Products December 9, 2010

Principal Ready for Roth Conversion Requests

The Principal Financial Group will begin processing plan changes for in-plan Roth conversions and for participant requests for such conversions beginning December 16, 2010.
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A Principal news release said 401(k) and 403(b) sponsors have until December 15 to request the change in writing, in order for participants to take advantage of special tax benefits for conversions made in 2010. Participants can either claim the conversion as income on their 2010 tax return or split it between their 2011 and 2012 tax returns.

“With the IRS unveiling final guidance on the in-plan Roth conversions, we’re hearing from more sponsors who want to allow the conversion option,” said Joni Tibbetts, vice president of retirement and investor services at The Principal, in the news release  “We’re ready to help sponsors with plan amendments and we’ll be ready for participants who want to make the conversion.”

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Data & Research December 9, 2010

New Jersey Residents Have More Rainy Day Funds

New Jersey took the top spot in three key measures of financial capability, according to research released by the FINRA Investor Education Foundation.
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The foundation last year revealed results of its U.S. Financial Capability Study (see Poll Finds Few Retirement Planners), but has now released a state-by-state analysis.  New Jersey came out on top for the number of individuals who reported they spend less than their household income (48.7%) and have rainy day funds (47.8%).  

The state also had the fewest number of individuals reporting using non-bank borrowing methods (13.8%), which the foundation noted often results in higher interest rates and often attracts individuals with poor credit histories.  Non-bank borrowing methods include taking out an auto title loan or a payday loan, getting an advance on a tax refund, or using a pawn shop or rent-to-own store.  

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However, when measuring financial literacy, New Hampshire scored best with a mean number of 3.3 correct answers out of five to a financial knowledge and decisionmaking quiz. Rhode Island had the highest number of individuals that comparison shop for credit cards (41.3%).  

A listing of states ranked most and least likely to engage in the five key measures of financial capability is here.  

In addition, a new Web site, http://www.usfinancialcapability.org, features a clickable map of the United States and allows the public, policymakers and researchers to delve compare the financial capabilities of Americans in every state and across geographic regions.  

The survey of more than 28,000 respondents was developed in consultation with the U.S. Department of the Treasury and t he President’s Advisory Council on Financial Literacy.

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