OCTOBER 2008

Credit Crunch Likely to Boost Popularity of 401(k) Debit Cards
A quick-fix solution for long-term, more lasting problems

By Savita Iyer-Ahrestani

A decade ago, when Americans took part in investor knowledge surveys, most people did not even know what stocks or bonds were, recalls Barbara Roper, director of investor protection at the Washington, D.C.-based Consumer Federation of America. But the one thing that just about everyone knew for sure, she says, was that they could borrow against their 401(k) plans.

Now, the advent of 401(k) debit cards, which allow people to withdraw from their 401(k) plans the way they would from say, a home equity line of credit, has made it all that much easier for people to access their retirement savings—something that Roper believes is dangerous for the future of retirement finance in America. “I understand that to a limited extent, assuring investors or employees that there is some way that they can access their 401(k) plans in an emergency is important,” Roper says. “Making that too easy, though, is a mistake. We should not consider our 401(k) plans as emergency funds or general purpose savings accounts to turn to any time we want money.”

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Most Gen X, Gen Y Members Don’t See Early Retirement
More than half expect to retire between the ages of 60 and 69

More than six in 10 Americans (62%) aged 19 to 39—members of Generation X and Generation Y, in other words—say they have given at least some thought to retirement, according to a recent survey by the Employee Benefits Research Institute (EBRI), and 20% say they have given the matter a great deal of thought.

The survey, entitled “Preparing For Their Future: A Look at the Financial State of Gen X and Gen Y,” was sponsored by the American Savings Education Council, an EBRI program, and Divided We Fail, a coalition involving the AARP, the Business Roundtable, Service Employees International Union, and the National Federation of Independent Business. Around 1,752 individuals participated in the survey, which aimed at getting a sense of how prepared Gen X and Gen Y are for retirement.

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More on Retirement Planning

Legal Double Dipping
What if you could tell a client that they can retire early and still get their full retirement benefits? Well, in fact, you can. “It’s not a new concept, but a lot of people don’t know that you can do it,” notes Pam Villarreal, senior policy analyst at the National Center for Policy Analysis (NCPA). “It’s not something that’s advertised.”

DOL Floats Advice Proposals
The Department of Labor (DOL) recently announced two proposed rules under the Pension Protection Act (PPA) designed to make investment advice more accessible for millions of Americans in 401(k)-type plans and individual retirement accounts (IRAs). Comments on the proposals are due October 6.

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Next Up in Exclusive Webinar Series for Advisors: Mark Tibergien, Thomas Giachetti, and Mark Elzweig
At a time of near chaos on Wall Street, and confusion on the part of many investors, including some of your clients no doubt, help is on the way. The editors of Investment Advisor, Research, and Wealth Manager magazines have put together three panels of experts to share their insights on separate Webinar conference calls, the last of which will occur at 3:00 Eastern time on Friday, September 26.