There are many points to argue about what is right and wrong when it comes to Social Security and other age based entitled programs. But one point I think we can all agree on without beating the point to death is that Social Security is in serious trouble as we currently use it.

I am not interested in placing blame or running through all the statistical data why it won’t last. Simply put, we borrow from the future to pay for the present but sooner or later the future shows up. Anyone that borrowed against their homes in the last few years knows all to well how that statement rings true.

But what will Obama, McCain or other politicians going to do about it?  How about get real!

According to the American Academy of Actuaries, raising the retirement age to 70 will cut the projected Social Security deficit in half. The statistics back up this age as a base age to use to start benefits with incremental increases built in. The current system increases the social security age one month at a time to age 67 but that is not enough.

The fact of the matter is that people are living longer. In 1935 the retirement age was 65 and you could expect to collect for 12 years. Now that number is closer to 19 years. That’s the type of inflation we can live with, “age inflation”. But that puts pressure on the social programs geared to help seniors with their expenses including Medicare.

According to the National Bureau of Economics the retirement age that is more realistic is closer to 73-74. That might be pushing it a bit and probably impossible to get through politically. The American Academy of Actuaries concludes that long after all the baby boomers are gone the demographics tell us that social security will only cover 75% of its costs. Women will be affected even more since they live longer than men.

But will this be a blow to current generations regarding their expectations for retirement? The answer is no, at least not for those that have given it any thought. Many baby boomers have simply not saved enough for retirement and a large percentage of them do expect to earn some type of income through work during their retirement years.

Financial advisors are also not optimistic about their client’s chances of retiring at the current young age of 65 and having their money last. Inflation and modest investment returns over the last decade have pushed an even greater number of workers into that work longer, save more demographic that will come to dominate those tapping age based social programs.

Raise the retirement age and acknowledge the simple fact that were living longer and we need to make some adjustments to age based entitlement programs.

To the North American Securities Administrators Association (NASAA), there are plenty of modern-day Willie Suttons eager to go “where the money is.” Today, “the money” is largely held by seniors. Hence, regulators say, seniors are the targets of unscrupulous salespeople armed not with pistols, but with professional designations that exaggerate their competence or their concern for seniors’ well-being.

Now some of these individuals are being sought out not by potential clients, but by federal regulators, including the SEC and FINRA. These regulators are making it clear that advisors who use the word “senior” or various synonyms to transact business unethically are squarely in their sights. These individuals are “among [regulators'] top targets,” says Tracy DeWald, general counsel at Securities America, a broker-dealer based in Omaha, Neb. “People age 60 and over are the biggest source of regulatory complaints.”

Targets

Indeed, seniors are targets for all types of unscrupulous vendors. In the financial world, many of those engaged in unethical practices—or merely failing to make adequate disclosures—hold designations that include the words “senior,” “elderly” or “retirement.” contrary to the unethical practices, the designations indicate that the holders are experts in serving the financial needs of senior citizens.

The burgeoning controversy has prompted some reputable firms to take action to avoid being tarred by the same brush. These firms have been limiting the ways their people may use some “senior” designations when doing business. According to NASAA, some product salespeople using “senior” designations typically invite senior citizens to seminars where a free lunch is served along with a presentation on investments. Either at the seminar or through follow-up contacts, some advisors ultimately sell unsuitable investments to some of the attendees.

In April, NASAA introduced a model rule on the use of senior- specific certifications and professional designations. This rule, which prohibits the misleading use of designations that include words like “senior” and “retiree,” has already been adopted by the state of Washington. At press time, New Hampshire was set to adopt the rule and other states are likely to follow suit. A report issued last year by NASAA, FINRA and the SEC lists the popular Certified Senior Advisor (CSA) designation among those it considers misleading or confusing.

That’s not to say that the mere use of the word “senior” will automatically spur regulatory scrutiny. In its model rule, NASAA leaves room for certain designations to be recognized. “Regulators are drawing a distinction between designations that are earned and those that are bought like prizes in a Cracker Jack box,” DeWald says.

What distinguishes a real designation from a specious one? “An authentic designation requires you to pass a difficult test,” DeWald explains.

In addition, DeWald adds, “there are continuing education requirements and you can be kicked out if you violate the rules. On the other hand, there are some designations that you can get by writing a check and spending a couple of hours online. Some are just made up by the person using it.”

