More than a year after the stock market meltdown, a big rally has soothed the pain and slowed the push to overhaul the retirement system. So what's next for our nest eggs?
When the stock market hit its all-time high in October 2007, few investors questioned the merits of their 401k plans. Two years later, their feelings are different.
As investors continue to nurse the wounds of losing more than a third of their retirement savings, many wonder whether there's a fundamental flaw in 401k plans. Should the system be scrapped and replaced with something without all the risk?
While the once-loud calls for change have quieted a bit as the stock market has soared about 60% since March, legions of investors remain anxious that their 401k's might let them down again.
There are several ideas floating around Congress that include increased disclosure of fees in mutual funds and new regulations about 401k investment advice.
Michael Townsend, as the vice president of legislative and regulatory affairs for Charles Schwab, analyzes government proposals to determine how they might affect individual investors. He offers insight into what's under consideration.
Q: Is the discussion of retirement savings a priority in Washington, D.C.?
A: There's no question that retirement savings issues are on the radar screen, but they definitely don't rise yet to the level of the big-ticket issues that we're watching, like health care reform and the overhaul of financial regulations. What might or might not happen with retirement savings is somewhat dictated by what happens to other big-ticket issues and whether there will be time to focus on retirement accounts.
There are a couple of proposals both at the legislative level in Congress and on the regulatory side. In the 401k space, fees and investment advice top the list.More from MSN MoneyAre amateurs running your 401k?Is your mutual fund worth its fees?7 tools to rebuild your nest eggCompanies take reins of workers' 401k'sThe 10 strangest mutual fundsDisclosure and advice Q: Let's discuss fee disclosure first. This legislation would require companies operating mutual funds within a 401k plan to disclose management and other fees clearly. What's the status of this proposal?
A: There's a House bill that contains both fee disclosure language and investment advice provisions. It has moved through the Education and Labor Committee, chaired by Rep. George Miller, D-Calif.Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 304, 314, {"configCsid": "MSNmoney", "configName": "player-money-4x3-articles-inline", "player.vcq": "videoByUuids.aspx?uuids=5b5e5e42-1ee2-47df-827f-ee1e09694bc1,e3bec6d0-e9e5-4275-a08c-2c1c8deb6e4f,f52c95fc-2b0f-4932-a195-24386c43c3b8,baf68f52-b408-45b5-89dc-21d6f11731f1", "player.fr": "iv2_en-us_money_article_Taxes-PreparationTips-inline"}, 'PlayerAd1');Advocates of the changes are waiting to see what the Ways and Means Committee does with it. Some lawmakers believe action may be taken in December, but something's more likely to happen in the early part of 2010. There has not yet been a ton of momentum on this issue on the Senate side. While the House may move a bill, it's not at all clear where this ranks on the priority list in the Senate.
Q: You mentioned investment advice is also a part of the bill, but isn't the Department of Labor also developing similar rules as part of its regulatory responsibilities?
A: Yes. At the same time the investment advice issue is working its way through Congress, it may ultimately be addressed more quickly through the regulatory process, which means it may be unnecessary to address investment advice in a new bill. The Department of Labor postponed implementation of some rules approved by the administration of George W. Bush in its final days. President Barack Obama's administration had some concerns about the possible conflicts of interest in the Bush rules, which would have allowed certain advisers who sell investment products to also give advice to consumers about which products they should buy. Critics said there was no certainty that those advisers, who might have profit motives to push one product over another, could separate their interests from those of the consumer.
More about 401k alternatives
Q: When might the Labor Department's rules take effect?A: They are quite far along in the process of drafting new regulations, and we'll likely see those late this year or early next year. Then there will be a short comment period, then they'll move forward to finalize them. It's quite possible the regulatory process may overtake the legislative process in this area.
Q: What's included in the regulations?
A: We'll see tightening of the language to be more restrictive to be sure participants can get conflict-free advice. How they're going to do that, we're all waiting to see.Major change unlikely Q: There's been some discussion around a wholesale reform of the 401k system because of the steep losses that some investors suffered. Is there a possibility of a significant overhaul?
A: There's been a lot of talk about that, but it really peaked last fall. While there have been some proposals and there was a hearing in the House Education and Labor Committee as they looked at proposals, I haven't sensed a broad consensus on any approach. My sense is that it's more likely to be reform within the current systems rather than a wholesale move to some sort of alternative system.
Q: Has the stock market recovery since March helped blunt discussion of an overhaul?
