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ARCHIVE
Investing Basics: Saving for Retirement with a 401(k) Plan
By Christina Kilroy
September 9, 2020
As part of the ICI Education Foundation’s 30th anniversary celebration, we are sharing a series of ICI Viewpoints posts explaining basic investing concepts, drawn from the ICI Education Foundation’s Investing Road Trip.
When I first moved to the Washington, DC, area, I got lost constantly. I was accustomed to looking for green road signs for directional guidance. Those brown recreational signs? I pretty much ignored them. But in and around Washington, the National Park Service manages more than 265 miles of roadway where brown signs contain important information for drivers—like, say, the exit to the airport.
Similarly, the ICI Education Foundation’s Investing Road Trip contains road signs with basics for investors meant to point the way to investing success, and the journey ends at retirement, depicted with idyllic images of a park bench and a golf cart. But what if, in real life, you don’t quite follow this tidy path? Even for workers who get a late start, hit some bumps, and take a few detours, saving for retirement is still possible.
More than 58 million active 401(k) participants and millions of former employees and retirees hold $5.6 trillion in assets in 401(k) plans. Employers offer 401(k) and other similar plans to attract talented workers and to provide them a valuable benefit—but employees still must be sure to make the most of that benefit. Here are guideposts to get you started, maintain your progress, and make the most of your 401(k) as you journey to retirement.
Just Getting Started or Starting a New Job
As the saying goes, a journey of a thousand miles begins with a single step. That first step, if you have a 401(k) plan available to you, is to make sure you’re enrolled in it. Some employers automatically enroll employees in 401(k) plans, selecting a default initial contribution rate and a default investment, unless the employee indicates otherwise.
If you’re not enrolled automatically, you’ll have to opt in and choose how much you want to contribute and how you want your contributions to be invested. You can build your own portfolio from the investment options available in your plan (on average, 401(k) plans offer 28 investment options) and adjust your portfolio over time to maintain an appropriate, diversified mix of assets.
If picking your own investments seems daunting, more than three-quarters of 401(k) plans offer target date funds among the investment options, which can simplify portfolio building. Each target date fund holds a diversified mix of stocks and bonds that is automatically rebalanced depending on the target date, which is usually your expected retirement year.
Balancing Competing Financial Demands
Saving for a far-off goal such as retirement can be challenging, especially when near-term obligations are pressing. But even when balancing saving for major financial goals—such as college costs or a home purchase—with retirement, you should at least try to contribute enough to your 401(k) plan to maximize your workplace benefits.
Employers contribute to workers’ 401(k) accounts in eight out of 10 plans, and often base their contributions on how much the employee contributes. The formulas for these contributions vary by employer, but the most common approach is a simple match, where the employer matches a certain percentage of employee contributions up to a maximum percentage of employee salary. Not maxing out the match is leaving money on the table—money that is a valuable part of your employee benefit. Review your contribution rate to make sure you are at least taking full advantage of any match your employer offers.
Depending on your situation, you may want to go beyond maxing out the employer match to save even more.
Experiencing Financial Hardship
The best thing to do during challenging times, if you’re able, is to stay the course—and most retirement savers do. Despite the economic stresses brought about by the COVID-19 pandemic, only 2.0 percent of participants in 401(k) and 401(k)-style defined contribution plans stopped contributing to their plans in the first half of 2020, according to recent ICI research. The most important thing to remember, if you do have to pause your 401(k) contributions, is that you start contributing again when you are able.
Changing Jobs
When leaving a job, avoid the temptation to cash out of your employer plan, even if your account balance is small. Research has shown that younger workers are more likely to withdraw small account balances, even though they have the most to lose by missing out on the future returns of those assets. Plus, if you do cash out, you could be hit with tax penalties.
So how do you maintain your savings—and the tax advantages of your workplace plan—when switching jobs? You’ll likely have three options available: roll the money over to an individual retirement account (IRA), move it to a new employer’s plan, or possibly keep it in your old employer’s plan. IRA rollovers are especially appealing to those who want to consolidate their assets as they progress through their careers, rather than leave them behind in a series of former employer plans.
