Our daily roundup of retirement news your clients may be thinking about.
The problem with 401(k) plans is the very high investment fees that participants pay, so including low-cost index funds as options within the plans can help workers improve their retirement saving prospects, according to Jack Bogle, founder of Vanguard Group. 401(k) plans include actively managed funds that have higher investment management fees compared with index funds, the article says. Also actively managed funds also have other costs, such as the sluggish returns caused by managers' decision to hold cash when stock market rises, and the trading costs from buying and selling stocks to enhance returns. -- MoneyWatch
Retirement savers may consider contributing to both a 401(k) plan and a Roth IRA, but contributions to these accounts may not be the same, according to an article in Time Money. Clients should take advantage of employer match contributions in their 401(k) plans, but need to limit their contributions or defer them if the employer doesn't have a match. While Roth IRA contributions are subject to tax, distributions are tax-free, early distributions are allowed, the impact of rising inflation in the future is eliminated. Time Money
The decision by the California Public Employees' Retirement System to drop its investments in hedge funds has not affected other pensions and investors' appetite for this investment type, according to an article on CNBC. Pensions still stick to their hedge fund investments, and a massive pullout is very unlikely at this point, industry observers say. Research in the last six decades and the experience of many pensions and endowments point to the "benefits of increasing diversification, lowering correlations of asset classes and thereby improving returns over long cycles," an executive says. -- CNBC
A client's spousal benefit will not be affected in the event her spouse's former partner decides to seek a divorced spousal benefit, according to this article on Forbes. Also, the divorced spousal benefit will have no bearing on the client's spousal benefit if her spouse is already dead. Forbes
Although delaying Social Security retirement benefits will result in increased value, 80% of female workers still decide to start receiving their monthly benefit at age 62, according to a report from the Nationwide Retirement Institute. Many women take early retirement because they think they will get more money in the long term if they take their benefits sooner, according to an expert with Nationwide. Other women may have also taken an early retirement because of necessity, the expert adds. CBS Moneywatch