NASAA, FINRA and the SEC are by no means the first to recognize the potential abuses of professional designations, especially when it comes to seniors. Some states, including Massachusetts and Missouri, have filed complaints or cease-and-desist orders against people for giving inappropriate investment advice to the elderly while using the “senior specialist” title. Underlying these charges is the idea that certain designations imply specialized knowledge or training, lending credibility to salespeople.

Forbidden Credentials

Some broker-dealers have effectively banned reps from publishing senior-related credentials. Genworth Financial, for example, prohibits its employees and agents from using the CSA designation (the most common senior designation) on their business cards or in their marketing materials.

“We have a similar policy,” says DeWald of Securities America. “In fact, we have lists of which designations are acceptable in published materials and which aren’t. None of the ’senior’ or ‘elder’ designations are on the accepted list. Some of our reps have these designations, which they can mention to clients in conversation. They can’t put the letters behind their names to promote themselves.”

Comparable cautions are in effect at major brokerage firms, says Sean Walters, deputy executive director at the Investment Management Consultants Association (IMCA), which confers the Certified Investment Management Analyst (CIMA) designation. “We work mainly with full-service wirehouses,” he says. “They’re paying a lot of attention to designations, including those aimed at seniors, and deciding which ones should be approved for use.”

Designations are also under scrutiny in the fee-only universe. “At NAPFA, we looked at senior specialist designations,” says Tom Orecchio of Greenbaum and Orecchio, a wealth management firm in Old Tappan, N.J., and chair of NAPFA’s board of directors. “The vast majority were not worth anything, we felt. They don’t require much studying or continuing education. There are too many credentials around; the last thing we need is more clutter,” he says. The one exception, Orecchio notes, is the Chartered Advisor for Senior Living (CASL). “It’s offered by the American College and [courses for it are] taught like courses for the CLU and ChFC.”

9,500 Strong

Of all the senior-oriented designations, the CSA is the only one mentioned specifically by states, including Nebraska, when warning seniors to check the credentials of so-called senior specialists. Several of the individuals identified in state regulatory actions hold a CSA.

The CSA designation is conferred by the Society of Certified Senior Advisors (SCSA), which bills itself as the world’s largest membership organization for professionals seeking to improve their skills in working with seniors. More than 9,500 advisors now hold a CSA designation.

SCSA executives are quick to defend their organization. “We’re aware of regulators’ concerns that certain professional designations may be misperceived by the public,” compliance specialist Bill Kaluza says. “That’s why SCSA requires each CSA to provide a written disclaimer to clients and potential clients.” This statement, while asserting that designees have taken steps to bolster their knowledge of seniors’ financial needs, includes notification that “the CSA designation alone does not imply any expertise in financial, health or social matters.”

Of course, whether all 9,500-plus CSA designees are actually making this disclaimer to every potential client they approach is difficult to determine. Kaluza says SCSA makes an effort to police its designees. “CSAs themselves are often our most reliable reporters about CSAs who do not comply with these rules,” he says.

What’s more, Kaluza claims that when a member of the public contacts the SCSA to inquire about a particular CSA, the organization investigates to see whether the CSA in question actually provided the disclaimer. “To date, we’ve had very little indication that CSAs are not using the statement,” Kaluza says.