Getting a Late Start
Even if you start saving for retirement later than you may have liked, all is not lost. While you may not have time to enjoy the full magic of compounding, the IRS does offer help to older workers by allowing for catch-up contributions. Savers aged 50 and older may make additional catch-up contributions of $6,500 to their 401(k) or similar plans, on top of annual deferral limits of $19,500 for tax year 2020. With this provision, workers who are ready to make retirement saving a priority can go a long way to prepare in the run-up to retirement.
After a lot of U-turns, I finally learned to pay attention to the road signs here in Washington. I hope that the road signs in this series and in the Investing Road Trip offer helpful guidance, wherever you are in your journey of saving and investing.
Other Posts in the Investing Basics Series
- What Is Investing?
- What Is Risk?
- Types of Investments
- Diversification
- Dollar-Cost Averaging
- Benefits of Mutual Funds
- Tax Benefits to Encourage Saving
- 529 Savings Plans
- Compound Returns and the Power of Reinvestment
- Understanding Fees and Expenses
- Saving for Retirement on Your Own
- Saving for Retirement with a 401(k) Plan
Christina Kilroy is vice president of the ICI Education Foundation.
Permalink: https://www.ici.org/viewpoints/20_view_icief12
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: Saving for Retirement on Your Own
By Christina Kilroy
August 31, 2020
A majority of workers aged 26 to 64 were active participants in a workplace retirement plan in 2017, according to ICI’s most recent tabulation of tax data. But what if you don’t have access to a workplace retirement plan? You still have great options to save for retirement with similar advantages to the 401(k). Learn more in the latest installment of ICI Education Foundation’s investing basics series.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: Understanding Fees and Expenses
By Christina Kilroy
July 30, 2020
In the ICI Education Foundation’s Investing Road Trip exhibit, a toll booth illustrates the fees and expenses that are part of investing. Every vehicle on a toll road pays and some of that money helps to maintain the road, which ultimately makes for a smoother and safer trip for everybody. Likewise, every investor pays a cost to invest but receives professional management and services in return.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: Compound Returns and the Power of Reinvestment
By Christina Kilroy
June 29, 2020
Start saving early. You’ve heard it once, you’ve heard it a million times. There are a few reasons why that’s a good idea—to get in the habit, to manage risks to your investments and income, and to allow more time to contribute to your savings and let them grow. But the strongest case for starting early boils down to one phrase: compound returns.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Tax Filing Deadline Extended to July 15: What It Means for IRA Savers
By Christina Kilroy
June 18, 2020
On March 21, 2020, the Treasury Department and Internal Revenue Service (IRS) extended the federal income tax filing due date—also known as Tax Day—for the 2019 tax year. Workers now have until July 15 to prepare their 2019 tax returns, as well as more time to consider options to potentially reduce taxable earnings. One of the easiest and most popular ways to reduce taxable earnings is contributing to an individual retirement account (IRA).
TOPICS: IRAInvestment EducationRetirement ResearchSavingsTaxes
2020 Investment Company Fact Book: Letter from the Chief Economist
By Sean Collins
May 19, 2020
A version of this letter by ICI Chief Economist Sean Collins was released in the Institute’s 60th edition of the Investment Company Fact Book.
TOPICS: Financial MarketsFund RegulationGlobalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder
2020 Investment Company Fact Book: Letter from the President and CEO
By Paul Schott Stevens
May 13, 2020
This ICI Viewpoints is a version of a letter from ICI President and CEO Paul Schott Stevens that was released in the 60th edition of the Investment Company Fact Book.
TOPICS: Financial MarketsFund RegulationGlobalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder
Investing Basics: 529 Savings Plans
By Christina Kilroy
May 7, 2020
One thing you can expect when you’re expecting a baby is to pay a lot for diapers—you might pay about $600 by your child’s first birthday. But the cost of diapers is child’s play compared to the costs that could come later when paying for college.
