Getting Your Financial Ducks In A Row » rant

Review of 2011 Stats

jblankenship — Sun, 01 Jan 2012 05:01:02 +0000

Ed. Note: As in past years, I’m taking a break from my normal business of posting retirement, tax and other personal financial planning topics to report on the blog itself and the statistics we’ve seen in this, the 8th year of publication for this blog. I’ll be back to regular programming with the next entry. – jb

Over the past year, this blog has seen continued growth. This year has been all about Social Security as much as anything. As you know, in October I released A Social Security Owner’s Manual, and many of you have picked up copies, thank you! Through your comments and email questions I have come to meet literally hundreds and hundreds of you over the years – and we’ve learned a lot together. I’ll take this opportunity to thank you for your tremendous support by reading, asking questions, and making comments on what I have written. I hope these interactions have been as fulfilling for you as they have been for me.

Planned for 2012: more of all the wonderful income tax, IRA, Social Security and other retirement, investment and financial planning articles that you’ve come to expect; completion of the print edition of An IRA Owner’s Manual; guest experts from time to time will contribute posts on areas complimentary to the subjects of this blog (contact me if you’d like to write an article, I’m always looking for more!); book reviews as a part of an arrangement with McGraw-Hill (more on this in the new year); and continuing the pace of approximately 175 to 200 posts throughout the year. Please pass along any suggestions for new topics that you’d like to see written up and discussed.

Listed below are the Getting Your Financial Ducks in a Row end of year statistics and Top Ten lists for 2011. A huge THANK YOU goes out to everyone that has taken part in this blog over the years!

General Statistics for 2011

176 total posts
164 comments & trackbacks
148,842 page views – averaging 408 per day (2010: 75,774 views, 207 per day)
300 RSS subscribers

Top 10 Referrers for 2011

Top 10 Search Engine Terms for 2011

ira charitable contributions
charitable contributions from IRA
social security file and suspend
social security wage base
life expectancy tables
windfall elimination provision
social security spouse options
government pension offset
qualified domestic relations order 401k
social security pia

Book Review: Saving Capitalism from Short-Termism

jblankenship — Mon, 19 Sep 2011 12:38:23 +0000

How to Build Long-Term Value and Take Back Our Financial Future

This is a great book. I got a lot out of the sections that bring to the surface a lot of the issues that we’ve been seeing in our economy. These issues have been written about in countless places, but author Alfred Rappaport also proposes workable options that could be put into place to resolve these issues, a step that has been lacking in other places I’ve seen these issues discussed.

But I’m getting ahead of myself. The issues I’ve referenced above are the sort of systemic issues we’re seeing in economy in general and specifically the financial services industry. Included in these issues are the wild short-term fluctuations we have been seeing in the markets, in part due to the ways that CEOs are compensated, how investment managers are compensated, and how those compensation systems influence behaviors and methods of management.

Specifically, in today’s world CEO compensation is typically tied to earnings, on a quarter-over-quarter and year-over-year basis, which tends to cause the CEO to forego longer-term investments and moves in favor of moves that result in short-term earnings increases. Once or twice this kind of activity might not cause much problem, but always opting for the short-term over long-term value creation has resulted in the kinds of wildly-fluctuating markets that we’ve seen in the past couple of decades.

Along the same lines, investment managers, specifically fund managers, tend to be compensated similarly with short-term views. I’ve written about this in the past in an article explaining how many managed mutual funds wind up being closet index funds due to the nature of the compensation system, but I didn’t go into how managed funds could use a different method of compensation to resolve this.

These issues have been around for quite a while – oddly enough I recently found reference to the accounting shenanigans that are still in use today, in a book written in the early 1970’s, Super Money by Adam Smith. Clearly the problem has been going on for a long time, and resolving it is going to take major changes.

Mr. Rappaport takes the situation a step further by providing real, workable examples of ways that the compensation systems could be re-aligned to provide long-term value from both the standpoint of the CEO and the investment manager. The resolutions aren’t simple, and putting them into place will require buy-in from CEOs, corporate boards, and others stakeholders in the overall process. Since the systems that we’re using have been in place for so long, it’s going to take guts from everyone involved – but the payoff should be enormous.

