EAST GRANBY, Conn., July 9, 2012 /PRNewswire/ --The Retirement Advisor Council made public and freely available a template Request for Proposal (RFP) questionnaire for use by 401(k) and 403(b) plan sponsors looking to select an Advisor. The document covers all the elements of service typically available from Professional Retirement Plan Advisors, including investment services, participant services, provider services, fiduciary support, and compliance support. This customizable document includes 65 questions on five pages. You can obtain the template RFP questionnaire in Microsoft Word document form on the Web site of the Council at http://www.retirementadvisor.us. The template is provided for use without copyright restrictions.

To supplement the template RFP questionnaire, the Council developed an Advisor search protocol for use by plan sponsors also posted on the Web site of the Council.The protocol outlines a suggested process for plan sponsors seeking to select a professional retirement plan advisor, or to perform due diligence on a current advisor.

"The advisor RFP questionnaire will assist plan sponsors in complying with recent legislative regulations centered on fee / service benchmarking; it also provides a turnkey solution saving both time and resources for the plan sponsor relative to production of the questionnaire. The fact that the questionnaire stems from the experience and business models of a highly successful and nationally recognized group of advisors enables a sponsor to avoid the "guess work" in regards to what should be asked or measured in the benchmarking of an investment/fiduciary advisor." says Council member Gregg Andonian, AIF, Principal, Baystate Fiduciary Advisors, Inc.

The Retirement Advisor Council developed the protocol and the accompanying advisor search RFP template over a twelve-month period between July 2011 and July 2012 with input and feedback from the Plan Sponsor Council of America and Asset International, Inc., publisher of PlanSponsor Magazine and PlanAdviser Magazine. The document is the result of months of hard work by a dedicated Cabinet of advisors, advisory firms, service providers, and investment managers collaborating to enhance plan and participant outcomes. The Cabinet was headed by Steve Davis, Regional Vice President at The Hartford. The Council intends to periodically review the protocol and the advisor search RFP template to keep both documents current.

About the Retirement Advisor Council

The Council advocates for successful qualified plan and participant retirement outcomes through the collaborative efforts of experienced, qualified retirement plan advisors, investment firms and asset managers, and defined contribution plan service providers. The Council accomplishes this mission by its focus on:

Learn more about the Council at http://www.retirementadvisor.us

For more information and/or interview requests:Eric Henon (860) 653-1705 ehenon@eachenterprise.com

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Request For Proposal Template For Retirement Plan Advisor Search Freely Available

Americans worried about running out of money in their golden years are trying a new investment strategy: day trading their retirement funds.

Disillusioned with the conventional buy-and-hold approach, baby boomers are anxious to improve their retirement prospects after two punishing bear markets in the last decade.

Some people are trading the mutual funds in their 401(k) plans more frequently. Others are venturing into options. And some aggressive investors have begun day trading their nest eggs all in a bid to make up for lost time.

"A lot more frequent trading is happening," said Chad Carlson, a financial planner based outside of Chicago. "People are saying, 'I'm that much closer to retirement so I have to do something.'"

That thinking prompted 49-year-old Vlad Tokarev to start day trading his three individual retirement accounts last year.

The Minneapolis biomedical software engineer wants to quit working before age 65. But after watching his 401(k) get pounded in the last bear market, he fears that another plunge in the stock market could wreak havoc with his plans.

Minutes before the market closes every day, Tokarev buys or sells a mutual fund linked to the Standard & Poor's 500 stock index. His goal is to profit from temporary fluctuations in stock prices, so he buys when stocks are falling and sells when they're rising.

"I didn't see a lot of returns using the buy-and-hold method," he said.

Most Americans with IRA or 401(k) accounts embrace the "set it and forget it" philosophy. Only about 15% of investors made any change to their 401(k)s last year, according to benefits firm Aon Hewitt.

But among those willing to make shifts, there's a growing inclination to do so more frequently as retirement approaches, according to some financial planners. These experts sympathize with investor frustrations but predict that this type of trading will backfire for most.