To encourage people to save for these education costs, nearly every state and the District of Columbia offer 529 plans, and most offer special tax treatment for savers participating in those plans.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: Tax Benefits to Encourage Saving
By Christina Kilroy
April 14, 2020
To encourage people to save, federal and state governments offer special tax treatment for savings plans for specific goals, such as retirement and education. By increasing the benefit that savers receive in the short term, the government nudges savers to take a positive action that will provide a benefit in the long term.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: The Benefits of Mutual Funds
By Christina Kilroy
March 31, 2020
We’ve reached the halfway point in this series, and we’ve covered a lot of ground: the benefits of investing, how to think about risk, different types of investments, why diversification is important, and dollar-cost averaging. This month’s installment brings all these topics together and examines seven features of mutual funds that make them an enduringly popular investment choice.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: Dollar-Cost Averaging
By Christina Kilroy
February 27, 2020
Emotions are the enemy of successful investing. For long-term investors, dollar-cost averaging is a smart way to take the emotion out of investing and to eliminate the difficulty and uncertainty of trying to time the market.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: Diversification
By Christina Kilroy
January 30, 2020
Eggs play a starring role in diversification’s ubiquitous analogy—one we used in the Investing Road Trip©—and for good reason. If you drop a basket holding all your eggs, you’ll be out a lot of eggs. Spreading your eggs across several baskets is a good defense against the risks of exposing all your assets to the same risk.
But perhaps we should also make the point that eggs shouldn’t be the only food in your basket. They may be high in protein, but your body needs a mix of nutrients for good health. Similarly, with investing, a better goal is to build a balanced “diet” of asset classes across industries, geographic areas, and types of securities....
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: Types of Investments
By Christina Kilroy
December 23, 2019
Two of the most common investments are stocks and bonds. Chances are if you own a portfolio of investments, those two types of assets make up a significant part—or perhaps all—of it. For those who want to start investing, it’s essential to understand these common portfolio building blocks...
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Talkin’ ’Bout the Generations: ICI Research on Mutual Fund Ownership by Generation
By Michael Bogdan and Candice Gullett
December 11, 2019
Talk about the differences between generations is a hot topic in today’s cultural conversation. And the Millennial and Baby Boomer generations are in the middle of a little generational warfare. But when it comes to owning mutual funds, are there really that many differences?
TOPICS: 401(k)Equity FundEquity InvestingIRAInvestor ResearchMoney Market FundsRetirement ResearchSavings
Investing Basics: What Is Risk?
By Christina Kilroy
November 26, 2019
You invest with the hope of earning a return on your investment. That opportunity invariably involves risk, including the possibility of losing some or all of the money you invested. Understanding these risks is an essential step toward successful investing.
The second installment of the ICI Education Foundation's blog series celebrating its 30th anniversary explores different types of investing risks.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Investing Basics: What Is Investing?
By Christina Kilroy
October 31, 2019
This month, the ICI Education Foundation celebrates 30 years of developing, delivering, and promoting investor education. As part of our yearlong celebration, we will be sharing an ICI Viewpoints post each month that explains a basic concept of investing, drawn from the ICI Education Foundation’s Investing Road Trip.
TOPICS: 401(k)Exchange-Traded FundsIRAInvestment EducationMutual FundSavingsShareholder
Happy Birthday, IRA! Congratulations on 45 Years
By Sarah Holden and Elena Barone Chism
September 12, 2019
Labor Day 2019 marked the 45th birthday of the individual retirement account (IRA). When the Employee Retirement Income Security Act was signed into law on September 2, 1974, it introduced bold steps to safeguard Americans’ employer-sponsored pensions and created the IRA.
Forty-five years later, IRAs are a significant component of US households’ retirement assets, holding $9.4 trillion in assets, or about one-third of the total US retirement market, at the end of March 2019…
TOPICS: IRAInvestor ResearchMutual FundRetirement ResearchSavingsShareholder
30 Tips to Celebrate 30 Years of Investor Education
By Christina Kilroy
September 3, 2019
For 30 years, the ICI Education Foundation has pursued its mission to advance investor education by developing, delivering, and promoting investor education to diverse audiences across a range of ages and life stages. As we kick off our celebration of the foundation’s 30th anniversary in October, we will be sharing tips for successful investing on our social media accounts over the coming weeks....
