Health Care Worries Dent Savings Goals

Participants in employer-sponsored retirement plans are prepared to reduce 401(k) account contributions to mitigate worries over health care expenses, the Mercer Workplace Survey finds.

Results from Mercer’s annual survey indicate workers in the U.S.—especially those closest to retirement—are decreasing planned savings goals for the future. In fact, while retirement plan participants have generally become more optimistic about the economy this year, they are planning to save slightly less over the next 12 months.

For workers over the age of 50, worries over increased health care costs and other expenses have driven down savings goals by about 18%.

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When looking across all age groups, preretirees are likely to dial back on their 401(k) contributions by about 10% in the year ahead. These same workers are also distrustful of the Patient Protection and Affordable Care Act (or ACA), the survey says, and consequently expect to be worse off due to the health care reform law by a ratio of almost six to one.

Regarding the nation’s general economic outlook, more than three out of four (77%) workers expect economic growth to continue in the year ahead, up four points to tie the post-recession bounce noted by Mercer in 2010. The proportion of those expecting another recession in the near future fell to 23%.

Other figures reported in the survey indicate improving local home values is the most powerful factor driving optimism among preretirees, with half of all respondents expecting home values in their area to be higher a year from now—up 15 points over last year’s survey. 

The proportion expecting higher unemployment is also down, but the proportion of workers expecting lower unemployment remains flat.

Perceived job security is virtually unchanged, notching a two-point increase in the share of workers concerned about losing their jobs in the next 12 months. Workers over the age of 50 actually feel somewhat more secure; those under 50 marginally less so. Although high by historic standards, the proportion of workers considering delaying retirement (40%) is down four points, the survey shows.

A full summary of the annual survey results can be downloaded at www.mercer.com/workplace-survey.

Power Dividend Index Fund Released

W.E. Donoghue & Co., Inc. (WEDCO) has launched the Power Dividend Index Fund.

The mutual fund’s strategy uses WEDCO’s Power Dividend Index to seek to generate income. The fund also deploys a tactical overlay in an effort to preserve capital in all market cycles.

“For long term, risk-averse investors who share our conviction that traditional benchmarking is antiquated, this product may offer a more effective way to increase total return,” says Jeffrey R. Thompson, senior vice president and portfolio manager of WEDCO, which is based in Norwood, Massachusetts.

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The Power Dividend Index isolates the top five dividend-yielding stocks in each of the 10 Global Industry Classification Standard (GICS) sectors—consumer discretionary, consumer staples, energy, financial services, health care, industrials, materials, utilities, telecommunication services and information technology—that comprise the S&P 500 Index.

These 50 stocks make up the S-Network Sector Dividend Dogs Index and are equally weighted in the fund’s portfolio. The fund will sell positions in stocks that are removed from the S&P 500.

WEDCO uses an intermediate term tactical overlay to position the fund bearishly or bullishly depending on market developments and outlooks. This enables the fund’s portfolio to be invested in money market funds and other cash equivalents to protect investors during equity market downturns. Under normal market conditions, the portfolio’s stock holdings are automatically rebalanced on a quarterly basis.

Thompson adds, “The Power Dividend Index Fund combines a variety of elements in an effort to mitigate risk and maximize returns. Our rules-based approach to dividend investing can provide investors with a core high-yield strategy unaffected by the volatility in the fixed-income universe.”

W.E. Donoghue & Co., Inc. is a registered investment adviser offering tactical asset allocation solutions. The firm manages more than $600 million for individual and institutional separate account and mutual fund clients.

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