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Anxious investors day trading with retirement accounts

The traditional financial-planning prescription for life's financial emergencies is to hold three to six months' worth of living expenses in cash.

But how should retirees handle unplanned expenses? Should they also have an emergency-fund cash cushion on hand, or should they simply increase their withdrawal rates when they need to and then tighten their belts at a later time?

With an eye toward unearthing some best practices on how to handle unplanned expenses during retirement, I turned to the Investing During Retirement forum of Morningstar.com's Discuss boards.

Not surprisingly, our healthy contingent of retired posters had already given this question considerable thought, and many worthwhile strategies poured forth. Some retirees have carried on with the traditional rainy-day fund in retirement, while others have attempted to factor in unplanned expenses into their withdrawal-rate projections. Several advised that with some advance planning--putting a time horizon on new-car purchases, for example--it's possible to circumvent unexpected expenses.

To read the complete thread or share your own in-retirement strategy for managing unplanned expenses, click here (http://socialize.morningstar.com/NewSocialize/forums/p/307666/3267735.aspx#3267735).

'The Old-Fashioned Rainy-Day Fund'Several posters stated that there's no need to reinvent the wheel; unplanned expenses should be anticipated and addressed just as they were during the working years--by maintaining a liquid reserve that can be tapped in a pinch.

For steelpony10, that means "a cash reserve of uninvested money for nonroutine and unpredictable expenses. The old-fashioned rainy-day fund. It's been around for years. The same thing people should have when they weren't retired."

Bobk47 noted that he and his spouse haven't had to tap their emergency reserve to date, but it's there if they need it. "We do have an emergency fund that I pretty much just keep in an FDIC-insured account. It isn't earning anything but I know it will be there in an emergency."

Festus is also a believer in setting aside extra for the inevitable unexpected expense, writing, "In retirement it really is all about having enough money and being able to stay ahead financially, regardless of what comes along the way. I have a savings bucket to cover the unexpected surprises that seem to appear from time to time, no matter how prepared you think you are, they arise from nowhere."

Richendric and his spouse maintain two liquidity pools. "We have owned a home for 40 years and always had a 'maintenance accrual' account for large unplanned expenses on the home. For real emergency expenditures not covered by insurance, such as acts of God, personal accidents/health related issues, and emergency cash for children (already had one of these), we would use our cash reserve."

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How to Manage Unplanned Expenses During Retirement

Estimating expenses over the duration of one's retirement is a fundamental part of retirement planning. Yet, there's surprisingly little agreement among financial planners about spending behaviors.

Some suggest that retirement spending rises as clients age due to accumulating health care expenses. Others suggest that expenditures decrease as retirees reduce their spending in areas such as travel and entertainment. Still others suggest that retirement spending stays relatively level and simply keeps pace with inflation.

The long-term impact of inflation is a fundamental risk for retirees. Yet most individuals never adjust their portfolio withdrawals each year for inflation. Instead, the checking account bears the brunt of inflation, which means funds need to be replenished. To determine how much inflation you are experiencing, you must look at changes in the checking/savings account balances over time, preferably over one year.

A recent article by Wade Pfau, director of the Macroeconomic Policy Program at the National Graduate Institute for Policy Studies, Tokyo, Japan, examined the question of How do spending needs evolve during retirement? It concludes that most people's spending patterns change over the course of retirement. Expenses look very different at age 90 than at age 65.

He cites a paper by Californian Lutheran University Professor Somnath Basu, Age Banding: A Model for Planning Retirement Needs, that discussed post-retirement spending patterns.

Basu considered a 30-year retirement divided into three 10-year intervals. Rather than assuming a constant rate of inflation for expenses in retirement, he divides spending into four general categories: taxes, basic needs, health care and leisure. Within these categories, he investigated the spending patterns by age and made allowances for differential inflation rates among these categories.

For example, he noted that retirees spend more on leisure (7 percent inflation rate) in the early part of retirement and more on health care later. Health care expenses, which had an inflation rate of 7 percent, were adjusted upward by 15 percent at age 65, 20 percent at 75 and 25 percent at 85. Taxes and basic living expenses were assigned an inflation rate of 3 percent, and 7 percent for health care and leisure.