A: The market recovery may have at least slowed some of the enthusiasm among the public and Capitol Hill for a wholesale solution. Retirement savings plans are on the presidential agenda. The president gave a Labor Day radio address focused on retirement savings ideas. From my perspective, it's interesting that he talked about these issues at all, with everything that's going on in this administration. That's indicative of how 2010 will unfold. This will continue to be an issue that percolates along, not at the high-profile level, but there's real, genuine concern in the White House and on Capitol Hill to try to help people save more for retirement, and that's going to be a continuing theme.
This article was reported by David Pitt for The Associated Press.
Rate this Article Click on one of the stars below to rate this article from 1 (lowest) to 5 (highest). LowThank you for rating.UGR('ratCntrl')High var avgRating=0;avgRating=5.651742; if(avgRating!=0){avgRating=avgRating/2;avgRating=Math.round(avgRating*100)/100;var sDisplayText="Average rating: " + avgRating + " from ";var usersCount=201;sDisplayText = sDisplayText + usersCount;if (usersCount==1)sDisplayText=sDisplayText + " user";else sDisplayText=sDisplayText + " users";avgRatingElem=document.getElementById("averageRating");avgRatingElem.innerText=sDisplayText;} View all top-rated articlesE-mail us your comments on this article Discuss in a message board MSN Money InsightSuperModelsTop Stocks blogCompany FocusMutual FundsContrarian ChroniclesSmart Spending blogNew Investor CenterMSN Money Video Msn.Video.createWidget('Gallery2Container', 'Gallery', 120, 350, {"configCsid": "MSNmoney", "configName": "new-todays-investing"}, 'Gallery2');5 dumb 'deals' that waste your cashAll videosSearch by tickermore ...Mutual Funds Decision CenterFind the best-performing funds with the lowest fees.Fund data provided by Morningstar, Inc. © 2009. All rights reserved.StockScouter data provided by Gradient Analytics, Inc.Quotes supplied by Interactive Data.MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.Msn.Video.createWidget('Gallery8Container', 'Gallery', 500, 230, {"configCsid": "MSNmoney", "configName": "gallery-money-article-site-wide"}, 'Gallery8');msft.msn._ic.cid='wx76sbwi5v35x49f5d9rpvscsjb2acq5';msft.msn._ic.pst=false;msft.msn._ic.pgn=1; Join the discussion!Add a commentShow commentsSort by:Newest firstOldest first_uc2f12('iucGo');1 - 10 of 19PreviousNextDeregulate This #1Monday, December 21, 2009 11:00:45 PMI still want STIFF REFORM for the 401(k) plans. I want the fund managers to have some SKIN in the game. If they don't perform with the plan, they get all their assets seized ---- THAT INCLUDES ALL of their multi-million dollar bonuses.
If I'm going to starve in my old age, then SO SHOULD THEY!!!!!!!!
NONE of the plans in the 401(k) earn the much advertised 8% per year. EVERY SINGLE advisor claims that the market EARNS 8% per year..... Not one fund in the entire 401(k) system earns 8% per year.
Now, Executives claim we need Pension funds to attract Talented and (rich) executives, but those same pensions will destroy the company if given to the working class. ?????? how is that????
ReplyReport AbuseDeregulate This #2Monday, December 21, 2009 11:10:59 PMRemember when GW was trying to privatize Social Security? ---- If that was such a GREAT Idea, then WHY did he not propose it when he was asking the American people to support a 700 Billion Dollar TARP program to buy up troubled assets the Bankers (who run 401k plans) are in charge of????
And these are the same No-Talent morons that f-ed up the economy.
So, if SS was privatized.... all the old people in the country would be sleeping on the kids' couches. Such a lovely thought. I hope the Free Market can regulate itself....
Oh Wait, Greenspan said "the market cannot regulate itself, I was wrong".
Hmmmmmmm, I look forward to breaking into rich Executives' houses and finding food ---- the food I would have bought with my retirement funds --- if those executives hadn't stolen them.
ReplyReport AbuseCOWBOY_FAN #3Tuesday, December 22, 2009 2:02:02 AMI don't know about most people, but every 401K I have ever been in, I had the ability to pick and choose the funds into which I chose to put my money.
There are certain realities in investing, those markets with the highest initial return are subject to the most volatility and even when the market is not crashing, could suffer setbacks as businesses or types of businesses the fund invests in have setbacks. Nothing is a sure bet.
The safest bet in investing has always been and will always be Money Market accounts and CD's. I was told a long time ago in high school economics that to make any type of return on your investment you have to be in it for the long haul, that is more true of Mutual Funds.
