The Markets October 13, 2015

Participants Stay the Course in September Trading Trends

GIC/stable value, money market and bond funds again saw the most inflows over the month.
Reported by

Defined contribution (DC) participants transferred money from equities to fixed income amid a rough September on Wall Street, according to the Aon Hewitt 401(k) Index. Fixed-income funds were the only asset class with positive net inflows for the month. Additionally, 81% of the trading days in September favored fixed income—the highest ratio of days to fixed-income funds in two years.

September also had four days of above-normal trading activity, the highest number of above-normal days in a month since May. On average, participants transferred 0.026% of total balances in September, the same level as the previous month. 

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GIC/stable value ($282 million), money market ($70 million) and bond funds ($52 million) saw the most inflows over the month. The most common classes for outflows were target-date funds (TDFs) ($166 million), large U.S. equity ($92 million) and company stock ($70 million). Target-date funds (unchanged from the previous month’s level, at $346 million) continued to receive the majority of new contributions into individuals’ accounts.

When combining contributions, trades and market activity, participants’ overall allocation to equities declined, to 64.6% at the end of September, from 65.4% at the end of August. Future contributions to equities decreased marginally, to 66.7%, from 66.8% in August.

More information is here.

Data & Research October 13, 2015

Boomers in Poor Shape for Retirement

But, fortunately, there are steps they can take to improve their situation, IRI says.
Reported by

Baby Boomers are ill prepared for retirement, the Insured Retirement Institute (IRI) says in its new report, “Baby Boomers and Retirement Planning Strategy.” Forty percent have no retirement savings at all, and 69% have no defined benefit plan. Of those who do have savings, 59% have saved less than $250,000 and 37% have saved less than $100,000.

Annual expenditures for today’s 65-year-old retiree exceed $50,000, yet Social Security generates only $16,000 a year on average.

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However, the good news, IRI says, is that Boomers can take steps to rectify the situation. Retiring at age 70 instead of age 65 can reduce needed retirement savings to approximately $720,000, and moving to an area of the country with a lower cost of living can further decrease that amount.

A 50-year-old saver who takes advantage of retirement plan catch-up contributions of $6,000 per year until age 70 at a 5.5% annual rate of return will add another $239,000 to their savings. Boomers can also seek help from family, increase their savings, reduce expenses in retirement and attempt to maintain the best health possible.

The report concludes, “Statistically, the retirement realities facing many Boomers are grim. Put simply, they face a dangerous combination of being under-saved and long-lived. Those at the point of retirement with no savings and who are unable or unwilling to delay retirement are in the worst position, and will need to take the most drastic steps to reduce expenditures. Those with time left to build savings can take steps to increase their savings as much as possible, delay retirement to maximize Social Security and reduce the cost of lifetime income, and work on reducing anticipated expenditures by carefully planning both the timing and location of their retirement.”

The full report can be downloaded here.

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