By Donald Jay Korn
August 1, 2008

WASHINGTON — U.S. inflation soared to a 17-year-high annual rate in July, a government report showed, led by gains in food, energy, airline fares and apparel.
With energy and commodity prices on the retreat this month and the U.S. dollar strengthening, the report is unlikely to spook Federal Reserve policymakers into raising rates anytime soon as the economy struggles with rising unemployment and soft consumer spending.
Still, a surprising rise in core inflation that excludes food and energy last month will keep officials on edge about the possibility that food and energy prices will become more firmly entrenched in the economy.
The consumer price index rose 0.8% in July, the Labor Department said Thursday. That came on the heels of June’s 1.1% rise, which was the second largest June 1982.
Excluding food and energy, the CPI advanced 0.3% for a second-straight month.
Wall Street economists had expected only a 0.4% rise in the headline and 0.2% core increase, according to a Dow Jones Newswires survey.
Unrounded, the CPI rose 0.818% last month. The core CPI advanced 0.327% unrounded.
Consumer prices jumped 5.6% on a year-over-year basis, the highest rate since January 1991. The core CPI grew a more modest 2.5% compared to July 2007, though that’s still well above the Fed’s long-term goal of 1.5% to 2%. Over the past three months, core inflation rose at a 3.5% annual rate.
Though Fed officials said in a policy statement last week that inflation remains a “significant” concern, they are likely to look past the July data. The Fed is generally expected to keep official interest rates steady into next year, though the rise in core inflation, if repeated in coming months, could put rate hikes later this year back into play.
Many of the forces boosting prices in recent months — particularly high energy and commodity prices and the weaker U.S. dollar — have reversed since mid-July.
In a Dow Jones Newswires interview Wednesday, Minneapolis Fed President Gary Stern said even though the U.S. is “probably…in for a few more sizable increases” in overall prices measures, “assuming we don’t get a resurgence of energy prices, we will see over time a diminution of headline inflation, for sure.”
“As that occurs, I think we’ll also see some diminution of the core,” said Stern, who is considered one of the most vigilant inflation fighters on the Fed.
Energy prices swelled 4% last month, according to Thursday’s report. Gasoline prices spiked 4.1%, and natural gas prices rose 7.4%. Food and beverage prices rose 0.9%.
Medical care prices, meanwhile, increased a modest 0.1%.
But other core items posted sharp gains, a sign that higher headline inflation may have started seeping through the rest of the economy.
Clothing prices, for instance, rose 1.2% compared to June, a 10-year high. Transportation prices soared 1.7% on the month as airline fares swelled 1.3%, reflecting the rise in fuel prices. New vehicle prices advanced a modest 0.2%, reflecting falling demand.
Housing, which accounts for 40% of the CPI index, was up 0.6%. Rent increased 0.3%. Owners’ equivalent rent advanced 0.1%. However lodging away from home rose 0.7%, while home fuel and utilities posted sharp gains.
Services prices rose 0.5%.
In a separate report, the Labor Department said the average weekly earnings of U.S. workers, adjusted for inflation, fell 0.8% in July, suggesting incomes aren’t keeping pace with prices.
That, in turn, could further damp consumer spending which appeared weak in July, according to a retail sales report released Wednesday.
-By Brian Blackstone; Dow Jones Newswires;

Don’t scoff. Oprah Winfrey just left $30 million to her dogs. Like many people who didn’t have children she considers her pets her “babies” and heirs. And pet trusts are not just for the likes of Leona Helmsley, who left $12 million to her beloved white Maltese named Trouble. (The dog’s security, grooming and chef-prepared meals—served on a silver tray—cost $300,000 a year alone.) On the contrary, estate planning for pets is part of the lucrative and growing pet-care industry, and can be a valuable addition to the range of services offered to an increasing number of totally sane clients.

Consider the statistics: Two-thirds of American households have a pet, while only one-third has a child. According to the American Pet Products Manufacturers Association, pet industry expenditures have doubled since 1998, to $43 billion a year. The Mercanti Group, a financial advisory firm, expects this to remain the fastest-growing retail sector after electronics. And that growth will be driven by high-wage earners.

Well-heeled animal lovers increasingly spend on doggie day care and posh pet hotels. What’s more, all that doctors can do for humans these days, vets can do for pets. Does your dachshund need disc surgery? At Red Bank Veterinary Hospital in Tinton Falls, N.J., that costs $10,000, plus $90 a session for physical therapy. Should little Weiner need a kidney transplant, you’re talking $20,000, plus $2,000 a month in anti-rejection drugs. No wonder, The Mercanti Group reports, households with incomes over $100,000 accounted for 35% of all spending on veterinary care in 2006, up from 27% in 2003. “You can’t expect a caregiver to pay for all that,” says Annie Brody, who runs Camp Unleashed, where dogs and their owners romp in Becket, Mass. “You have to set aside the resources.”

The Pet and the Plan

Of course, not many people will leave more to their animals than to their human heirs. But even a modest pet trust can significantly benefit both client and advisor. To Dave Ness, president of Raymond James Trust, planning for a pet helps strengthen an existing fiduciary relationship. “These are frequently elderly people, and their animal is their confidante, the one who is there for them in the dark of the night,” he says. “They want that animal properly cared for, and rightly so. If you can help them solve that problem, you have helped them in an extremely important way.” To Gina Barry, a lawyer with Bacon Wilson in Springfield, Mass., such planning can start a relationship. “People don’t like to think about dying, but they will begin by thinking of their animal,” she says. “That is the start to getting their whole plan done.”