Always study the literature on the fund. Look at what it invests in. Look at it's track history and then decide what type of investor are you. Are you conservative or aggressive or moderate. I myself like to spread my investment, but a little heavier in the aggressive funds. So yeah, my 401K lost big, but I knew it could and that was my strategy. Now then as I get closer to retirement, that is going to change and I'll move to more stable investments, so that when I do retire and start cashing out, that money won't fluctuate so radically.
I don't know that we really need major reform, we just need people to actually understand what they are investing in and who they are and have them ready to accept some responsibility for their decisions as to where to put their money.
ReplyReport Abusepdlenter #4Tuesday, December 22, 2009 5:44:27 AMI fully expect our bankrupt government will simply confiscate our 401K's, SEP's and other retirement accounts. They'll say they are trying to protect us from ourselves. I believe we should get our money out of tax deferred retirement accounts. Paying the penalties is less onerous than having the Democrats in Congress confiscate your savings with legislation. If the public hates the Health Care Bill, and the government crams it down our throats anyway, what makes you believe they won't steal your retirement savings? That would simply be what socialists do. It is who they are.ReplyReport AbuseVan87 #5Tuesday, December 22, 2009 6:16:40 AMHey Deregulate this,
Stop your crying. If you lost money, remember, it was your choice to participate in the plan. I'm sure you were on these same boards crying the same song in the 90's when your 401k was up 60% instead of down. I would suggest you start paying attention to your money, your strategy and your risk tolerances in both good times and bad. Stop seeking to blame other people and take responsibility for your own ventures. It really makes sense that the Fidelity's, and Schwabb's of the world are lining up to pay fund managers big bucks. They love to just dole out large sums of money to fund managers. Have you ever stopped in your libral tracks long enough to understand basic economics? Also, don't forget that the fund managers do have something at stake. Their reputation and track record. In fact that is all they have in order to keep their jobs. The rules were great when they worked in your benefit right? Now they are mean spirited and unfair. Grow up, take responsibility and learn from this experience. If you lost more than you could afford in this mess then you risked more than you could afford to lose. The rules are easy and we don't need to complicate the process further with more regulation created by the government. Stop inviting them into our lives. Stop being so weak and learn from your mistakes. That is the difference between you and the ones who made money during this mess. Education, experience and understanding.
ReplyReport AbuseTralfaz #6Tuesday, December 22, 2009 6:20:39 AMpdlenter,Do you actually believe the tripe coming off of your fingertips? If everyone in America took their money out of 401k accounts, that would be both a Government windfall from the fees and taxes as well as complete destruction of the world markets due to the selloff. If we follow your advice, we will be living in caves in 5 years. Besides, if the Government ever did take everyone's 401k (which they won't), you have bigger things to worry about, like the ensuing revolution...ReplyReport AbusePB_Topper #7Tuesday, December 22, 2009 6:34:26 AMIt's amazing how we separate money from goods and services. It's as if magically money can create goods and services. PEOPLE [workers] provide these in return for an income. All money does is reallocate goods between people. The baby boomers [including me] think that somehow they will get a huge share of these goods and services. It can't work that way. There is a minimum share of the goods and services that must go to the workers or they rebel. We cannot provide for that minimum and provide what the baby boomers think is due to them. 401K plans or not. Now, the better "savers" might get a bigger piece of this smaller pie, but the boomer generation, as a whole, had best expect a meager retirement. If workers are willing to let 50% of what they produce go to the retired, what's the best way to increase the available goods and services? More workers willing to let 50% of what they produce go to non-workers [boomers]. How do we get more workers quickly? Legitimate immigration where the immigrants work and their incomes are taxed. How will our economy limit the goods that go to the boomers in retirement? 1) Inflation will eat away at the buying power of their savings. 2) Additional market collapses will cut back their ability to spend. 3) Bankruptcy of the Social Security system will cut benefits. If we only look at ourselves individually and not at the economy's ability to produce goods and services as a whole, the boomer generation will have the worst retirement, overall, of the past 200 years. Put that in your 401K. Investment legislation will not help. Punishing investment advisors won't help. Improving our economy, productivity and worker base - it's our only hope.
ReplyReport Abusenopoguy #8Tuesday, December 22, 2009 7:39:34 AMVan87, you are right on the money. people need to monitor there investment themselves. My 401k is up 16.85% from jan. 1st 2009.
Tralfaz, Pelosi has been trying to get your 401k, pension, Ira's for a while now and that crazy bitch has enough liberals in office to get away with it.
