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October 2013

Inside this issue:


Study Says Retirement Confidence is Declining

The Employee Benefit Research Institute (EBRI) 2013 Retirement Confidence Survey revealed that 28% of workers were “not at all confident” about having enough money for a comfortable retirement, an increase of 23% among those who also participated in the 2012 survey. About 13% were “very confident,” which is essentially unchanged from the previous survey.

About 17% of workers felt “very confident” that they were doing a good job of retirement preparation, while those who felt “not at all” or “not too” confident that they’ve done so remained unchanged at 36% from the 2012 survey.

Savings efforts continued to decline
Only 10% reported that their savings and investments amounted to $250,000 or more.
Two-thirds (66%) of workers said they and/or their spouses have saved money for their retirement, which continues the decline from the 75% who responded this way in 2009.
As previous Retirement Confidence Surveys have found, an alarming percentage of workers have little or no savings or investments. About 57% of workers reported that their savings and investments, excluding the value of their primary residence and any defined benefit plans, were less than $25,000. Also of concern is that 28% said their savings total was less than $1,000.

Too few have set a savings goal
Only 46% of workers said they and/or their spouse have calculated how much they need to save for a comfortable retirement, up from 42% in the 2012 survey. And 29% said they think they’ll need less than $250,000 for retirement.

Expected retirement age rose
Almost one-quarter (22%) of survey respondents said their expected retirement age would be later than planned. In the new survey, 25% stated that they expect to retire after age 65. Those expecting to retire at age 70 or older represented 26% of those responding.

Confidence in retirement affordability declined
Workers continue to have limited confidence in their ability to pay for basic expenses (16% were “not at all confident”), medical costs (29% were “not at all confident”) and long-term care expenses (39% were “not at all confident”) in their retirement years.
As far as Social Security’s ability in the future to provide benefits at least equal to those that retirees receive today, 41% were “not at all confident” this would happen. Similarly, 37% responded that they were “not at all confident” that Medicare would continue to provide benefits at today’s levels.

EBRI’s survey can be found at http://tinyurl.com/EBRI2013RetConfSurvey.


Record Retention: What Should I Keep, For How Long and How Should I Organize It?

We frequently are asked, “what records should I keep, how long should I keep them, and how should I organize my files?”

The key to record retention simple: Keep the things you need, and store them so you can find them easily. If a participant, auditor, or DOL agent requested plan information, could you find it quickly?

Here are several rules of thumb when it comes to record retention.

  • Plan Documents should never be discarded. This includes Basic Plan Documents, Adoption Agreements, Amendments and Summary Plan Descriptions.
  • Annual Filing Reports should be maintained for at least six years. This includes 5500s, supporting materials for contributions, testing results, plan audits, Summary Annual Reports, and distribution records.
  • Participant Records should be retained during the participant’s employment and at least six years after the participant’s termination. This includes enrollment forms, beneficiary forms and distribution forms. Loan records should be maintained at least six years after the loan is paid off.

As for organizing your Fiduciary File, we suggest a format that includes the following sections:

  • Documents − for all plan documents, amendments, tax filings, etc.
  • Administrative − for all audit results, contribution records, Plan Review Meeting Minutes, Fee Benchmarkings, participant complaints.
  • Participant Communication − copies of enrollment materials, communication memos, meeting sign-in sheets.
  • Investments − listing of fund menu with expenses, Investment Review Meeting Minutes.

If your fiduciary advisor has an online document archive such as the proprietary Fiduciary File Cabinet™ offered by Montgomery Retirement Plan Advisors, this can be a useful resource for record retention and back-up. However, plan sponsors should also maintain their own copies of needed records.


Looking For Market Certainty?

Have you ever heard the following comment or possibly said, “I want to take my money out of the market until there’s more certainty and things have calmed down?” The perception of uncertainty is often a trigger for the fear and emotional instability that grabs hold of investors.  Unfortunately, many people react to uncertainty by making changes to their investments “just temporarily” and miss out on the market growth they would have achieved if they had just stayed put. 

The government shutdown is just one of the latest events in a very, very long history of short-term economic uncertainty.  Late last year it was the fiscal cliff.  Before that it was the United States Presidential election.  In fact, there have been dozens of economic or market concerns in recent years. There’s essentially no such thing as short-term certainty in the investment market.

Whether it is wars, change in presidencies, recessions, you name it, there will always be economic and market uncertainty and each time it is different than the rest.  The great thing is that you, and only you are in control of your budget and where you direct the income you make.  If you choose to sit on the sidelines or in an overly conservative portfolio waiting for perceived certainty in the market, then you’re actively choosing not to have growth potential you may have if you simply stayed invested with proper diversification for your long-term goals.

The key action item from this article is not to wait for short-term market certainty.  Create a plan for your investing goals, take action to implement the plan, and stick to it.  If we let the perception of uncertainty toss us back and forth like the waves of the ocean, then we’ll never get to where we want to go.  We’ll just drift with the current, letting it direct our results. Instead we should take control and chart our own path.

David M. Montgomery, AIF®, CRPS


Seeds of Investing

For a copy of this month’s Seeds of Investing newsletter, formatted for distribution to retirement plan participants, contact David Montgomery at DMontgomery@m-rpa.com or 813-868-1930.

This material is intended for informational purposes only and should not be construed as legal advice and is not intended to replace the advice of a qualified attorney, tax adviser, investment professional or insurance agent. Montgomery Retirement Plan Advisors does not warrant and is not responsible for errors or omissions in the content of this newsletter.


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