Most people still do it the old-fashioned way, says Ness. They leave all their worldly possessions, including the cat, to their grown children. (Yes, Kitty is considered property, with all the legal standing of a dust mop.) But what if they have no children? Or the children work long hours? Or, as Ness says, it’s, “Great Dane, small apartment—bad fit.” Then clients need to select a responsible caregiver, make the level of care they expect clear and specific, and fund it with a trust.

There are two main types of pet trusts. The simplest, a “statutory pet trust,” is authorized in almost 40 states. This is a basic document, naming a trustee and making an animal the beneficiary; it requires nothing more than a provision in a client’s will stating, “I leave $15,000 in trust for the care of my dog, Fifi.” The second, a “traditional pet trust,” is effective in all states. In this, the client also names a trustee to manage his funds, but appoints a caretaker as the beneficiary, with the money earmarked for the pet’s expenses. A traditional trust provides much greater control. The pet owner can direct what kind of care the pet will receive, what to do if the beneficiary dies, even where the pet will be buried.

A trust can be created while the client is still alive (an “inter vivos” or “living” trust) or when the client dies (a “testamentary” trust which is included in a will). The living trust has the advantage of providing for a pet if an owner becomes incapacitated, and can take effect immediately, if he dies, before the will passes probate. Those with a testamentary trust would have to make sure their power-of-attorney and healthcare proxy provide for their animal should they become disabled.

An advisor can help clients calculate how much money pets will need. Consider, say the experts, the animal’s life expectancy: A beagle, 15 years; a cat, 18 years; a tarantula 30 years; and a macaw 80 years. In addition to providing for inflation, calculate the cost of potentially expensive medical care, the cost of professional boarding when the caretaker is away, and whether the caretaker will be paid for his services.

Animal Assets

The money may be invested in a bond mutual fund, for instance, with income for expenses and the principal for emergencies. Or the trustee can be made the beneficiary of a pet owner’s life insurance policy; the policy may be taken out simply to fund the pet trust, or a portion of an existing policy may be made payable to the trust. Similarly, an annuity or retirement plan can be used to fund both inter vivos and testamentary trusts by making the trustee the recipient of some of the assets.

Problems, however, can arise. Ness cautions his clients not to leave a lump sum to a caregiver for a pet’s well-being. “Accidents happen all the time,” he says darkly. “You may have created an incentive for the caregiver to plot the early demise of Fluffy.” Better, he says, to make sure any money for the caregiver is separate from the money for the animal, and earmark the funds that remain after the animal dies to charity.

Animal lover Barry, who runs a horse sanctuary, advises that the pet be clearly identified, preferably with a microchip. She tells of the black cat that literally had close to nine lives: The caretaker replaced the cat several times to keep her payments coming.

Advisors should also warn clients not to leave too much to their pets. “A 12-year-old Pekingese can only eat so much,” says Ness. If a client leaves more than her animal reasonably needs, “the other heirs can use that to say that grandma was goofy,” and contest the trust. After all, says Ness, some “some people care the way they do for their animals because they feel abandoned by their families.”

Generally, an advisor can broach the issue of a pet trust merely by asking, “What are you going to do with your cats?” and referring the client to a competent lawyer. In Ness’s experience, $100,000 invested at a 4% annual return “should be more than enough.” In some cases, however, the bank becomes the trustee, and in rare cases, that can cause complications.

Joseph Macri, vice president and market manager for M&T Bank in Harrisburg, Pa., had such a case. A widow left $600,000 for the lifetime care of her beneficiaries—three dogs—named a dear friend as caretaker, and directed the remainder of the money (once the animals died) to charity. The bank, which had served as trustee during her lifetime, continued in that role. Macri determined the salary of the caretaker and made periodic, unannounced visits to check on the animals’ care.

In a twist, however, the pet owner had also left her house to the animals, making it “the most expensive doghouse in the world.” Macri had to see that the lawn was mowed, the snow shoveled, the bills paid, including cable “so the dogs could feel someone was talking to them.” Fortunately, Macri’s staff, and the bank’s tax and real-estate departments, shouldered the load. And he never found the caretaker negligent, abusive or extravagant.

Macri’s preferred solution is much simpler: “Just give a friend a bequest and ask him to care for your animal.”

Estate Planning
By Joanmarie Kalter
Joanmarie Kalter is a writer who lives in Montclair, N.J. with her cockapoo, Harry.

WASHINGTON, DC- U.S. Senators Bob Casey (D-PA), a member of the Senate Special Committee on Aging, and Herb Kohl (D-WI), Chairman of the Senate Special Committee on Aging, today introduced a bill to help protect seniors from investment fraud.  The Senior Investor Protections Enhancement Act would increase penalties for those who commit securities violations against people who are at least 62 years old.