This methodology provides a useful tool for planning long-term retirement budgets. Having a system to track your expenses is a must. Make it a habit each year to review where your money is going and what increased and decreased.

Your expenses will change during retirement.

Thomas M. Rush is a wealth adviser with Yuma Investment Group. He can be reached at 329-1700.

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How will your expenses change in retirement?

Looking ahead ... Todd and Karen Eldridge. Photo: Jon Reid

An entire industry has grown around telling you how poor you'll be in retirement. As if you need reminding.

As a rough rule of thumb, $1 million at 65 (or about $1.25 million at 60) will give a comfortable lifestyle, which the Association of Superannuation Funds of Australia (ASFA) retirement standard says is $55,080 a year after tax.

But it depends on what you earned in the meantime because that will determine what you consider comfortable, whether you've paid off the mortgage, expect an inheritance, are going to downsize your home or move interstate, and how long you live.

On course Mark and Erica Kirby may need to salary sacrifice into super. Photo: Simon Alekna

Super is a great tax break but isn't the be-all and end-all of a decent retirement, either.

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Under the seniors and pensioners tax offset (forever destined to be called SAPTO), a retired couple over 65 could earn up to $57,948 a year without paying a single cent in tax.

That's more than twice the ordinary tax-free threshold.

Options ... Dennis Maddock. Photo: Alex Ellinghausen

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Retirement reality check

We asked:

Among the bills that moved through Congress last week is one allowing for phased retirement for federal workers. Would such a program, which would allow employees to work part time after retirement, with their salaries and annuities prorated help or hurt agencies? Would you participate in the program?

You said:

I would consider this option. It seems that it would benefit both the agency and the retiree with the transition. When all you know is to get up and go to work every day, then you do not have that [retirement] focus (unless you are fortunate enough to not be a widow/widower and have plans with your mate in retirement). The finality of retirement would be less.

Plus, knowledge and experience sometimes just cant be written in a continuity book!

I work for the Department of Defense with the Air Force and have for the past 28 years.

Katherine N. Lane

resource adviser

Moody Air Force Base, Ga.

I think this is a great idea. It is a win-win. The individual can prepare for retirement at his own pace. The agency benefits because they can still tap into the knowledge that the individual has. This will help agencies from making mistakes that they solved years ago but there is nobody left to remember that solution. Additionally, the agency can have the part time retiree mentor the new people coming into the agency. The agency has a vacancy and can hire a person to do those duties while the retiree mentors him.

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Federal workers: phased retirement sounds good

As kids, they sat on gas lines in the backs of their parents' cars. As young adults, they saw the stock market crash, and when it finally came time to settle down, they bought a house at the peak of the housing bubble and then were faced with the worst economy since the Great Depression. It's no shock that Generation X - those born from 1965 to 1981 - may get short changed in their golden years.

Though they've watched parents and grandparents nestled with pensions, Social Security and strong economic growth, these are no longer guarantees. On the other hand, longer life spans with more medical bills and greater need for cash are the reality for many.

Gen X is the first generation to deal with the fact that the models of American retirement are changing - and its members are flustered. The generation once called "slackers" has been true to form with retirement planning.

"Gen X is a transition generation," says Carol O'Rourke, a certified financial planner and Executive Director for the Coalition for Debtor Education in New York City. "Gen Xers were young during the tech bubble, and when they came of age, housing was a lot more expensive. With all the talk about whether Social Security is going to survive, there is a sense of not having something to look forward to."

According to a 2012 Insured Retirement Institute , IRI, report, only one-third of Gen Xers are "very confident" about having enough money to live comfortably during retirement, cover their medical expenses, and pay for their children's higher education.

Just 41 percent of the group have tried to figure out how much money they will ultimately need to save for retirement, and among those who have saved, half have amassed less than $100,000.

"Even though they have a longer time horizon toward retirement, there has been a tremendous emotional impact on their confidence in the future. What are they going to do to be sure that they have enough?" adds Cathy Weatherford, IRI president and CEO.

