Data & Research June 15, 2012

401(k) Eligibility a Key Factor in Retirement Readiness

Being eligible to participate in a 401(k) is critical in closing the retirement savings gap for Generation X, according to the Employee Benefit Research Institute (EBRI).
Reported by

Generation Xers with at least 20 years of future eligibility are projected to have a much lower financial shortfall ($23,000 per individual) than those without any future years of eligibility ($78,000 per individual), according to EBRI’s latest Retirement Security Projection Model.

EBRI’s estimate includes nursing home and home health care expenses, which EBRI says leads to a more realistic projection.

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“Ignoring the impact of nursing home and home health care costs in retirement significantly overstates the likelihood of retirement income adequacy,” said Jack VanDerhei, EBRI’s research director.

When nursing home and home health care expenses are taken into consideration, 68% of single male Gen Xers look to have no financial shortfall in retirement. If these expenses are not factored in, a much larger percentage (90%) has what is actually a falsely optimistic picture of retirement adequacy.

Earlier EBRI research has found that about 44% of both Baby Boomer and Gen Xer households are likely to be at risk of running short of funds during retirement, assuming they retired at age 65 and retained any net housing equity in retirement until other financial resources were depleted. (See “More Workers Estimated To Be Retirement Ready.”)

The full report is available in the June issue of EBRI Notes. 

 

The Markets June 15, 2012

Mutual Funds See Smallest Monthly Intake in May

Long-term mutual funds recorded their smallest monthly intake year to date in May, with $14.1 billion in new assets.
 
Reported by

Among the broad asset classes, taxable-bond funds showed the greatest decline, from April inflows of $16.9 billion, to $7.7 billion in May, and U.S stock funds saw their 13th consecutive month of outflows, according to Morningstar data.

Although actively managed stock funds—both domestic and international—have suffered outflows of more than $172.3 billion over the past 12 months, a subset of these, dividend-focused equity-income funds, have bucked the trend and seen inflows of $21.7 billion over the same period.

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After five straight months of strong inflows, high-yield bond funds saw net outflows of $1.2 billion in May as prices fell, but the magnitude of money leaving open-end funds was relatively small compared with past pullbacks.

Vanguard, led by inflows to its index funds, and JPMorgan had the greatest provider-level inflows during the month. However, MFS was a close third, fueled by inflows of $1.3 billion for MFS Value. American Funds notched its 35th consecutive month of outflows.

Although money market funds reversed four straight months of outflows, inflows were a negligible $1.4 billion in May.

The complete report is available here.  

 

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