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Retirement Planning > Retirement Investing

Tough Talk Marks MMI Conference

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Asset management industry executives, gathered in Philadelphia for the Money Management Institute’s annual conference, have received stern warnings about the future from one of their own, as well as the head of a prominent Washington-based think tank.

Steven Gresham, executive vice president of Phoenix Investment Partners, cautioned that advisors and their firms are not paying enough heed to creating investment processes and setting “specific numeric goals” for their retail clients, much as they do for institutions. He also suggested that unless they grow more creative, today’s financial services firms may be ignored by the next generation of consumers, much as Baby Boomers have spurned Cadillacs and Buicks in favor of Lexuses and BMWs.

An even sterner message came from Dallas Salisbury, president of the Employee Benefit Research Institute. He noted that despite the Bush administration’s push to remake Social Security, the unfunded liabilities of Medicare are nearly triple those of the retirement system. All told, he estimated that Washington has already “made $43 trillion in unfunded liability promises over the next 75 years.” Despite President Bush’s desires to make his tax cuts permanent, “either [federal] spending will have to be wiped out or taxes will have to be raised substantially,” Salisbury maintained.

He added that Americans are woefully unprepared to meet their retirement income needs, considering the rising costs of medical care not covered by Medicaid as well as those for long-term care. A mere 2.7% of those eligible to contribute to a tax-deferred individual retirement account actually do so, he noted, adding that only 7.8% of workers in 401(k) plans contribute the legally allowed maximum amount and that most plan participants never change their asset allocation from the day they enter the program until they leave. A quarter of those eligible for 401(k)s don’t even bother to contribute.

Salisbury called for plan sponsors to add more automatic contribution features to help workers build assets as well as increase efforts to educate participants about retirement living and health care expenses.


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