Nevin's Data "Points"

Several weeks back, my wife and I sat down with a financial planner to review and update our financial plans. Doing so brought with it a bit of personal trepidation since, being “in the business” I not only had a working knowledge of what needed to be done, I also had a pretty good sense of what hadn’t been done, and what hadn’t been done the way it should have been done in some time. As I surrendered copies of the statements from my three separate 401(k) accounts, rollover IRA, traditional IRA, and SEP-IRA, I found myself wondering (again) why I hadn’t gotten around to consolidating some of those accounts. More and more Americans are finding themselves with multiple savings accounts, not only because of the relatively consistent pattern of job change in the American economy (see “Tenure, Tracked” ), but because those job changes frequently result in rollovers to individual retirement accounts. On the other hand, in recent years, it has gotten easier to simply leave your 401(k) with ...

Ravens or 49ers – either way, your stock portfolio could have something to cheer about this year. According to the Super Bowl Theory, which was invented/popularized by the late New York Times sportswriter Leonard Koppett, a Super Bowl win by a team from the old National Football League is a precursor to rising stock values for the year (at least as measured by the S&P 500), but if a team from the old American Football League (AFL) prevails, stocks will fall in the coming year. As it turns out both teams in Super Bowl XLVII - the Baltimore Ravens (by way of NFL legacy Cleveland Browns) and the San Francisco 49ers – are NFL legacy – and thus, regardless of which team wins, a legacy NFL team will prevail. Of course, looking back over the years, the record is a bit, shall we say, “inconsistent.” It “worked”for 12 of the first 13 Super Bowls – and, over 45 Super Bowls, it’s proven to be “accurate” 35 times. On the other hand, over the past 15 years, it has only held true about...

I finally got to the dentist last week. Don’t get me wrong, I like my dentist. The folks there are more than nice, they treat you like an adult (even when you clearly haven’t flossed since your last visit), and they outline options in a way that feels like you actually have a choice (including my personal favorite, “If it’s not bothering you, do nothing”). That said, it had been a ridiculously long time since I had been there. Honestly, I knew it had been a while, but when my dentist pulled out his (detailed) record of my last visit—well, let’s just say I couldn’t believe it had been that long. In fact, I think if I had known how long it had been before I went, I might well have postponed it again, if only to spare myself the embarrassment. Fortunately, despite my extended hiatus, things were in pretty good shape. Sure, the cleaning was more painful than it might have been, but overall, things were better than I had a right to expect. After the market tumult of the pas...

If you want to get a quick sense of just how fast time flies, consider that it was only a year ago this week that Lehman Brothers filed for bankruptcy—the same day that Bank of America announced its plans to acquire Merrill Lynch, and a day on which, not surprisingly, the Dow Jones Industrial Average closed down just over 500 points. That, in turn, was just a day before the Fed authorized an $85 billion loan to AIG—and that on the same day that the net asset value of shares in the Reserve Primary Money Fund “broke the buck.” This was made all the more surreal because it was going on while we—and several hundred advisers—were in the middle of our PLANADVISER National Conference. Let’s face it—no matter how busy or hectic your week has been, I’m betting it’s been a walk in the park compared to those times. The funny thing is, looking back (and armed with the prism of 20/20 hindsight), there were lots of signs of the trouble that eventually cascaded like a set of dominos, resetting not ...

While I am sure there was a period in my youth when I wanted to be a fireman, a cowboy, or maybe even a professional athlete, my earliest memories are of wanting to be an astronaut. Never mind that my odds of becoming a professional athlete were considerably better than those of joining the nation’s elite group of astronauts. It was evident even to me early on that I lacked the athletic acumen for a career in sports—it took years for me to appreciate what would have been required for me to satisfy NASA’s requirements (and be able to rationalize that the “real” reason was that I was too tall). It was a magical time for our nation’s space program. There was a plan, three separate programs (Mercury, Gemini, and Apollo) to help us get there, and a vision—as President John F. Kennedy said in May 1961, of “achieving the goal, before this decade is out, of landing a man on the Moon and returning him safely to the Earth.” There was also a sense of national urgency (the so-called “Space Race...