The payoff that Rappaport refers to is the creation of long-term value, which is in the best interest of all involved parties. Just think of it! An economy where we’re focused on longer-term values, rather than living and dying with each quarterly earnings report. Massive fluctuations day-to-day fluctuations in the markets would be a thing of the past, and investing would become much less “exciting” – more like an actual saving activity than the crazy, topsy-turvy world we’ve had to get used to.

It’s a tall order to be certain, but the ideas that Mr. Rappaport has detailed are within reason and workable, but as I mentioned before they require buy-in from all stakeholders. The ideas also require a sea-change in thought processes but as of now, they’re the only valid option that I’ve seen put forth. I think anyone who is in a position to help put these ideas into play should read this book as soon as possible.

The above book review is part of a series of reviews that I am doing in an arrangement with McGraw-Hill Professional Publishing, where MH sends me books with the only requirement being that I read the book and write a review – like it or not. If you find the information in this review useful, let me (and McGraw-Hill) know!

You can pick up my book, A Social Security Owner's Manual, at Amazon in either the print version or the Kindle version by clicking the links.
Post from: Getting Your Financial Ducks In A Row

Book Review: Saving Capitalism from Short-Termism

What Can Be Done to Save Social Security?

jblankenship — Fri, 09 Sep 2011 12:20:19 +0000

Image by Lady_Helena via Flickr

This is, of course, one of the most volatile questions on the political landscape these days. We have some constituencies claiming that the whole plan is a Ponzi scheme and we should get rid of it altogether – and many others aiming to make radical tax increases in the system to improve solvency, or pushing back the age(s) for receiving benefits to reduce drag on the system.

True, the system is in dire straits – not bankrupt, but needing attention. Current projections indicate that at current pace, funds allocated to the system will run out sometime around 2036 unless something changes.

Increasing taxes is never popular, and current political winds have shown just how far the dream of no increases in taxes will be pushed. In addition, extending the age limits during a time when unemployment is at record highs only exacerbates that issue – with older workers hanging on longer, younger workers can’t fill those jobs.

And eliminating the system altogether just isn’t workable. Roughly 55 million Americans are currently receiving benefits – many with little else to live on in retirement. A great many more are coming on the rolls every day, as the Baby-Boom generation hits the magic age(s).

Privatization, although once very popular, has lost its luster in recent years due to the market’s fluctuations. The fact is that the majority of folks are just not very good at managing their own money – and the stakes are too high to give them a shot at what could be their only sustenance in retirement. 401(k) plans are great, but the facts are scary: the Employee Benefit Research Institute’s (EBRI) March 2011 report showed that nearly half (46%) of all surveyed Americans who have saved anything at all have less than $10,000 saved (not including homes or defined benefit pension plans). What’s worse is that over a third (36%) of those surveyed figured that if they saved up $250,000, that should be enough to retire comfortably, when in actuality that figure might cover the individual’s healthcare needs only. And further, EBRI has indicated in countless reports year after year that when a 401(k) plan is in place, the actual returns achieved are dismal compared to the market average, due mostly to reactionary moves by investors operating without proper guidance.

So what can be done? Means testing, for one thing. Donald Trump doesn’t need Social Security, and neither do his young children – but they’re eligible (and are likely receiving it). That’s not to say that eliminating the Donald and his peers from the recipient rolls will balance out the system; many more Americans will likely have to forego at least a part of the benefit that they’ve been expecting.

We’ve had a form of means testing in place since 1983 – via the taxability of Social Security benefits. And since the limits haven’t been adjusted since that legislation was put into place (actually since the 1993 legislation), this means test is becoming more and more “taxing” to folks with any additional income on top of Social Security every year. But it probably doesn’t go far enough.

Another item that could be dealt with is the payroll tax ceiling – currently at $106,800 – that could be liberalized a bit without too much ruckus. Granted, this does mean a new, or rather increased, tax, but when you weigh that against the alternatives, it’s not a bad option to consider.

