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Muriel Siebert & Co.


Got enough to retire? Survey says: Maybe Not



The notion of spending your retirement years lollygagging on the beaches in South Florida or on the links in Arizona could go the way of the dinosaur.

If you're like many, odds are you haven't socked away enough money to enjoy a decade-- or two or three---without working. At least that's what the John Hancock Financial Services ninth survey of defined contribution plan participants showed.

"Beyond simply putting money into their 401(k) plan, most participants are almost entirely disengaged from the retirement planning process, " says Wayne Gates, general director of market research and development at John Hancock Financial Services. "Even during the boom years, they essentially were leaving retirement security to luck. I think belatedly they may be coming to this realization and now fear they are running out of time---and luck."

The Hancock survey examined the knowledge, attitudes and actions of individuals relating to their retirement savings. And, showed that the investing skills of the 800 participants weren't nearly as good as they ought to be.

Gates added, "Consistent with past surveys, most participants have only minimal active involvement with their plans."

Survey findings revealed that slightly more than half of respondents had ever calculated how much money they would need to maintain their existing lifestyle in retirement; more than half spent no more than twenty minutes a month planning for retirement or managing/monitoring their investments; and nearly half of them said that they have little or no investment knowledge.

Those interviewed also thought that employer stock was less risky than a domestic or international stock fund (which is not the case); that government bond funds and domestic bond funds were less risky than money market funds (not true, either); 45 percent thought money market funds contain stocks (money market funds don't hold stocks in their portfolios); and less than 25 percent knew that the best time to invest in bonds is prior to a decrease in interest rates (when interest rates fall bond prices rise which typically translates to an increase in value in a bond fund's portfolio).

The average retirement plan nest egg of survey participants was $49,800. That was down from the average sized nest egg of $54,800 in the 2002 survey and up from the $37,600 average one in the 1993 survey. Bring inflation into the equation and the 2004 balances are only about 3 percent higher than they were in 1993. Oh my.

"For most Americans, 401(k)-type plans are the foundation of their future retirement security and forcing do-it-yourself investing upon them clearly represents a huge crack in that foundation, " says Gates. "It should seem painfully clear by now that while most individuals are more than willing to save for retirement, they either can't handle or don't want the responsibility of investing for retirement."

If you're in the fog regarding how to invest the money in your company's 401 (k) account, keep the following in mind:

  • First, ask before you invest. Make sure you understand what a 401(k) account is, what each of your investing choices are, and whether or not your employer will match any contributions and/or the terms of their participation.

  • Second, get an idea of what to expect. While historical returns are no indication of what future investments may bring, they do offer a clue. For instance, from 1926 and 2003, stocks returned on average 10.42 percent; bonds, 5.89 percent; and money market funds, 3.75 percent.

  • Third, the Tax Man. Money investing into a 401 (k) is not tax-free money it's tax-deferred money. That means, at some point in time these accounts will have some tax consequences imposed on them.

    From where I sit and what I've seen, full retirement at age 62, 65 or even 67 isn't going to happen for many in my Baby Boomer Generation (and perhaps the ones behind it) because they've simply not saved enough or life's circumstances has made minced meat of their financial plans. Whatever the reasons, if your retirement coffers aren't as chock-full as you'd like, here's hoping you've a job you enjoy and that you've taught your children---and grandchildren---that saving for retirement is as necessary a long-term habit to get into as brushing their teeth is.


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