« Podcast for 2/8/07: Forced Retirement? | Main | Don't second guess »

February 11, 2007

February 2007 Family CFO Briefing

Investing

 

You gotta love this. In the same vein as the monkey's throwing darts and Rusty, the Longhorn steer that picks stocks by pooping on the stock pages: A subscription web site that provides its subscribers with stock picks for as much as $100 a month invites, in January, 10 Playboy models to participate in an investing contest. When results are tallied toward the end of the year, 40 percent of the bunnies deliver better returns than the S&P 500, compared with just 29 percent of actively managed mutual funds.

 

Investing for Retirement

 

Millions of American women face declining living standards in retirement. Like men, they'll feel the sting of cutbacks on corporate pensions. But women suffer more than men from the high rate of divorce, which can deprive them of savings and income when they need it most. Many also lose benefits and income when they leave work to care for children and they live longer than men. (Los Angeles Times, free registration required)

 

Some brokerage firms make more money on money market spreads than they do on commissions. Most money market sweeps are paying less than 2% in brokerage accounts while money market fund rates are averaging 4.75%. By reinvesting client funds on the open market, brokerage firms are pocketing the difference and making a tidy 2% to 2.5% profit on your money. (Wall Street Journal, subscription required)

 

The Employee Benefit Research Institute (EBRI) reports "IRA Assets Hit Record $3.67 Trillion" fueled by IRA rollovers. Total IRA assets are larger than those in either traditional pension or 401(k) type plans.

 

Another EBRI report, issued in February, reports that 401(k) type plans have become the dominant form of employer sponsored retirement plan. There has been a significant increase in the percentage of family heads with a defined contribution plan (typically a 401(k)-type plan). In 2004, almost 26 percent of family heads who participated in an employment-based retirement plan had a defined benefit (pension) plan only, while 56 percent had a defined contribution (401(k)-type) plan only, while the remaining 18 percent had both a defined benefit and defined contribution plan. This was a significant change from 1992, when 42.3 percent had a defined benefit plan only and 40.8 per-cent had a defined contribution plan only.

 

Big corporations announced 15% more layoffs in January than in December, but the total was down 39% from this time a year ago, according to an unscientific tally of job-cut announcements released Thursday by outplacement firm Challenger Gray & Christmas. (MarketWatch)

 

Congress and government regulators are planning an array of moves to strengthen oversight of 401(k) accounts, which have become the linchpin of retirement savings for millions of Americans but are often burdened by hidden fees that chip away at their value. (Baltimore Sun)

 

MSN Money lists five common blunders people make in their 401(k) plans. (WARNING: shameless self-promotion coming up.) Our new web-based program, How To Turn Your 401(k) Into A Million-Dollar Nest Egg goes much farther than pointing them out. It will tell you step-by-step how to properly manage the many different aspects of your plan so that it can someday provide enough income for you to live comfortably in retirement. Our unique paint-by-numbers approach will tell you exactly which funds available in your plan are the most likely to deliver the best results. It will show you how much to invest and where. We are very proud of this new product because we believe it will help a lot of people who are clueless when it comes to what to do with their 401(k). Stop by our web site for a free preview. (Now back to your regularly scheduled programming.)

 

Housing, Real Estate and Mortgages

 

If you are making accelerated mortgage payments and not contributing the maximum to tax-deferred retirement plans, you are making a big mistake according to a recent paper titled "The Tradeoff Between Mortgage Prepayment and Tax-Deferred Retirement Savings," published by the Federal Reserve Bank of Chicago.

 

In Dallas County, foreclosure postings are up 24 percent. In Tarrant County, they are up 17 percent. Denton County came up 15 percent and in Collin County they are up 61 percent over this time last year. Dallas and Fort Worth are in the top ten in the nation for foreclosures. Dallas ranks number 5 and Fort Worth is number 7. (CBS 11 local coverage)

 

Debt and Savings

 

• Only 17% stick to their New Year’s resolutions!
• 38% said that losing weight was #1 priority for 2007 followed by spending more time with loved ones
• 24% consider getting out of debt their second most important priority for 2007
• 31% answered that they currently have credit card debt of MORE than $8500 while 40% said they have less than $1000
• 60% said that they could live as they do now for less than 3 months or less if they lost their job tomorrow - while 31% said they could live longer than 6 months
• Nearly ½ of all surveyed don’t know their credit score!  (48%)
• 56% consider ‘viewing their online bank balance’ managing their personal finances
• Nearly ½ of all surveyed do NOT have an emergency fund stashed away (49%)

 

(Note: I don't have a link for this one. The information comes from a press release sent to me by Quicken's PR firm looking for interview opportunities. The firm must not have done a very good job because a Google search turns up zilch. Sorry! I'd give you a link if I could find you one!)

 

I found these statements, without attribution, when I was doing research for a project. Since sources weren’t cited, I can't vouch for their validity but they certainly ring true. Judge for yourself:

 

• Americans currently owe nearly $9 trillion in debt -- accumulating nearly 40% of it in the past five years.
• Over the past four years, Americans have borrowed more against their homes than they've invested.
• Forty percent of new-car buyers still owe money on their trade-in.

 

The previous rings especially true given the following: People once again spent everything they made and then some last year, pushing the personal savings rate to the lowest level since the Great Depression more than seven decades ago.

 

And finally, how's this for perspective? New research into the world's personal wealth finds assets of just $2,200 per adult placed a household in the top half of the world's wealthiest. $61,000 puts you in the top 10% and if you have more than $500,000, the United Nations Study says you are among the richest 1% in the world! Here is the terrifying number. Half the world - nearly 3 billion people - live on less than $2 a day. (MSN Money)

 

Kim Snider, Kim Snider Financial Communications, Chronim Investments and/or Snider Advisors make no representation that the information and opinions expressed are accurate, complete or current. The opinions expressed should not be construed as financial, legal, tax, or other advice and are provided for informational purposes only. Call 866-952-0100 to request the Snider Investment Method™ Owner's Manual, which includes a description of the Snider Investment Method, investment objectives, risks, suitability and other information. Please read and consider carefully before investing. All investments are subject to risk including possible loss of principal.

Tags: 401(k), 403(b), EBRI, Employee Benefits Research Institute, financial education, foreclosure rates, housing market, Investing for retirement, investor education, IRA rollovers, pension plans, personal finance, personal savings rate, real estate boom, retirement savings, SIMPLE, total IRA assets

Posted by Kim Snider on February 11, 2007 | Permalink

TrackBack

TrackBack URL for this entry:
https://www.typepad.com/services/trackback/6a00d8341d248853ef00d835194a7569e2

Listed below are links to weblogs that reference February 2007 Family CFO Briefing:

Comments

The comments to this entry are closed.