All in all, the Social Security system has its problems, to be sure. It is, after all, a form of social insurance – meaning that some folks will get far less from the system than they put into it, and others will get far more from it than they put in. But we’ve got it in place and it’s working (pretty well anyway), so we just need to make some adjustments to make sure that the system can make it through the rough patches.

You can pick up my book, A Social Security Owner's Manual, at Amazon in either the print version or the Kindle version by clicking the links.
Post from: Getting Your Financial Ducks In A Row

What Can Be Done to Save Social Security?

Lifetime Income Disclosure

jblankenship — Fri, 28 Jan 2011 13:10:17 +0000

There is a piece of legislation hanging around in the Senate that makes a good deal of sense, and really shouldn’t cause too much grief to implement in the long run.

This particular bill, introduced by Senators Bingaman (D-New Mexico), Isakson (R-Georgia), and Kohl (D-Wisconsin), is called the Lifetime Income Disclosure Act, and it proposes that the administrators of ERISA-approved retirement plans provide for their participants a disclosure of the “annuity equivalent” of the total benefits that each participant or beneficiary has accrued within the retirement plan.

What this means is that, for likely the first time for most folks, an estimate would be provided to them with their statement that outlines what that lump sum means in terms of real, annualized income replacement in retirement.

Specifically, the government would establish certain assumptions about the annuity value of a lump sum, given the participant’s age, and from those assumptions a lifetime income stream valuation would be derived.

This could be an important provision giving folks an eye-opener into what they could expect from their 401(k) plan when they retire. Most folks won’t actually purchase the annuity described for many reasons, one being that in order to purchase an annuity you must deal with an annuity salesman. But this illustration of the potential income value is a good step in the right direction for folks to gain a better understanding of their present position.

Of course, just knowing this fact won’t necessarily resolve our retirement savings shortfalls, but maybe it would help to inspire folks to save more and spend a little less. Every little bit can help.

If you agree with me that this provision makes sense and if you’re inclined to do so, write or call your representatives in Congress and tell them so. Unless you speak up, they won’t hear you.

Photo by Christina Welsh (Rin)

You can pick up my book, A Social Security Owner's Manual, at Amazon in either the print version or the Kindle version by clicking the links.
Post from: Getting Your Financial Ducks In A Row

Lifetime Income Disclosure

Was BP Just Being Nice?

jblankenship — Mon, 15 Nov 2010 12:16:21 +0000

Remember back when the oil spill first started to get really ugly, and BP announced their efforts to start the cleanup, by whatever means were necessary?

BP even went so far as to hire some 2,000 people to assist with the effort – 2,000 people who lived in the gulf coast area. BP also very publicly announced that they’d only consider people who had been out of work for 60 days or more – under the auspices that they were altruistically working to improve the lot of these folks who had been impacted by the economy, and further by the spill itself.

I’m not going to address the spill or the cleanup, this has been discussed in many forums to great length. Regardless of the effort put in and the emotional ramifications of BP’s cleanup effort – I found it interesting that BP specifically indicated they’d only consider folks who had been out of work for 60 days.

The reason this is interesting is that this is the very qualification required to take advantage of the Hiring Incentives to Restore Employment Act of 2010 (HIRE Act 2010). With this law, all of the wages that these qualified new employees earned are subject to forgiveness of OASDI tax, a benefit equal to 6.2% of the wages paid between March 18, 2010 and December 31, 2010.

I don’t fault BP for taking advantage of the tax law – I just thought it was important to point out that the company wasn’t simply being altruistic with their choice of workers. Even in this hour when we Americans, the consumers of their product and those impacted by their greed, needed this company to be heroic with their intentions and their efforts, they still found a way to work things in their favor in the working out of the cleanup. Nice.

Photo by jb

You can pick up my book, A Social Security Owner's Manual, at Amazon in either the print version or the Kindle version by clicking the links.
Post from: Getting Your Financial Ducks In A Row

Was BP Just Being Nice?