Along the same lines, a November 2011 report from the Guardian Life Insurance Company of found 82 percent of Xers believe the economy is headed in the wrong direction.

Skepticism is one of the defining X characteristics, says Robert Wendover, managing director at the Center for Generational Studies in Littleton, Colo.

"Many of the institutions that they were taught as children didn't play out, whether it was political or social or economic. They just kind of unraveled for a variety of reasons," says Wendover.

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Retirement May Be Mission Impossible for Gen X

COLUMBIA A new law signed last week by Gov. Nikki Haley will cut $2 billion from South Carolinas $15 billion retirement shortfall and eliminate it completely by 2044, according to a recently released analysis.

The law makes it difficult for public employees to retire early, forcing them to work longer, and means less money will be withdrawn from the states $25 billion retirement fund. Without changes, taxpayers would have had to increase their annual contributions to the system by nearly 4percent, or about $337 million, according to the most current payroll information. Because the changes make the retirement system stronger financially, taxpayers will have to increase their contributions by 0.42 percent, or about $39.4 million. The state can spend that $300 million difference on other things.

Thats huge, said Rep. Brian White, R-Anderson and chairman of the House Ways and Means Committee. Thats what we were after.

Accountants estimate that the states $25 billion retirement fund will run out of money over the next 30 years, falling about $15billion short. The retirement fund has three sources: investment returns, employee contributions and taxpayer contributions. The funds shortfall was increasing every year for two reasons: poor investment returns and people retiring earlier while living longer.

Lawmakers have now addressed those issues. Last summer, the State Budget and Control Board lowered the projected investment return on the retirement fund to 7.5 percent from 8percent. The new law limits some popular retirement incentives that encouraged public employees to retire early, including:

Eliminating the TERI program: TERI, short for Teacher and Employee Retirement Incentive, allowed workers to retire and continue working for up to five years, receiving a retirement check and a paycheck at the same time. The program will be phased out gradually, closing for good on June 30, 2018.

Restricting the states return-to-work program:. Beginning in January, if employees retire and return to work at their same job, they will have to forfeit their retirement checks once they earn $10,000 in salary in one year.

Making it tougher to retire early because of a disability: The law adopts the federal Social Security standards, which are more difficult to meet than the state standards. This does not take effect until Dec. 31, 2013.

Police officers and firefighters are upset about the disability changes. They have more dangerous jobs than the average state employee and have a higher rate of disability retirements. That is why lawmakers delayed the disability changes for 17 months, allowing time to come up with another solution during the next legislative session, which starts in January.

We focused so much on the retirement aspect of it weve not really ... had the time to devote to that (disability) issue, said Sen. Thomas Alexander, R-Oconee and one of the authors of the retirement bill. I think what weve done is given the directive to the (retirement) department to study for these next six months and bring us back some recommendations by January.

Excerpt from:
Analysis: S.C. retirement reform will make fund solvent

Investing wisdom sometimes comes from unlikely sources. Tess Wilkinson-Ryan and Jill Fisch are both law professors at the University of Pennsylvania Law School. Their recently published paper, An Experiment on Mutual Fund Fees in Retirement Investing, attempts to answer a vexing question: Why do investors ignore the impact of fund fees when making investment decisions?

With the decline of defined-benefit plans and the rise of 401(k) plans, investment decisions are being made more by individuals and less by professional investment managers. The SEC requires that investors in mutual funds be given a staggering amount of information. Unfortunately, many investors are confused and overwhelmed. This is one reason why the authors of this study accurately refer to "the phenomenon of systematic under-attention to mutual fund fees".

This is a "phenomenon" because, as the study notes, everyone from the director of mutual fund research at Morningstar to former SEC Chair Arthur Levitt agrees that the management fees charged by mutual funds (expressed as expense ratios) can dramatically affect the returns of the fund.

