-hopin' Wednesday roundup of consumer news from around the Web:

-- Doing some decorating? IKEA has a deal for you. The king of ready-to-assemble furniture says it's dropping prices by up to 3% this year and expects similar price cuts next year, despite rising costs of materials. Mikael Ohlsson, CEO of the Swedish company, says operational efficiency and corporate thriftiness allow the company to pass savings on to customers. IKEA has 37 locations across the United States, making this the second-largest market for the company after Germany. The Internet has also embraced IKEA in a big way. At, you can find all sorts of ideas for modifying designs to get even more bang for your put-it-together-yourself buck.

-- Those Brits ... what will they think of next? An Asian-themed restaurant in London's theater district is giving its patrons a virtual look at food before they order, projecting images of dragon rolls, black cod and other dishes directly onto diners' plates. If you like what you see, just tap the touchpad. Your food will arrive shortly. Entrepreneur Noel Hunwick says he came up with the idea for the restaurant, named Inamo, several years ago while eating with a friend at a busy pizza parlor. "We were desperately trying to attract a waiter's attention," Hunwick recalls. "We thought: Wouldn't it be great if we could press a button and get our food?" The new restaurant does just that. Pretty cool.

-- Viking Range has agreed to pay a civil penalty of $450,000 after admitting it was aware for years of a defect involving its refrigerator doors that resulted in injuries to consumers but failed to report the defect, as required by law. Viking reported the safety defect to the Consumer Product Safety Commission in April 2009, and the firm agreed to a recall two months later. Subsequent investigation conducted by federal regulators uncovered that the company had been aware of the problem -- and related injuries -- for several years. The problem is that refrigerator hinges can loosen and detach, posing an impact injury hazard to consumers. Viking sold the refrigerators through appliance and specialty retailers from July 1999 through April 2006.

-- David Lazarus

Photo: You may soon be able to get this chair and other goodies cheaper at IKEA. Credit: IKEA



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