Bankruptcy of the Social Security System, Bigfoot, and Other Myths

jblankenship — Tue, 13 Apr 2010 12:42:55 +0000

For most folks, the Social Security system and how it works is a mystery. Many believe that there is an account somewhere with your name on it, and you’ll get to draw funds from that account when you retire. Other folks will tell you that the system is bankrupt or nearly so. Still others will swear that it’s a Ponzi scheme.

These are mostly myths. So what is the truth?

How The Social Security System Works

In a way, the Social Security system actually does resemble a Ponzi scheme, in that the early participants paid in very little and received an inordinately large benefit (by comparison to what they paid in) – while later participants will be paying in a far larger amount, possibly more than they will ever get back out in benefits. To be a true Ponzi scheme though, the later participants would be told that they can expect the same return on investment that the earlier folks received. I think we’ve understood for quite some time that this isn’t an investment, but a tax – and that we may get very little out of the system compared to what we put in it.

From the beginning, the Social Security system has overtly been a “pay as you go” system, meaning that current receipts from tax withholding are used to pay present-day recipients of benefits. Most of the time during its 75-year existence, the system has been paying out less in benefits than it is taking in from withholding, and so the surplus has been placed in a “trust fund” to help pay for benefits in the future. This trust fund amounts to roughly $2.5 trillion these days.

This design was based upon the (incorrect) assumption that each succeeding generation would be larger than the previous generation, therefore the receipts would always be greater than the payouts. That was before the Baby Boom.

It has been projected that, beginning in 2017 (although I’ve seen it reprojected to 2016 lately) that the system will begin drawing from the trust fund regularly, although the interest alone on the trust fund’s account will be enough to cover the excess needs of the system through 2027. At that point, it is projected that the principal in the trust fund will be accessed to pay benefits, and the trust fund principal is expected to be exhausted by 2041.

So – What’s Going to Happen?

I can’t tell the future, but I have a couple of guesses as to what may occur. But first, I wanted to point out a couple of recent developments:

1) In 2010, due in part to the economic downturn, the Social Security system is expected to pay out more than it takes in. This is not a catastrophe, and not expected to be a long-term trend, nor is it the first time this has happened. It is, however, unexpected, and may have a big impact on the crossover point projected in 2017 2016. This is primarily due to unemployment staying high (less money coming in due to smaller payrolls). Stay tuned, but also see #2.

2) The long-term trend that will likely have the greatest impact on the health of the Social Security system is the delay of retirement among many Americans, specifically the troublesome Baby Boom generation. According to some recent data from the Rand Corp., the percentage of folks between 65 and 75 that are still active in the workforce will be 25% in 2010, versus 17% in 1990. That’s a significant fact, because those folks are continuing to pay into the system, and either delaying receipt of benefits or receiving a smaller benefit (at least until Full Retirement Age) than was projected.

The combination of these two factors is likely to improve the outlook for the overall system, although we’ll have to wait for the witch doctors actuaries to sift through the numbers to know what the new projections will look like.

My Guesses

In the meantime, here’s my guess as to what will happen: like anyone with a finite budget, when it comes time to begin paying out of principal, I expect for benefits to be reduced across the board – possibly by as much as 25%. But before that happens, I expect that we’ll see increases to the ages for benefits, such as bumping up the early retirement age from 62 to 64, and the maximum benefit age from 70 to 72. These increases would match the increase in the Full Retirement Age that has been in place for some time now. And lastly, plan on the fact that pretty much any benefit you receive will be taxed to some degree.

Regardless, all this talk about going bankrupt is pretty much ill-founded. Since the system has the ability to draw in tax rolls it cannot be bankrupted; benefits can reduce and ages for benefits can increase, but it can’t go completely broke. It’s bad, but not catastrophic. It’s sort of like if we were to discover that, after all of the sightings and legends over the years, it turns out that Bigfoot isn’t really an unknown species, but rather that it was just members of The Allman Brothers Band wandering about in the wilds. Frightening, but not the end of the world.

