Category Archives: Consumer behavior

How did you respond to recent volatility?

When the financial markets closed on Aug 15th, the stock market had recouped all of its losses from the previous horrific week of volcanic volatility.  Three-year and five-year Dow Jones and S&P500 returns were either flat or negative.

The Investment Company Institute reported that over $50 billion moved into money market funds in the week ended August 10, but the cumulative change in the prior three weeks was a $130 billion outflow from money market funds.

The Wall Street Journal reported that the wealthy no longer have an appetite for the risk of equities and are “hunkering down with cash, gold, farmland and other safe-haven investments.”

Many financial advisors recommend staying the course with a diverse portfolio including, among other investment options, target date funds.

Are you peeking at your portfolio?

People with retirement plans run the gamut from “set it and forget it” types who rarely even think about how their portfolio is performing to obsessive types who get a text alert every time one of their fund managers sneezes. How about you?

Retirement benefits breakdown

We’ve been asking for your thoughts on defined benefit (DB) pension plans and defined contribution (DC) 401(k) plans over the past couple of weeks and, as we covered in the most recent Retirement Town Hall rewind, there are some interesting trends coming out of the answers to our poll questions. This week we’re following up on a question we posed a while back. We’re wondering who prefers which benefits. So…

Inspiring employees

With a title like “Inspiring employees” you might have guessed that this post would be the incredible story of how one man climbed the corporate ladder and went from the mail room to the board room. Sorry to disappoint you, but we’re actually using “inspiring” as a verb, not an adjective. We want to know how you inspire your employees to use the retirement planning tools you offer.

Unlike previous poll questions, this time we’re leaving an open-ended “other” section where you can write in what methods you’ve used to get employees to enroll in a 401(k) plan. And if that’s not enough space to tell your story, leave a comment on this post.

App helps women to plan for retirement

Denise FosterRecently I wrote in this blog about educating Generation Y and X women on retirement and I suggested that the Department of Labor create an app to go along with its Wi$e Up financial literacy website for young women. After further digging, I came across a a few iPhone apps (titled Women, Wealth and Wisdom) that help young women envision their retirement and start planning today. So I thought I’d give one of them a test drive.

The app is Women, Wealth and Wisdom Retirement Income Calculator created by AXA Equitable Financial Services back in 2009 as part of a suite of financial apps for women. The app does what it’s supposed to do, nothing more and nothing less. Users can type in some basic information about their retirement savings and the calculator spits back some estimated answers to questions like “How much money will I have to spend each month of my retirement?” Users can adjust things like rate of return and years of retirement.

Although not particularly specific to women, I found this app to be functional and generally helpful in answering the basic questions. There was one minor oddity, though. The default answer for the “current age” section of the form is 60. Yikes! I thought we were trying to get women to start planning for retirement early? Still, unlike your real retirement numbers, the defaults in this app can be easily changed.

Basic questions and answers about lump-sum distributions

Bart Pushaw

The ins and outs of lump sum distributions, and whether to take them or not, are among the most common conundrums facing new retirees. Here are a few questions about the basics that I hear frequently and the answers I offer to them.

Q: Shouldn’t I take a lump sum distribution when I retire?

A: In general, people and their spouses should review what’s best for them. If a retiree has sufficient income to live without using their savings immediately, the lump sum can provide flexibility in spending and a potential estate. Or if a monthly income is most advantageous, then an annuity makes more sense.  Everyone needs to think what’s best for them and their family. From a purely mortality-neutral point of view, the answer for most of us is NO.

Q: But I’m told I can beat the returns and have more flexibility if I take a lump sum. What’s that about?

A: If you take a lump sum, you still need to earn monthly income from it. How to go about getting that monthly income is the problem. You can buy an annuity, self-annuitize by withdrawing some amount each year, or hire a financial planner and work out a plan. More often than not, these are suboptimal alternatives that can sometimes lead directly to personal financial crises.

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