“Everyday, older Americans are targeted for investment scams and they see their life savings go down the drain” said Senator Casey “Pennsylvania has the second highest number of residents over the age of 65 and we must take care of them.  This legislation will help better protect our older citizens from being targeted from fraud.”

“Many seniors are discovering that their life savings may not be enough to last them throughout their retirement.  As they turn to investments to bridge the gap, seniors need to know that they can trust the people who handle their money,” said Senator Kohl.  “This bill will ramp up the punishment for those who advantage of older Americans’ well-earned retirement savings.”

Americans over the age of 65 control an estimated $15 trillion in assets, a large portion of which are investable.  Seniors have difficult and complicated decisions to make on how to stretch their savings throughout their retirement.  Their assets remain at risk from traditional fraud and Ponzi schemes.  Recently, seniors are increasingly offered many new but complicated investment tools such as reverse mortgages and various annuity products.  While these products can be very valuable to Americans generally and seniors specifically, they can also be abused by unscrupulous actors.    

Additionally, many older Americans are targeted by con artists who seek to exploit them through manipulation and fraud.  Seniors already account for more than half of all investor complaints received by state securities regulators.   The U.S. Securities and Exchange Commission (SEC) has reported that they are working to improve their ability to prevent fraud and abuse where possible and prosecute it where necessary.   

Under the Senior Investor Protections Enhancement Act, penalties for existing securities violations could include an additional $50,000 civil fine for each violation that is primarily directed toward, specifically targets, or is committed against a senior.  Under the legislation, seniors are defined as persons age 62 or older, the age at which most retirement savings become available for use and investment.  

The bill would increase penalties for those who commit securities violations against seniors - violations could include selling them products that are unsuitable for their age, failing to disclose fees, lock-ups of cash or large penalty charges, switching investments sold with the one marketed or other material aspects of the investment.  The bill would not interfere with legitimate investment advisors who recommend products and investments appropriate for their customers.

Last September, the Aging Committee held a hearing to examine some of the questionable practices used by so-called senior financial investment specialists in order to gain access to the retirement savings of older Americans.  An investigation conducted by the Committee revealed that many seniors targeted by such unscrupulous salesmen have lost their life savings because they were steered toward investment instruments that were unsuitable for them, given their retirement needs and life expectancy.

For more information on retirement income and investing for income visit www.livelongliverich.com and don’t forget to sign up for the free newsletter!

The prevailing sentiment among financial planners for several decades now has been that inflation will run at normal levels over time and that investment returns will outpace the erosion of buying power caused by inflation.

But for those at or near retirement, what was supposed to occur has not. Investment returns over the last decade for the S&P have been just over 3 percent. Inflation for real people is 6 percent year over year. Even those that have planned and saved diligently over that period did not plan for such low returns or such high inflation. To be sure the issues facing seniors today are decidedly more complex.

The commonly accepted norms may play out from generation to generation, but today’s retirees unfortunately have to deal with the reality that many will not have enough income generation to last through their investment lives.

This generation can count on Social Security but for 2008, social security payments rose 2.3 percent. Let’s see how far that goes when your air conditioning bill arrives. That sinking feeling many will feel is the realization that they are woefuly under prepared even though they saved and invested like they were supposed to do.

Fact: Americans 65 and older represent the fastest growing group seeking bankruptcy protection.

Fact: In the last 15 years, among households 65 and older, the average amount of credit card debt more than doubled.

Fact: Median amount of mortgage debt for households 55 and older rose 63% in the last 15 years.

Fact: Debt is at an all time high and savings is at an all time low.

Unfortunately, in some cases, hard decisions will have to be made. Will I eat? or sleep well.  Outliving your money is not an option.

So what can you do to help extend the income producing life of your assets? There are several things you can do, basic things that can help. Together, they will add up in your favor.

1) Instead of building debt for fear of liquidating assets, begin a systematic withdrawal from your non-income producing mutual funds. I would rather see you keep the high interest off the books which will eat you alive over time. Your returns through investments may not offset the high cost of that debt.

2) If you have individual stock investments, make sure they pay a dividend so you can receive some type of return and income stream while you wait out a bear market.

3) Use tax-efficient withdrawal strategies from your accounts. Make sure you think of the tax consequenses of your trading activitity. Should that be purchased in my IRA or personal account? Since my tax bracket is low this year, would it be wise to take a larger withdrawal from my IRA instead of the minumum?