So What Can You Do?

Write your congressmen & women. Light a candle. Wring your hands, and say “oh my”. And then just get over it, realizing that Social Security should not be counted upon as a significant portion of your retirement income – especially if you were born after about 1955. Concentrate on your savings, and then, if the Social Security fairy happens to leave something under your pillow when you are retired, consider it gravy.

Photo 1 courtesy Wikipedia
Photo 2 courtesy Georgia Informer

You can pick up my book, A Social Security Owner's Manual, at Amazon in either the print version or the Kindle version by clicking the links.
Post from: Getting Your Financial Ducks In A Row

Bankruptcy of the Social Security System, Bigfoot, and Other Myths

Advisor or Salesman?

jblankenship — Thu, 18 Mar 2010 13:27:20 +0000

Recently I came across an article in the New York Times blogs section by Andrew Ross Sorkin that once again underscores the scary situation that many consumers of financial services face. As I have mentioned here on several occasions, it’s important to know the source of any “advice” you might receive.

This particular article includes comments from former brokers who have either retired or switched over to independent financial advisory firms. One comment in particular gave me the shudders:

The difficulty I had in the brokerage industry is that you don’t get paid for the delivery of financial advice absent the sale of a financial product. That is not to say the advice I rendered was not of professional quality, but in the end, I always had the sales pitch in the back of my mind.

This is not to construe that brokers cannot provide good advice – but rather, that even the brokers admit that the compensation system to which they adhere causes a bias that can be counter to the best interest of the client, the consumer of financial services.

In addition to the explicit issue of compensation systems, since the broker/salesman is not required to act as a fiduciary, certain under-the-table compensation systems can be in place with “preferred” mutual fund choices which offer revenue sharing with the brokerage above and beyond commissions. Disclosure of such arrangements is brand-new, only within the last year or so, and have come about in response to class action lawsuits against the likes of Edward Jones and Morgan Stanley Smith Barney.

At one stage it looked hopeful that upcoming legislation might have an impact on this situation – the first version of Senator Dodd’s financial overhaul bill required fiduciary duty by all brokers and advisors – but this bill has been scrapped and who knows what (or when) will be the final outcome. Stay tuned…

Photo by Neubie

You can pick up my book, A Social Security Owner's Manual, at Amazon in either the print version or the Kindle version by clicking the links.
Post from: Getting Your Financial Ducks In A Row

Advisor or Salesman?

Coming Soon: No Change For the Financial Services Consumer If FatCats Get Their Way

jblankenship — Tue, 16 Feb 2010 13:02:07 +0000

We talked about this issue of the accountability standards for financial professionals some time ago (click here to get the background). Unfortunately, it seems that the big money and best interests of the large brokerages, banks, and insurance companies is turning the tide against the proposed fiduciary standard for all financial professionals.

The fiduciary standard has long been sought after by consumer advocates, as the great majority of financial professionals are held to a much lower standard of care – one that often leaves the consumer of financial services exposed to higher costs and a low likelihood of advice being in his or her best interests. Last year, proposals were offered in Congress to require the fiduciary standard of all regulated financial professionals – which is a step in the right direction.

However, intense lobbying efforts by the fatcats, the heavyweights of the financial services industry (think banks, brokerages, and insurance companies) has just about killed the concept of an industry-wide single standard altogether. The original proposal by Senator Dodd (head of the Senate Banking Committee) that was to require a fiduciary standard across the board has been withdrawn due to intense opposition from lobbied members of the committee. Now the committee is working on a compromise, which is not likely to carry the same requirement.

WHY?

You’ve got to ask yourself – Why? Why is it so important to these companies that their sales forces are not held to a standard of fiduciary care? After all – the fiduciary standard requires that advice given is in the best interest of the consumer. Who could be against something like that?

