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Retirement Planning > Retirement Investing


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The Senate Finance Committee took up the issue at a September 5 hearing of whether increased tax liability for private equity managers would be paid by pensioners. If the tax on carried interest was raised from the current 15% capital gains rate to the income tax rate of up to 35%, the effect “would be equivalent to an increase in costs on the order of 10 to 20 basis points annually,” Alan Auerbach, an economics and law professor at the University of California, Berkeley’s Burch Center for Tax Policy and Public Finance, told the Committee. “The burden of this increase in costs would be shared by fund investors and fund managers,” but how the two groups would split the tax is unclear, he continued. “Even if only some of the tax burden were borne by fund managers, the tax change would be highly progressive.” Speaking on whether a tax hike would affect the fiduciary duty of those who oversee pension funds, Don Trone, president of the Foundation for Fiduciary Studies, said that “in theory, a tax hike would have the effect of making hedge funds and private equity investments less attractive in a prudently diversified portfolio.” But in reality, he said, “the current, unbridled exuberance for these investment strategies means that a tax increase will have little-to-no-effect on their use.”

Fidelity Investments announced September 5 that it will be rolling out a Web-based retirement income planning tool during the month of September through its three advisor-servicing units: Fidelity Investments Institutional Services Company (FIIS), National Financial, and Fidelity Registered Investment Advisor Group (FRIAG). Called the Fidelity Retirement Income Evaluator, the free, Fidelity-built tool allows advisors to build, modify, and customize retirement plans for clients using Monte Carlo software. The final plans can be customized by the advisor and printed and distributed to clients with only the advisor’s branding.

The tool was developed partly in response to advisor demand, according to David Liebrock, executive VP of FIIS. While two years ago, advisors said they didn’t need such a tool, Liebrock says, the need has grown since then, since advisors are feeling “a time crunch,” and a “capacity issue,” while helping pre-retirees plan for the end of their working days and those already in retirement. That’s so, says Liebrock, since retirement income planning takes more time to do well than does planning for clients who are still in the accumulation phase of their lives, as discovered in previous Fidelity research. With technology aids like the Evaluator, Liebrock argues, advisors can manage their retirement planning time better, and reap the benefits of the increased share of wallet, referrals, and client satisfaction that comes with efficient retirement income planning.

TMark Associates,, a Chicago-based consulting firm that works with employee benefit service providers, has released a new report–Target Date Funds in 401(k) Plans: A Fiduciary Guide to Fund Selection and Alternative Investment Options–that TMark says provides data fiduciaries need to analyze these funds, determine what role an advisor should play, and “evaluate potential alternatives to make a supportable investment decision that can withstand legal scrutiny.” The study analyzes, for instance, the target date funds available; what differentiates one fund from another; fund of fund limitations; how costs affect performance; how target date funds compare to risk-based funds; and active versus passive management.


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