4) Ladder your fixed income investments. Invest some in short-term and some in longer-term and some in between. Spreading your investment maturities may increase your income stream.

5) Look into guaranteed lifetime income producing annuities. The annuities of today are not as restrictive or as expensive as those in the past and it may help you sleep at night. Don’t listen to what others say, examine the benefits and costs for yourself and decide if it is right for you and your family.

Every retiree needs to take a hard look at their assets and understand the risks their asset allocation may have on their ncome stream later in life. This is not the time to put your head in the sand. Educate yourself and seek help if you need it. If you examine your options now instead of waitng, it could be the difference between living the retirement you dreamed of, or living in your son-in-laws basement.

For more information about how to create retirement income and easy to use strategies and links to useful information please visit www.livelongliverich.com.

BOSTON– (BUSINESS WIRE) — Unexpected health care costs and inflation are top concerns for pre-retirees and retirees, according to a retirement survey recently commissioned by MFS Investment Management® (MFS®). In line with these concerns, pre-retirees expect to work on average a full decade longer than those already in retirement, with nearly half expecting to work early in retirement and one in three working throughout retirement to bolster their savings.

“Due to the many challenges and concerns facing today’s pre-retirees, they are being forced to reassess what retirement means — working longer and working into retirement,” said William Finnegan, Senior Vice President and Director of Global Retail Marketing for MFS. “We see the changing definition of retirement as a tremendous opportunity for financial advisors to engage their clients about retirement income planning.”

Pre-retirees and retirees alike view unexpected health care expenses and inflation in general as top concerns regarding retirement savings, with more pre-retirees viewing each with greater concern than retirees — 70% to 60% for health care expenses and 64% to 50% for inflation, respectively.

“Inflation concerns — be it outliving ones’ savings, unexpected health costs or lost purchasing power — are clearly on the minds of today’s pre-retirees,” said Finnegan. “We recommend advisors and their clients develop a retirement policy statement, just as they would an investment policy, tailored to the needs and risk tolerance of their clients, which can serve as the basis for a plan designed to help a client’s nest egg continue to grow - keeping pace with inflation while generating the income necessary to meet the challenges of the rising costs of everyday expenses.”

Pre-retirees are redefining retirement. According to the survey, existing retirees retired at an average age of 58, with 40% relying on their pension as the primary source of income. Today’s pre-retirees are approaching retirement differently, fully expecting to work on average a full ten years (age 68) later than current retirees, with roughly the same number relying on pensions (23%) as on workplace retirement plans (25%). While approximately one-quarter (24%) of today’s retirees continue to work or worked early in retirement, nearly half (47%) of pre-retirees expect to continue to work in the early phase of retirement. Of those surveyed, 32% of pre-retirees plan to work throughout their entire retirement as well. That figure drops to one in ten for retirees.

“Baby boomers are going to redefine retirement, and financial advisors need to deepen their involvement in the planning process,” Finnegan added. “With typically low savings rates for the average American and greater potential longevity, combined with the above-cited concerns over inflation, pre-retirees will be living and working longer than previous generations. We are challenged as an industry to develop investment products and strategies to help clients manage their financial picture in a redefined retirement phase.”

Nearly half (46%) of pre-retirees and more than one-quarter (28%) of retirees surveyed reported that neither they nor their advisor have developed a formal retirement income plan, representing a tremendous opportunity for financial advisors. Survey results show that once a conversation about retirement income planning took place, both pre-retirees and retirees took action:

• Half changed investment allocations (53% pre-retirees, 52% retirees);
• One-third (32%) of pre-retirees increased their savings;
• About three in ten consolidated assets to one advisor (27% pre-retirees, 30% retirees).

“Once pre-retirees have engaged an advisor regarding retirement income, many take action,” concluded Finnegan. “In the coming decades, today’s pre-retirees will redefine what it means to be ‘retired’ and extending the planning conversation well into their golden years may benefit them and provide market opportunities for advisors and planners.”

The MFS investor survey was conducted in September 2007, with responses from 204 pre-retirees and 229 retirees, between the age of 55 and 75, who were either working full-time or retired, used a paid financial advisor and reported at least $100,000 in investable assets (excluding retirement and real estate). Similarly, the MFS advisor survey included responses from 206 financial advisors who identified themselves as financial advisors, brokers, investment managers, certified financial planner or wealth managers in September and October 2007. Richard Day Research, Inc., an independent research firm not affiliated with MFS, conducted both surveys and did not identify MFS as the study sponsor.
MFS manages $200 billion in assets on behalf of more than 5 million individual and institutional investors worldwide as of December 31, 2007. The company traces its origins to 1924 and the creation of America’s first mutual fund.