ReplyReport AbuseUla Ashore #9Tuesday, December 22, 2009 7:59:38 AMMy 401k lost 30%... and then gained it all back with interest. That's what the stock market does, go up and down, right? When it's up, nobody complains. When it tanks, everyone screams to Congress. Honestly, if you believe government can manage Wall Street, then you'd be safer putting your retirement funds under the mattress. I'll keep mine in the 401k....ReplyReport Abusetheincredibleshrinkingwoman #10Tuesday, December 22, 2009 8:36:05 AMcowboy fan - I'm not even sure money markets (the bank type, not the mutual fund type) and CDs are now even safe enough if they are in U.S. dollars and invested in U.S. financial institutions. I'm not arrogant or dumb enough to believe the U.S. can't completely collapse economically, or even as a country. I wonder if we should be diversifying overseas, in safe investments in pounds, Euros, yen, etc. - not for tax evasion purposes - but for asset preservation. But if the U.S., as a superpower fails, will all these currencies collapse too? I wish I knew more.
ReplyReport Abuse1 - 10 of 19PreviousNext_ucf13('0'); _iuc2Om1('MSNPortalInlineComments','Initial_Load_Comment_View','http://articles.moneycentral.msn.com/Investing/MutualFunds/will-2010-bring-401k-reform.aspx?','en-us');Are you sure you want to delete this comment?Report AbusePlease help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease notify us using the Report abuse form below. We will investigate your report and take appropriate action against offenders. We report all illegal activity to authorities.CategoriesSpam or advertisingChild pornography or exploitationProfanity, vulgarity or obscenityCopyright infringementHarassment or threatOtherAdditional comments(optional)100 character limit To add a comment, pleasesign in/*MSN PrivacyLegalAdvertiseRSSHelpFeedbackSite map© 2009 Microsoft/*Q: You mentioned investment advice is also a part of the bill, but isn't the Department of Labor also developing similar rules as part of its regulatory responsibilities?
A: Yes. At the same time the investment advice issue is working its way through Congress, it may ultimately be addressed more quickly through the regulatory process, which means it may be unnecessary to address investment advice in a new bill. The Department of Labor postponed implementation of some rules approved by the administration of George W. Bush in its final days. President Barack Obama's administration had some concerns about the possible conflicts of interest in the Bush rules, which would have allowed certain advisers who sell investment products to also give advice to consumers about which products they should buy. Critics said there was no certainty that those advisers, who might have profit motives to push one product over another, could separate their interests from those of the consumer.
More about 401k alternatives
A: They are quite far along in the process of drafting new regulations, and we'll likely see those late this year or early next year. Then there will be a short comment period, then they'll move forward to finalize them. It's quite possible the regulatory process may overtake the legislative process in this area.
Q: What's included in the regulations?
A: We'll see tightening of the language to be more restrictive to be sure participants can get conflict-free advice. How they're going to do that, we're all waiting to see.Major change unlikely Q: There's been some discussion around a wholesale reform of the 401k system because of the steep losses that some investors suffered. Is there a possibility of a significant overhaul?
A: There's been a lot of talk about that, but it really peaked last fall. While there have been some proposals and there was a hearing in the House Education and Labor Committee as they looked at proposals, I haven't sensed a broad consensus on any approach. My sense is that it's more likely to be reform within the current systems rather than a wholesale move to some sort of alternative system.
Q: Has the stock market recovery since March helped blunt discussion of an overhaul?
A: The market recovery may have at least slowed some of the enthusiasm among the public and Capitol Hill for a wholesale solution. Retirement savings plans are on the presidential agenda. The president gave a Labor Day radio address focused on retirement savings ideas. From my perspective, it's interesting that he talked about these issues at all, with everything that's going on in this administration. That's indicative of how 2010 will unfold. This will continue to be an issue that percolates along, not at the high-profile level, but there's real, genuine concern in the White House and on Capitol Hill to try to help people save more for retirement, and that's going to be a continuing theme.
This article was reported by David Pitt for The Associated Press.
I still want STIFF REFORM for the 401(k) plans. I want the fund managers to have some SKIN in the game. If they don't perform with the plan, they get all their assets seized ---- THAT INCLUDES ALL of their multi-million dollar bonuses.
If I'm going to starve in my old age, then SO SHOULD THEY!!!!!!!!
NONE of the plans in the 401(k) earn the much advertised 8% per year. EVERY SINGLE advisor claims that the market EARNS 8% per year..... Not one fund in the entire 401(k) system earns 8% per year.
Now, Executives claim we need Pension funds to attract Talented and (rich) executives, but those same pensions will destroy the company if given to the working class. ?????? how is that????
Remember when GW was trying to privatize Social Security? ---- If that was such a GREAT Idea, then WHY did he not propose it when he was asking the American people to support a 700 Billion Dollar TARP program to buy up troubled assets the Bankers (who run 401k plans) are in charge of????
And these are the same No-Talent morons that f-ed up the economy.
