By Kevin L. Coppola
(Click Here to Read the ORIGINAL ARTICLE)
The on-again-off-again public concern over Social Security seems to me to be an inversely correlated concern over what the markets—and correspondingly, retirement plan balances—are doing. When times are good for the stock market, people seem to want to raise concerns about Social Security. And when the markets are going down, Social Security seems to take a back-seat to concerns about the market.
Why is this? I have 2 theories:
(1) Greed and fear are the 2 emotions that drive most people. No offense to you if you are one of the few who have those emotions well in check. However, for the “greed” driven, when all is well with their retirement plan, they go looking for MORE. “Social Security…woe is me…may not be there when we “need” it, etc.”
(2) For those already resigned to the possibility that Social Security may not be around—or at least insufficient to provide Retirement Income Security—their focus, AS IT SHOULD BE, is on the fate of their retirement plan…how to fix it…what is their employer going to do for them?, etc.
We don’t have a Social Security crisis in this country…what we DO have, and what the article confirms and Compass Investors has been saying for a decade, is that we have a retirement security crisis. And between 92% and 100% of those surveyed, depending on their age believe that to be the case too. And, BTW, having 90% of respondants agree to something is an unheard of number as far as surveys are concerned.
Compass Investors begins our education process by encouraging new customers them set a goal for having Retirement Income Security. That goal is, simply put to “make sure you can generate your pre-retirement level of income, no matter how long you should live.” This can be done by growing a nest egg large enough so that you can invest it in a guaranteed product (such as an annuity) and live off the interest alone.
The author speaks to the use of annuities in the article too. However, annuities have a bad rap for some reason. Well, we don’t sell them, but I can tell you I have a few for just the reasons I mentioned. If my company is not going to have pension money left for me when I retire, and/or if the government is not going to give me a “pension” (aka, Social Security), then I’ll just go create my own by growing my retirement plan large enough so that I can annuitize it and live off the interest—forever, if need be. After all, my retirement plan the ONLY thing I can control or do anything about!
Learn more about the SOLUTION today! Research Compass Investors L.L.C.
Kevin L. Coppola
by Kevin L. Coppola
(original article here)
This article entitled, “Scary study shows 401(k) matching doesn’t work” in and of itself should be a concern to a 401k investor and plan sponsor. The essence of the article is that the choice of which funds to own is a difficult one and one that the plan participant is likely to either not make at all, or make the wrong choice (at least better than doing nothing.)
This flys in the face of plan sponsors who think they are doing their plan participants a favor by giving them more choices. My favorite is the “brokerage window” offered to many Fidelity plan participants. If the plan participants can’t do well with 20 choices, what are they supposed to do with 3,000??!!
Additionally, the article all but admits that the best return someone can expect over their lifetime is 8%, which can be shown mathematically to leave plan participants well short of the Retirement Income Security goal of being able to replace 100% of their pre-retirement salary. And this is still overstated.
-As using historical returns of 10% for stock and 3-5% for bonds, it would require the average equity/fixed income mix over a lifetime to be 80%/20% when the reality is only the most “aggressive” investor would hold this percentage, and the industry advises all people to reduce the stock holdings – and therefore reduce the potential return – as they get older.
-So a 60/40 lifetime mix may be closer to reality and it’s return would be closer to 6% than 8%. Note that the BEST formulaic asset allocation fund (fixed pie-chart of XX%Stocks/XX%Bonds) over the last 14 years has averaged 6.7% return, so the average would of course be lower.
ATTENTION: Plan Sponsors
- Make the best use of the plan you already have
- Contributions—yours or your employee’s—matters little. What matters are the results.
-Most plan participants just want to be told what to do. The Horizon™ Model Portfolio does exactly that.
-The return for default investments can AT BEST be between 6-8% which are insufficient to generate enough income in retirement. Horizon™ offers 12-14% on average (Hard to believe? These results were audited by Ashland Partners).
ATTENTION: Plan Participants (401k Investors!)
- Get a regular analysis of your 401k fund options every 5 weeks with SIMPLE guidance on how to align your portfolio for success
- Empower yourself to have ACTIVE CONTROL on your own money with the proven support of the Horizon™ service
- Achieve better results for yourself and your money!
- Have confidence that your retirement investments are on the right track!
Kevin L. Coppola