Products September 12, 2011

Russell Develops Framework for Optimal Savings Rate

Russell Investments is aiming to help plan sponsors have a better understanding of if their participants are saving enough for retirement with its new “Target Replacement Income” (TRI) ratio.
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In its latest research paper, “What’s the right savings rate?” Russell  breaks down various parts of plan design in an effort to improve participant behavior.

Russell built its framework based on two questions:

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What is the “right” percentage of a participant’s pre-retirement salary that will be required to meet spending needs in retirement?

What target replacement income – TRI – is sufficient to fund retirement?

To answer the first question, Russell developed the “TRI 30” rule-of-thumb. Participants can determine their appropriate individual savings rates by multiplying their TRI rate by 30%.  According to Russell’s research, saving 30% of the TRI rate each year, including any employer contribution, leads to about a 90% probability of meeting the income goal at retirement.

Russell outlines additional considerations for determining an individual’s TRI in its paper, including the volatility of health care expenses and the challenges faced by lower-income participants.

“We’ve designed this framework to help plan sponsors determine what the right savings rate is for their average participant,” said Cohen. “There will never be a single answer for everyone, but what we hope is that this approach can spark a smart conversation focused on setting reasonable savings goals.

Products September 12, 2011

Fidelity Launches Site Dedicated to Fixed Income

Fidelity Investments is rolling out a fixed income market research and education site.
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The new resources provide a single-source destination for institutional-quality fixed income research, news and insights, and comprehensive fixed income education, the company said.

Fidelity noted with the first wave of Baby Boomers turning 65 this year, Americans will continue to need to generate income in retirement, and as a result, Fidelity has transformed its online resources for investors to learn about and select fixed income investments.  

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“Fixed income investments are an essential part of a diversified portfolio, and in fact, Fidelity’s retail and workplace investors have increased their fixed income investments by more than $100 billion in the past three years,” said James C. Burton, President of Fidelity’s retail brokerage business. “To meet this increasing demand, Fidelity has intensified its ongoing commitment to providing investors the best fixed income resources in the marketplace.” 

Fidelity’s new educational content helps investors learn about the differences between bonds, bond funds, and other fixed income investment vehicles, and understand key characteristics through comparison tables.

To help investors efficiently narrow the hundreds of bond funds available on Fidelity.com to the ones that best fit their investing goals, the fixed income market research offers simplified search functionality for bond funds by asset type and Morningstar Rating. Investors can also search for CDs, as well as 30,000 individual bonds by asset type, maturity date, credit rating, and geography. 

Interactive Data Corporation provided customized Web-based financial solutions and fixed income analytics data to the site, including key yield curves of Treasury, corporate and municipal bonds, and certain fixed income market benchmarks, to see how current interest rates compare to each other and over time. 

To supplement the Viewpoints, Fidelity is working with firms such as BlackRock, Inc., Econoday, and Standard & Poor’s to provide retail investors with a level of fixed income research and market data at no charge that previously was available only to institutional investors. 

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