If you look at the industry makeup, you’ll get a clue: 90% of the members of the financial professional industry are not held to a fiduciary standard, and much of the remaining 10% are small, independent firms, not backed by large marketing budgets. The reason becomes clear when you think about where the money is – it takes a lot of hard work to provide a fiduciary level of care, and as a result it can be costly to provide, and therefore difficult to justify. It is much more lucrative (and cost-effective) for these companies to provide one-size fits all solutions to masses of clients, especially if you don’t have to care if the solution is in the best interest of the client.

When there are billions of dollars annually at stake, it’s not hard at all to understand why the lobbying effort against the fiduciary standard is so intense. If this standard were to come into being, current sales techniques would have to be totally re-tooled, and likely the vast majority of the existing sales force would have to be replaced, due to increased training required to adequately provide the level of care that the fiduciary standard will necessitate.

So what can you do?

As consumers of financial services, we all owe it to ourselves to remain diligent – to understand the requirements and standards that our financial professionals are held to. Just because Congress isn’t up to the challenge of requiring a fiduciary standard of all financial professionals doesn’t mean that you have to swim with the sharks.

Know that your insurance guy, the broker down the street, and those bank employees are only required to provide you with “suitable” solutions, not solutions that are in your best interests. That’s not to say that you will never get a good solution from these folks – most often the non-fiduciary guy or gal truly wants to direct you to the right solution. But if a choice comes down to selling you a product that’s suitable versus pointing you to a solution that’s in your best interests but doesn’t pay off for him or her… it’s not hard to imagine that the product sale would win out most of the time.

Instead, seek out a true fiduciary, Fee-Only, CFP® professional to get your advice from. (You can start your search at www.NAPFA.org, the National Association of Personal Financial Advisors.) Those other guys are salesmen – go to them specifically to buy your insurance products, investments, and the like – but get the advice of a fiduciary advisor first.

Photo by Chika

You can pick up my book, A Social Security Owner's Manual, at Amazon in either the print version or the Kindle version by clicking the links.
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Coming Soon: No Change For the Financial Services Consumer If FatCats Get Their Way

Where to Get Your Annual Credit Report

jblankenship — Fri, 29 Jan 2010 15:15:14 +0000

As a smart consumer, you have likely heard that it’s a good idea to get your credit report every year from all three services: Experian, Equifax, and TransUnion. You’ve probably also seen the ever-present “Free Credit Report” commercials on the television (unless you TiVo everything and skip past the commercials!) – so you may be wondering: is that the place to go to get the credit reports?

While the service in the commercials will likely provide you with the reports you need, since that service is a “for profit” venture, you’re also likely to get more than you bargained for along with your reports. There are a lot of add-ons that can mysteriously show up, like hidden fees, credit score monitoring, identity theft protection, etc., all of dubious benefit.

The Real Answer

The ONLY authorized source for requesting your credit reports from all three agencies FOR FREE, with no strings attached, is at www.AnnualCreditReport.com. This source was set up jointly by the three credit reporting agencies in response to the Fair Credit Reporting Act.

Via this service, which can also be contacted by phone at 877-322-8228, or by mail (see the website for the form and address), you are allowed to request your credit report from each agency once every 12 months at no cost.

I have found that the mail option, while decidedly low-tech, is the most pain-free option. Navigating the online system can get a bit frustrating, especially if you’ve changed addresses somewhat frequently within the previous ten years, since mailing address is one of the important identifying factors. Unless the system has greatly improved of late, it can cause you some grief. I have to admit that it has been a few years since I tried to utilize the online order option, though.

The Report

The report you receive will be very detailed regarding your credit history, payment history, and any actions taken with regard to your credit. It is important to review this information to ensure that it is accurate – if any errors are located, you need to work out resolving those errors with the credit agency and the creditor in question.

You will not, as a rule, receive your credit score when you make this request for your credit report. The credit score is a separate mathematical ranking of your credit, and this can be purchased from the agencies for a small fee (typically less than $20) when you make your request for the credit report. If you’re concerned about your score and have not had reason to receive your score in another fashion (such as getting a mortgage), it might make sense to do so, but it’s not a requirement by any means.

Timing of Your Request

Since you have three agencies to work with and 12 months between reports, you have a decision to make: should you request all three at the same time, or intersperse them throughout the year?