Retirement Professionals and those in the retirement planning stages feel John McCain will best represent retirees and the issues they face.

Marietta, GA: Torrid Technologies along with LiveLongLiveRich.com conducted the poll. Torrid-Tech, a software company in Atlanta that specializes in retirement planning tools, and Craig Rappaport, author of Live Long Live Rich-Creating Your Retirement Paycheck, conducted the poll to take the temperature of the retirement planning community.

The poll suggesting an overwhelming majority of retirement investment professionals and those involved in the retirement process choose John McCain as the presidential candidate that will best represent retirees by capturing 63.3 % of the vote compared with Obama with 22.5% with Clinton viewed as least likely to best represent retirees with 14.2% of respondents

“We were surprised to see such an overwhelming majority vote for John McCain. We really had no idea what to expect so to see one candidate receive such overwhelming support was quite a surprise” said Tim Turner the creator of Torrid Technologies’s Retirement Savings Planner Software.

The poll received 591 responses and has a 95% accuracy rate plus or minus 4 percent.

“Retirement Income and financial security are major issues facing not only those currently in retirement but those planning their retirement as well. The candidate that best articulates a policy appealing to this group will capture a huge demographic group of voters. For the moment, it is John McCain” said author Craig Rappaport.

“With medical expenses and the cost of fuel eating away at retirees budgets this group is getting squeezed and will respond to the candidate that speaks to the wallet when it comes to getting these costs under control.”

23 percent of the respondents were currently retired while 77 percent were not. Torrid Technologies plans to conduct another poll after the democratic presidential nominee is chosen to see which candidate is viewed as most likely to best represent the interests of retirees.

About Craig Rappaport
Author of Live Long Live Rich-Creating Your Retirement Paycheck.
For more information visit www.livelongliverich.com

Craig Rappaport
Author of Live Long Live Rich
610.812.5800
Rappaport@livelongliverich.com

NEW YORK — Americans’ nest eggs grew last year, but the market’s rocky performance ensured that they didn’t fatten as much as they had in the previous year.

Overall U.S. retirement assets rose by $1.1 trillion in 2007 to $17.6 trillion, according to the Washington, D.C.-based Investment Company Institute, which represents the mutual fund industry. The 7% increase, which reflects contributions and asset appreciation, lagged the growth in retirement assets from 2005 to 2006, when nest eggs grew by $1.7 trillion, a nearly 12% increase, according to the ICI.

The institute will release its 2008 Investment Company Fact Book, which offers a comprehensive look at the scope of the nation’s retirement market, on Thursday. The ICI combines its data on individual retirement accounts and defined-contribution plans with publicly available data on defined-benefit plans, government employees’ plans and annuities to produce the report, which is considered an important annual snapshot of the overall retirement market, and which will be incorporated into government data.

Investors placed about $176 billion into mutual funds through individual retirement accounts and defined-contribution plans in the first three quarters of 2007, more than they had invested by the same means in all of 2006, said Brian Reid, the ICI’s chief economist. So the lower year-over-year growth rate in nest eggs was largely due to last year’s poor market performance, he said.

But, he noted that “in a not particularly good year for the market, still there were enormous gains for retirement savings.” Retirement assets accounted for nearly 40% of U.S. households’ financial assets at the end of 2007, up from 39% in 2006, the ICI found. The $17.6 trillion invested in retirement assets at year-end 2007 compared with about $16.4 trillion at year-end 2006 and $14.6 trillion at year-end 2005.Often overlooked, said Reid, is the important role that individual retirement accounts and defined-contribution plans, including 401(k) accounts, play in helping Americans build wealth for retirement. The tremendous ability of such investment vehicles to help investors get ready for their retirement years can’t be overstated, he said.

Investors held $9.2 trillion in IRA and defined-contribution plans at year-end 2007, which accounted for about half of the entire retirement market, the ICI said. IRA assets rose 12% to $4.7 trillion, with $2.2 trillion of that invested in mutual funds.

Investors held $4.5 trillion in defined-contribution plans, up 8% from the previous year, with mutual funds accounting for $2.4 trillion of that, the ICI found. And $3 trillion was held in 401(k)s at the end of 2007, making them the most popular type of defined-contribution plan.

