Article published by Bt Elizatbeh O’Brien, MarketWatch

401k plans were never designed to supplant pensions, merely to provide supplementary income to retirees.
But over the past three decades, employers have continued to eliminate defined-benefits programs (pensions) in favor of less-costly contributions into workers’ 401k’s.

We weren’t meant to carry the weight of your future
When 401k’s were first introduced, in the late 1970s, most workers still had “defined-benefit” pensions — retirement plans in which employers made all the decisions about what to invest where. Back then, 401k’s were intended as mere supplements to those plans, says Lee Topley, the managing director of the retirement plan consulting group at Unified Trust, a Lexington, Ky., company that manages the needs of plan participants on behalf of employers.

We have no idea how much cash you’ll need in retirement . . .
When it comes to actually figuring out how much to save for a comfortable retirement, most workers are on their own. And once they stop working, it’s up to them to figure out how to turn their nest egg into an income stream.

Figuring out how much you’ll need isn’t high on our agenda
Nearly three-quarters of large employers surveyed this year by Towers Watson say they offer a 401k plan to help provide for workers’ retirement income. But when companies were asked to name the top factors driving plan design, workers’ ability to retire came in fifth, behind the competitiveness of benefits within the industry, benefit plan costs, employee attraction and retention, and legislation and compliance.

Fee transparency? What fee transparency?
Some statements “disclosed” a wide range of fees, as in “your expenses range from 0.25% to 2%,” leaving companies wondering where exactly their fees stood. What’s more, the fees came without any guidance on industry averages. So even if a company was told it paid, say, 1.25%, executives would have no idea how those fees stacked up against other plans.

You’re losing years’ worth of savings to fees
Take, for example, a portfolio that says its fee is 1%, a percentage that wouldn’t be uncommon. That may not sound like a whole lot. But when it’s chipped from your retirement nest egg annually, the cumulative effect can be significant. Over the course of a career, a worker who makes $75,000 a year and saves 8% of that annually in a 401k would lose 2.8 years’ worth of savings in a target-date fund with a 0.2% fee, according to an analysis by Towers Watson. That amount of lost savings jumps to 11.6 years’ worth in a fund with a 1% fee.

Fewer choices doesn’t mean better ones
The number of large employers that offer 20 or more funds declined by 8% from 2010 to 2012, and the number of sponsors that offer nine options or fewer increased by 3%, according to Towers Watson. But the choices that remain are still too expensive overall, consumer advocates say.

The system isn’t working for employees — or employers
The aggregate retirement-income deficit for all baby boomers and Gen Xers — that is, the amount by which their savings, plus Social Security, falls short of what they’ll need — is $4.3 trillion, according to the Employee Benefit Research Institute. Clearly, folks aren’t setting aside enough for their post-work lives.

Small-business employees are missing out
Just half of workers in companies with fewer than 100 employees have access to retirement accounts, according to the federal Bureau of Labor Statistics, compared with 79% of workers in companies with up to 499 workers, and 86% of workers in large companies.

Automatic enrollment won’t save you
While it’s good that employees are forced to save — few who are auto-enrolled bother to opt out — they’re not saving as much as they should. That’s because companies often deliberately set the default contribution rate low — generally around 3% of pay — so they don’t have to match as much, Credico says. Of course, employees can always change their default rate, but few bother to do so. Indeed, many workers don’t even know their contribution rate.

Article written by The Self Directed Retirement Report
http://www.sdretirementreport.com/study-reveals-401k-disclosure-rules-not-helping-investors/

In an effort to add transparency to 401(k) administration, the Department of Labor created a new rule in 2012 that required all 401(k) plan providers to disclose “all fees associated with plan administration, investments, and other expenses”[1]. The idea was that with more information about where money was going on the administrative side of the process, 401(k) owners could make better decisions about where, how, and with whom to invest. Unfortunately, it appears that these disclosures are not particularly insightful for most 401(k) owners and that nearly half of them have no idea how much of their money goes to annual fees and expenses even after the disclosures are made.

“Fee disclosure is…very cumbersome,” explained vice president of corporate retirement plans at Personal Capital Tom Zgainer, adding that “participants need an easier way to discover and understand expenses associated with their retirement plans.” About the only thing that the disclosures appear to accomplish is making participants aware that they may be paying fees and expenses. Slightly more than a fifth of all participants believed after the disclosures that they pay no fees or expenses on their 401(k) plans. That number used to be more than a third (38 percent) when the disclosures were not required

Unfortunately, this issue is a much bigger one than you might think at first. According to NerdWallet, more than 90 percent of American adults underestimate the lifetime costs of their 401(k) administration by about $150,000[2]. The survey included more than 800 Americans. The Department of Labor supported these findings as well, reporting that a poor understanding of fees can result in reduced retirement balances that are as much as 28 percent lower than retirees might expect.

How do you keep your retirement-related administrative fees under control? Do you know if you are paying any?

BY IALC

In a recent article in the New York Times, Jean Chatzky, the financial editor for NBC’s Today Show, offered some insight into how deferred annuity products like indexed annuities are poised to make a difference in the financial future of a class of retirees facing a number of unique issues such as increased longevity and insecurity in pensions and social security.

“They are addressing the primary fear that baby boomers in particular seem to have about retirement, which is that they are going to run out of money before they run out of time,” she said.

With people living much longer than ever before, it is extremely important to build up a nest egg that can sustain you for two or three decades. It is more important than ever that those approaching retirement employ a savings strategy that is fit to last you through the years by focusing on accumulation and lifetime income, rather than pure growth. It is impossible to predict how long one might live, but adding conservative financial vehicles to your retirement plan, such as a fixed indexed annuity that can guarantee income for life–no matter how long that may be–can eliminate some of the guesswork when it to outliving your savings.

Chatzky is not alone in her favorable perception of annuities for those preparing for retirement. Suze Orman has been singing the praises of indexed annuities as a way to shield your retirement nest egg from market volatility for some time. In her 2001 book, “The Road to Wealth,” Suze Orman tells readers that “if you don’t want to take risk but still want to play the stock market, a good index annuity might be right for you.”

As many boomers witnessed their retirement savings take a big hit due to the financial crisis and recession, it is evident that this advice still holds water in today’s economy. Indexed annuities are unique because unlike investments, these insurance products offer a guaranteed minimum return, so you are protected from the negative effects of market volatility. However, because interest returns on an indexed annuity are based on an external index, such as the S&P 500, there is still potential for market-linked growth when markets are doing well. Those saving for retirement can add some balance to their financial plans—particularly in risky markets—by providing protection when the markets are down and potential for additional interest when the markets are up. Your personal risk tolerance can serve as a guide to determining the perfect balance for your retirement portfolio.