The Markets April 21, 2009

Most Americans Now Anticipating Insufficient Retirement Income

A recent Gallup poll shows that, for the first time this decade, a majority (52%) of non-retired Americans say they will not have enough money to live comfortably in retirement.
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In a release of the results, Gallup said this is probably true because the perception of reliance on defined contribution and defined benefit retirement plan assets in retirement has decreased and has not been replaced by another source of retirement income. Only 42% of respondents said they expect to rely on a 401(k), IRA, Keogh, or other retirement plan account when they retire, compared with 54% of Americans who said so just one year ago.

Less than one-quarter (24%) of those surveyed said they expect to rely on a work-sponsored pension plan for retirement income. Yet, still only 30% cited Social Security as a primary source of income in retirement.

The sources of income that more respondents than last year indicated they would rely on in retirement were personal savings (20% vs. 17% last year) and part-time work (22% vs. 20%).

Gallup noted that expected reliance on 401(k) and other retirement savings plans remains at the top of the list when Americans are asked how much of a source each of the 10 different income streams will be in their retirement years, signaling that expected comfort in retirement could increase if the stock market continues to pull out of its current slump.

Results are based on telephone interviews with 676 non-retirees, aged 18 and older, conducted April 6-9, 2009. The full Gallup results are available here.

The Markets April 21, 2009

Benchmarks Outdo Active Managers over Market Cycle

The majority of active fund managers underperformed benchmarks across all categories over the past five years, according to Standard&Poor’s.
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The year-end 2008 results for the Standard & Poor’s Index Versus Active Fund Scorecard (SPIVA) indicate that, over the five-year market cycle from 2004 to 2008, the S&P 500 outperformed 71.9% of actively managed large cap funds, the S&P MidCap 400 outperformed 75.9% of mid cap funds, and the S&P SmallCap 600 outperformed 85.5% of small cap funds. According to an S&P news release, these results are similar to that of the previous five-year cycle from 1999 to 2003.

SPIVA results are similar for international equity and fixed income funds, the announcement said. Benchmark indexes outperformed a majority of actively managed fixed income funds in all categories over a five-year horizon. The five-year benchmark relative shortfall ranged from 2% – 3% annually for municipal bond funds to 1% – 5% annually for investment grade bond funds.

Among international equity funds, indexes outperformed a majority of actively managed non-U.S. equity funds over the past five years in the four categories studied, including emerging market funds.

“The belief that bear markets strongly favor active management is a myth,” says Srikant Dash, Global Head of Research & Design at Standard & Poor’s, in the announcement. “A majority of active funds in each of the nine domestic equity style boxes were outperformed by indices during the down markets of 2008. The bear market of 2000 to 2002 showed similar outcomes.”

The year-end results are available here.

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