There was an intriguing survey published last week, but one that, IMHO, generates as many questions as answers. The online survey (accurately, if somewhat inelegantly, titled “Investors’ Beliefs about the Role of Target-Date Funds in Retirement Planning”—see Workers Might Have Wrong Idea about Target-Date Funds ) captured the sense of 251 respondents, most (55%) of whom were earning less than $50,000/year, but many (75%) of whom were saving for retirement. A full third were age 55 or older, and none was younger than 25. Consequently, while we know nothing about how they are saving, or the size of the programs in which they participate, one might well expect that they have at least a passing familiarity with one of the most popular and powerful 401(k) investment tools—target-date funds. Not so. Only 16% said they had even heard of target-date funds prior to reading the description in the survey, and apparently even among those, 63% weren’t able to explain the concept. From the respo...

The recent market tumult has hit Main Street in its retirement pocketbook—and some are once again fretting about their “201(k)s.” You can say all you want that this is a good buying opportunity, but the reality is that our retirement savings accounts have taken a hit, and most people are going to be in mourning, at least for a time. Regardless of the markets (which we can’t control), we all know that the most important determinant of retirement security is how much we save—something we can, within bounds, control. However, when it comes to saving, there are two big questions looming over us, IMHO: Are we saving enough?—and, more importantly, Can we save enough? Those of the opinion that Americans are saving enough are few and far between. With a median retirement savings plan balance of less than $125,000 (and that was before the impact of the last several weeks), it’s hard to see how we could be saving “enough” based on historical spending patterns, much less taking into account t...

Without question, asset-allocation solutions—particularly target-date fund solutions—are well on their way to becoming a dominating force on retirement plan menus. More than three-quarters of the roughly 5,000 respondents to last year’s Defined Contribution Services Survey already had one of these options on their menu. Moreover, the popularity of these offerings has resulted in a burgeoning number of choices, with what seems like a new introduction every other week, and by some of the most well-known and highly regarded names in the asset management business. Having said that, the notions of what constitutes an “appropriate” asset allocation, much less an appropriate asset-allocation fund—or fund family—are varied, to say the least. Almost as varied as the number of choices, in fact—and it appears that those notions are shifting as well. These “moving” targets (see “ Moving Targets ”) will keep us all on our toes for the foreseeable future—and I suspect that we will all bring to th...

Last week, I stumbled across another of those “DC plans are becoming like DB plans” articles—you know, the “DB-ification” of 401(k)s? This is all supposed to be a good thing, of course, because we know that defined benefit plans do a better job of providing adequate income in retirement than defined contribution plans (well, properly funded, and when workers accumulate adequate service credits, anyway). Moreover, the new Pension Protection Act-engendered trends toward auto-enrollment (nobody asks people to fill out a form to be covered by their DB plan) and asset allocation fund defaults (nobody asks participants to make the investments in the DB plan) are also widely touted as DB innovations that we have finally had the good sense to bring to the DC side of the world. Don’t get me wrong—anything that turns employees into participants (and automatic enrollment surely does that) and helps them make better investment decisions (and, generally speaking, asset allocation solutions fulfil...

It’s an undisputed fact that the vast majority of retirement plan participants never rebalance their accounts. It’s one of the reasons that that initial investment decision, particularly in a default situation, is so crucial. And most of us would guess that those participants who do make changes probably make a mess of it. However, new research from the Vanguard Center for Retirement Research tells a different story. Their report indicates that “traders” outperformed nontraders by 0.55% on an annualized basis. Not that we should draw much comfort from that result. First, only 17% of the one million or so participants in the Vanguard sampling were “active” traders (averaging just a bit under three trades each, but most did only one)—and, according to the Vanguard researcher, on a risk-adjusted basis, these same traders fared no better than nontrading participants. In effect, the extra risk they took on—during the relatively mild investing climate of 2003 and 2004—wiped out the be...