Expense ratios are expressed as a percentage of assets (as low as 0.1 percent up to 2.5 percent) which makes them seem less consequential. This is misleading. An investment of $10,000 with an average annualized gain of 10 percent would grow to $152,203 if the fund had an expense ratio of 0.5 percent. If the expense ratio was 1 percent, the fund would be worth $132,677--a difference of $41,817.

The study found that investors routinely underestimate the effect of fees on their returns. In a series of experiments, the authors were able to change this behavior by explicitly explaining to the subjects the importance of fees. This information caused those in the study to incorporate fee information into their investment choices. The study concludes that presenting fee information "simply and transparently" and educating investors about the impact of fees has the desired effect of helping investors make decisions likely to yield higher returns.

The typical expense ratio for an actively managed fund (where the fund manager attempts to beat a designated benchmark, like the S&P 500 index) is 1.5 percent. Compare this cost to the typical index fund (where the fund manager attempts to replicate the performance of an index, minus fees) cost of approximately 0.25 percent. If you pay attention to the conclusion in this study, you would select index funds over comparable actively-managed funds, based on the difference in cost.

Is this analysis too simplistic? Not according to Standard & Poors. It compares the performance of actively-managed funds to index funds in a scorecard published twice a year. At the end of 2011, it found the majority of active stock and bond managers underperformed comparable benchmark indexes over a five-year horizon.

Investing does not have to be complex. If you focus on fees and purchase a globally diversified portfolio of low management fee stock and bond index funds in an asset allocation suitable for you, you will have made a decision likely to improve your returns. In stark contrast, owning actively managed mutual funds is likely to lessen your returns and make your retirement goals more difficult to attain.

Dan Solin is a senior vice president of Index Funds Advisors. He is the New York Times bestselling author of The Smartest Investment Book You'll Ever Read, The Smartest 401(k) Book You'll Ever Read, The Smartest Retirement Book You'll Ever Read, and The Smartest Portfolio You'll Ever Own. His new book, The Smartest Money Book You'll Ever Read, was published on December 27, 2011.

The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.

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These Mutual Funds Can Ruin Your Retirement Plans

A new law signed last week by Gov. Nikki Haley will cut $2 billion from South Carolinas $15 billion retirement shortfall and eliminate it completely by 2044, according to a recently released analysis.

The new law makes it difficult for public employees to retire early, which forces them to work longer and means less money will be withdrawn from the states $25 billion retirement fund. Without the changes, taxpayers would have had to increase their annual contributions to the system by nearly 4 percent, or about $337 million, according to the most current payroll information. But because the changes make the retirement system more financially strong, taxpayers will have to increase their contributions by 0.42 percent, or about $39.4 million. That means they can spend that $300 million difference on other things.

Thats huge, said Rep. Brian White, R-Anderson and chairman of the House Ways and Means Committee. Thats what we were after.

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Accountants estimate the states $25 billion retirement fund will run out of money sometime over the next 30 years, falling about $15 billion short. The retirement fund has three sources: investment returns, employee contributions and taxpayer contributions. The funds shortfall was getting larger every year because of two problems: poor investment returns and people retiring earlier while living longer.

Lawmakers have now addressed those issues. Last summer, the State Budget and Control Board lowered the projected investment return on the retirement fund to 7.5 percent from 8 percent. And the new law eliminates some popular retirement incentives that encouraged public employees to retire early, including:

Eliminating the TERI program. TERI, short for Teacher and Employee Retirement Incentive, allowed workers to retire and continue working for up to five years, receiving a retirement check and a paycheck at the same time. The program will be phased out gradually, closing for good on June 30, 2018.

Restricting the states return-to-work program. Beginning in January, if employees retire and return to work at their same job, they will have to forfeit their retirement checks once they earn $10,000 in salary in one year.

Making it tougher to retire early because of a disability. The law adopts the federal Social Security standards, which are more difficult to meet than the existing state standards. This does not take effect until Dec. 31, 2013.

Police officers and firefighters are upset about the disability changes. They have more dangerous jobs than the average state employe and have a higher rate of disability retirements. That is why lawmakers delayed the disability changes for nearly two years.

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Retirement bill to save billions, end shortfall