So, if SS was privatized.... all the old people in the country would be sleeping on the kids' couches. Such a lovely thought. I hope the Free Market can regulate itself....
Oh Wait, Greenspan said "the market cannot regulate itself, I was wrong".
Hmmmmmmm, I look forward to breaking into rich Executives' houses and finding food ---- the food I would have bought with my retirement funds --- if those executives hadn't stolen them.
I don't know about most people, but every 401K I have ever been in, I had the ability to pick and choose the funds into which I chose to put my money.
There are certain realities in investing, those markets with the highest initial return are subject to the most volatility and even when the market is not crashing, could suffer setbacks as businesses or types of businesses the fund invests in have setbacks. Nothing is a sure bet.
The safest bet in investing has always been and will always be Money Market accounts and CD's. I was told a long time ago in high school economics that to make any type of return on your investment you have to be in it for the long haul, that is more true of Mutual Funds.
Always study the literature on the fund. Look at what it invests in. Look at it's track history and then decide what type of investor are you. Are you conservative or aggressive or moderate. I myself like to spread my investment, but a little heavier in the aggressive funds. So yeah, my 401K lost big, but I knew it could and that was my strategy. Now then as I get closer to retirement, that is going to change and I'll move to more stable investments, so that when I do retire and start cashing out, that money won't fluctuate so radically.
I don't know that we really need major reform, we just need people to actually understand what they are investing in and who they are and have them ready to accept some responsibility for their decisions as to where to put their money.
Hey Deregulate this,
Stop your crying. If you lost money, remember, it was your choice to participate in the plan. I'm sure you were on these same boards crying the same song in the 90's when your 401k was up 60% instead of down. I would suggest you start paying attention to your money, your strategy and your risk tolerances in both good times and bad. Stop seeking to blame other people and take responsibility for your own ventures. It really makes sense that the Fidelity's, and Schwabb's of the world are lining up to pay fund managers big bucks. They love to just dole out large sums of money to fund managers. Have you ever stopped in your libral tracks long enough to understand basic economics? Also, don't forget that the fund managers do have something at stake. Their reputation and track record. In fact that is all they have in order to keep their jobs. The rules were great when they worked in your benefit right? Now they are mean spirited and unfair. Grow up, take responsibility and learn from this experience. If you lost more than you could afford in this mess then you risked more than you could afford to lose. The rules are easy and we don't need to complicate the process further with more regulation created by the government. Stop inviting them into our lives. Stop being so weak and learn from your mistakes. That is the difference between you and the ones who made money during this mess. Education, experience and understanding.
It's amazing how we separate money from goods and services. It's as if magically money can create goods and services. PEOPLE [workers] provide these in return for an income. All money does is reallocate goods between people. The baby boomers [including me] think that somehow they will get a huge share of these goods and services. It can't work that way. There is a minimum share of the goods and services that must go to the workers or they rebel. We cannot provide for that minimum and provide what the baby boomers think is due to them. 401K plans or not. Now, the better "savers" might get a bigger piece of this smaller pie, but the boomer generation, as a whole, had best expect a meager retirement. If workers are willing to let 50% of what they produce go to the retired, what's the best way to increase the available goods and services? More workers willing to let 50% of what they produce go to non-workers [boomers]. How do we get more workers quickly? Legitimate immigration where the immigrants work and their incomes are taxed. How will our economy limit the goods that go to the boomers in retirement? 1) Inflation will eat away at the buying power of their savings. 2) Additional market collapses will cut back their ability to spend. 3) Bankruptcy of the Social Security system will cut benefits. If we only look at ourselves individually and not at the economy's ability to produce goods and services as a whole, the boomer generation will have the worst retirement, overall, of the past 200 years. Put that in your 401K. Investment legislation will not help. Punishing investment advisors won't help. Improving our economy, productivity and worker base - it's our only hope.
Van87, you are right on the money. people need to monitor there investment themselves. My 401k is up 16.85% from jan. 1st 2009.
Tralfaz, Pelosi has been trying to get your 401k, pension, Ira's for a while now and that crazy bitch has enough liberals in office to get away with it.
cowboy fan - I'm not even sure money markets (the bank type, not the mutual fund type) and CDs are now even safe enough if they are in U.S. dollars and invested in U.S. financial institutions. I'm not arrogant or dumb enough to believe the U.S. can't completely collapse economically, or even as a country. I wonder if we should be diversifying overseas, in safe investments in pounds, Euros, yen, etc. - not for tax evasion purposes - but for asset preservation. But if the U.S., as a superpower fails, will all these currencies collapse too? I wish I knew more.
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