Our daily roundup of retirement news your clients may be thinking about.
Clients who are financially knowledgeable incurred annual investment returns that are 1.3% higher compared with those who are least knowledgeable about personal finance, according to a study by experts with the National Bureau of Economic Research. The difference is considered significant, "enhancing the retirement nest egg of the most knowledgeable by 25% over a 30-year work life," the researchers said. The Motley Fool
Using the bucket strategy to draw retirement income may be difficult for retirees because it's complicated and investors will have a hard time monitoring and analyzing it especially if they have multiple retirement accounts with different balances, according to this article on Forbes. Retirees also have tax-deferred, taxable, and tax free retirement accounts, making the strategy more complicated to implement. Read three simple ways that retirees may consider when creating their own strategy for draw income from their retirement investments. Forbes
401(k) plans with less than $1 million in total assets have a median annual fee that is 1.27% of their assets, while plans with total assets between $10 million and $100 million have a median fee of 0.82%, according to a report from Deloitte Consulting and the Investment Company Institute. The median annual fee of 401(k) plans with $100 million to $500 million in total assets is 0.57% of their assets, while plans with total assets of $500 million have a median annual fee amounting to 0.37% of their assets, the report says. Workers may use the report to determine if their plan's fees are reasonable. The Wall Street Journal
Congress needs to pass laws that will require companies to offer retirement plans to workers and make retirement independent from the workplace if they want to improve the system, writes Robert Powell, editor of Retirement Weekly and professor at Boston University. There should also be laws that will allow companies to have multiple retirement plan providers and make investor education and payment for advice mandatory, Powell says. Lawmakers should also consider passing a law that will impose tighter rules for payday loans, he adds. USA Today
An increase of 1% in retirement savings can mean a big difference in income because of compounding, according to a report from Fidelity Investments. For example, a 25-year-old client earning $40,000 who opts to increase its savings rate by 1% per year or $33 monthly can expect an increase of $320 in retirement income in today's dollars, assuming he receives an annual raise of 1.5%, net of inflation, remain employed until age 67 and gets a 7% annual return, the report says. [L]ittle incremental differences can make a huge difference over time, says Fidelity's Jeanne Thompson. MarketWatch