I suppose it really comes down to your situation – if you have a potential credit problem to resolve, I’d suggest getting all three at once, then you can compare them side-by-side as you work out any problems or inconsistencies.

On the other hand if you’re just in a maintenance mode, that is, you don’t anticipate any issues with the report, you might want to set up a schedule and request a report from a different agency every four months. This way you can constantly monitor your credit to ensure that nothing funky is going on.

Just make sure that you use www.AnnualCreditReport.com, rather than the other, more publicized options. You’ll be glad you did.

Photo by Don Hankins

You can pick up my book, A Social Security Owner's Manual, at Amazon in either the print version or the Kindle version by clicking the links.
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Where to Get Your Annual Credit Report

401(k) – Good For Many, But Not Necessarily the Employee

jblankenship — Sat, 26 Dec 2009 13:00:47 +0000

Okay, the title might be a little misleading in regards to how I really feel about 401(k) plans… I do think that these plans are (or can be) good for a lot of folks, as long as they use them correctly and follow sound investing principles. But that’s not what this post is all about.

I recently read a very good article that echoes a sentiment I’ve written about before: this article speaks to how the 401(k) plan is one of the places that the average Joe Employee is getting ripped off – you can see the actual article here, and I’ll summarize below.

The 401(k) Dirty Little Secret

Without getting too technical about all this, the problem is that most 401(k) providers are able to get away with supplying a plan that is high in cost when compared to the rest of the marketplace, with no one but the plan participants (read that “employees”) bearing the brunt of the cost. And furthermore, the plan participants have little to no say in making changes to the plan in their favor.

Since there is no legislation to make true fiduciary responsibility a requirement – meaning that the plan provider must act in the best interests of the plan participants – most often the plan and the investment choices are among the highest internal cost investing options available. Since the way the fees are charged is totally at the back end (at the mutual fund company, usually) and the employer sees little or no up-front costs, the employer is happy with the plan.

In addition, the mutual fund company is thrilled to have a captive audience with only their funds available to be invested in – which translates into new deposits for the company for nearly no marketing cost. And of course the agent who sells the plan is ecstatic: for literally no ongoing effort, he is able to rake in a percentage from each and every dollar that goes into the plan.

However – the tide may be turning in favor of the employee. As indicated in the article, a recent Eighth Circuit Court of Appeals decision held that there was merit to the complaint that WalMart’s 401(k) plan included high-cost funds when lower-cost funds were available, and that subsidies given to the plan’s trustee could be in violation of ERISA law.

We’ll keep watching these developments, as this could be a major turning point for 401(k) plan participants. Hopefully this is just the start of good news for employees, who have continuously been given short shrift with regard to retirement plans.

Photo by mikebaird

You can pick up my book, A Social Security Owner's Manual, at Amazon in either the print version or the Kindle version by clicking the links.
Post from: Getting Your Financial Ducks In A Row

401(k) – Good For Many, But Not Necessarily the Employee

Getting Your Financial Ducks In A Row » rant

Review of 2011 Stats

General Statistics for 2011

Top 10 Most-Viewed Posts for 2011

Top 10 Referrers for 2011

Top 10 Search Engine Terms for 2011

Top 10 Most Popular Links Clicked in 2011

Book Review: Saving Capitalism from Short-Termism

How to Build Long-Term Value and Take Back Our Financial Future

What Can Be Done to Save Social Security?

Lifetime Income Disclosure

Was BP Just Being Nice?

Bankruptcy of the Social Security System, Bigfoot, and Other Myths

How The Social Security System Works

So – What’s Going to Happen?

My Guesses

So What Can You Do?

Advisor or Salesman?

Coming Soon: No Change For the Financial Services Consumer If FatCats Get Their Way

WHY?

So what can you do?

Where to Get Your Annual Credit Report

The Real Answer

The Report

Timing of Your Request

401(k) – Good For Many, But Not Necessarily the Employee

The 401(k) Dirty Little Secret