According to an analysis of Federal Reserve data published recently by the Employee Benefit Research Institute (EBRI), median asset levels in defined contribution (401(k) and IRA/Keogh) plans dropped at least 15% from year-end 2007 to mid-June 2009, reflecting the significant downturn in the economy. The EBRI study is based on the 2007 Survey of Consumer Finances (SCF), the Federal Reserve Board’s triennial survey of wealth, adjusted by EBRI to account for the economic downturn in 2008, which was not reflected in the SCF results. The EBRI analysis adjusted account balances of defined contribution plans and individual retirement accounts (IRAs) based on the asset allocation reported within the plans by using equity and bond market returns from January 1, 2008, to June 19, 2009:
o Defined Contribution Plans: Among all families with a defined contribution plan, the median (midpoint) plan balance was $31,800 in 2007, up 16% from 2004, the date of the previous SCF release. According to EBRI estimates, this dropped 16.4% (to $26,578) from year-end 2007 to mid-June 2009. Losses were higher for families with more than $100,000 a year in income (down 22%) or having a net worth in the top 10% (down 28%).
o IRA/Keogh Plans: Among all families with an IRA/Keogh plan, the median value of their plan was $34,000 in 2007, up 3% from 2004. EBRI estimates this median value dropped 15% (to $28,955) from year-end 2007 to mid-June 2009.
The EBRI analysis also provides extensive information on retirement plan participation and IRA ownership. In 2007, 40.6% of families had a participant in an employment-based retirement plan–either a defined benefit (pension) or defined contribution (401(k)-type) plan–from a current job, the EBRI analysis reports. This was up from 38.8% in 1992, but virtually unchanged from 40.3% in 2004.
NewRiver, Inc. recently announced the roll out of FundPOINT Desktop for 529 Plans, software designed to manage multi-layered 529 college savings plan information. Backed by NewRiver’s process technology for sourcing 529 plan data from multiple sources, FundPOINT Desktop for 529 Plans offers a streamlined, centralized approach to accessing 56 data points for all 529 plans, allowing advisors to perform real-time, plan-to-plan comparisons; conduct share class suitability analysis and communicate breakpoints to customers; provide point-of-sale disclosure; and calculate all tax advantages, fees, and commissions. NewRiver says that “favorable tax legislation and rising college costs have spurred a revival of 529 college savings plans largely because of their tax-free treatment, easy investing, no eligibility restrictions, and total donor control.” NewRiver also points out that “the regulatory environment has changed as the Municipal Securities Rulemaking Board has adopted rules and regulations for 529 plans that are comparable to FINRA practices pertaining to sales of mutual funds.”
The Bureau of Economic Analysis (BEA) reported that the personal saving rate was 4.6% in June, among the highest rate in more than two decades, and a significant increase from just over a year ago when the saving rate was zero. The Insured Retirement Institute (IRI), formerly known as NAVA, says that the trend toward increased personal saving comes at a time when data suggests a continuing decline in retiree confidence in the security of retirement savings. As a result, IRI sees evidence of an upward trend in consumers turning to advisors for guidance in mapping out a secure retirement strategy.