Lifecycle Funds Popular

Mutual funds managed $4.6 trillion by the end of 2007, or 26% of total retirement market assets, according to the Fact Book. The remaining $13 trillion were managed by pension funds, insurance companies and brokerage firms. That $4.6 trillion in retirement assets managed by mutual funds represents 38% of the $12 trillion managed by funds at year-end 2007, the ICI said.

Lifestyle funds, which are designed to meet risk preferences, and lifecycle funds, which rebalance allocations as investor age, continue to gain in popularity

“One of the reasons is that they provide a very convenient and easy way to get an asset allocation and to have that change over time in a way that’s understandable and intuitive,” said Reid. “They’re a wonderful, sort of one-stop shop for the investor.”

Net new cash flow into these funds reached a record $92 billion in 2007, the ICI said. Assets in lifecycle funds rose 61% to $183 billion, with 88% of those assets held in retirement accounts, according to the report. Assets in lifestyle funds reached $238 billion, of which 45% was held in retirement accounts, the according to the ICI.

Last year’s Fact Book for the first time included sections on closed-end and exchange-traded funds, and the 2008 Fact Book includes sections on each. ETF demand, from both retail and institutional investors, continued to be very strong in 2007, Reid said.

“If you look at mutual funds and ETFs together, they continued to take market share away from direct investment in stocks, bonds and other types of investment vehicles,” he said.

And investors continue to heed the advice of experts on the importance of fees. Assets in 401(k) plans are concentrated in lower-cost funds, the ICI found. For example, more than three-quarters of the 401(k) assets invested in stock funds are invested in funds with expense ratios of less than 1%, according to the 2008 Fact Book.

That’s nothing new, said Reid, noting that investors have been drawn to lower-cost funds since the early 1990s.

• Ability of retirement plan participants to sue broadened: In the case of LaRue v. DeWolff, the U.S. Supreme Court unanimously held that participants in 401(k)s and other defined contribution plans can sue for investment losses incurred in their individual accounts as a result of a fiduciary’s breach of duty. Mr. LaRue sued his former employer for investment losses that resulted from an alleged failure to respond appropriately to requests for investment changes. A prior Supreme Court decision (Russell v. Mass Mutual) seemed to state that a claim for losses due to a fiduciary breach could be brought only for the plan as a whole, and not by individual participants for losses in their own accounts. In LaRue, however, the Supreme Court limited its prior decision in Russell to defined benefit plans, explaining that the Russell decision did not apply to individual account plans like 401(k) plans, which dominate the retirement landscape today. The case is likely to generate a significant increase in 401(k) plan litigation.
• Economic stimulus payment notices to be issued: Beginning this week, the IRS will begin issuing letters to 130 million households reminding them to file a 2007 federal income tax return in order to receive a 2008 economic stimulus payment. These letters are being sent to taxpayers who filed 2006 federal income tax returns. Later this month, special notices will be issued to certain recipients of Social Security and Veterans Affairs benefits, who may not ordinarily be required to file a 2007 return, but who will have to do so to obtain the stimulus payment. Despite the media coverage of the Stimulus Act and the resulting checks, there’s still quite a bit of confusion out there–expect clients to have questions (about their parents’ checks as well as their own).
• SSA says no need for recipients to request replacement 1099s: The Social Security Administration has announced that Social Security beneficiaries who are filing a 2007 federal income tax return only to obtain a 2008 economic stimulus payment do not need to request (and wait for) replacement Form 1099s. An estimate of Social Security benefits received in 2007 is sufficient.
• 529 plans–IRS waves caution flag: In an advance notice of proposed rulemaking (Announcement 2008-17), the IRS invites comments relating to rules it intends to propose to curb perceived abuses relating to 529 plans. The IRS notes that the 529 plan beneficiary rules have the potential to be manipulated to circumvent transfer tax (e.g., multiple accounts could be established with different designated beneficiaries, with the beneficiary designations later changed to a single, common designated beneficiary). The IRS also notes the possibility that an individual might attempt to avoid gift tax by contributing to a 529 account for him or herself, and then subsequently changing the designated beneficiary to a family member in the same or higher generation. To protect against these–and other–potential abuses, the IRS intends to propose anti-abuse rules that would deny favorable tax treatment when a 529 plan is used for other than its intended purpose: providing for the qualified higher education expenses of the designated beneficiary.