TOPICS: 401(k)IRAInvestment EducationMutual FundSavingsTaxes
Mind the Gap
By Sarah Holden and Christina Kilroy
July 22, 2019
It’s a good idea to “mind the gap” if you’re traveling on the Tube in London, taking Amtrak in the United States, or riding Metro in Paris or Washington, DC. Being mindful of the space between where you are and where you’re going is important—not only when navigating public transit, but also when saving for retirement. Saving for retirement is a career-long process, with many decisions along the way....
TOPICS: 401(k)IRAInvestment EducationMutual FundRetirement ResearchSavingsShareholderTaxes
It’s 5/29—Are You Taking Full Advantage of College Savings Opportunities?
By Sarah Holden and Christina Kilroy
May 29, 2019
Saving for an education is an important financial goal for millions of US households. In fact, nearly one-quarter of mutual fund–owning households indicate saving for educational expenses is one of their goals for their mutual fund investments. An increasingly popular way to save for college is through 529 plans, named for the section of the tax code that provides for their favorable tax treatment....
TOPICS: Investment EducationSavingsTaxes
2019 Investment Company Fact Book: Letter from the Chief Economist
By Sean Collins
May 7, 2019
Globalization has hit a few speed bumps in recent years, but it hasn't slowed the globalization of the Investment Company Fact Book. Consistent with ICI’s mission to represent the interests of regulated funds and their investors worldwide, Fact Book is expanding its international presence....
TOPICS: Financial MarketsFund RegulationGlobalInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder
ICI’s Quarterly Retirement Market Resource
By Miriam Bridges
April 23, 2019
ICI publishes statistics on the US retirement market every quarter as an information resource for mutual funds, individual investors, the media, policymakers, and researchers. This report includes individual retirement account (IRA) and defined contribution (DC) plan assets, including 401(k) plans, and mutual fund assets held in retirement accounts....
TOPICS: 401(k)IRAMutual FundRetirement ResearchSavings
Mutual Funds: Rated E for Everyone
By Sarah Holden
December 12, 2018
Investing is subject to many misconceptions, including the notion that only wealthy households own mutual funds. As US households’ ownership of mutual funds has grown over the past four decades, the need to correct myths about who owns mutual funds has also grown....
TOPICS: Investor ResearchMutual FundRetirement PolicySavingsShareholder
Growing Better with Age: The 401(k) Turns Forty
By Miriam Bridges and Christina Kilroy
November 30, 2018
This month marks the fortieth birthday of the most prevalent retirement plan available to workers today: the 401(k). It’s a milestone, to be sure, but there are no mid-life doldrums here—401(k) plans continue to grow, and currently hold $5.3 trillion in assets on behalf of more than 55 million active participants and millions of former employees and retirees.
TOPICS: 401(k)Investor ResearchPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholderTarget Date Funds
28 Trillion Smart Decisions
By Christina Kilroy
October 22, 2018
Have you ever done one small, smart thing that ended up making a huge difference in your future? I’m not talking about blind luck—like buying a ticket that turns out to be the winner in the (currently) $1.6 billion Mega Millions. No, I’m talking about small, smart decisions that can materially affect us later in life....
TOPICS: Investment EducationMutual FundRetirement ResearchSavingsShareholderTaxes
Stock Ownership in the United States: It’s Main Street
By Sarah Holden
September 10, 2018
US household activity in the stock market has undergone a transformation over the past three decades. The old idea that investing in the stock market is just for the wealthy is vastly out of date.
In the late 1980s, less than a third of US households held stocks. Now, a majority do. This growth in stock-owning households has occurred across all income quintiles....
TOPICS: Equity InvestingInvestor ResearchRetirement PolicySavingsShareholder
Popular 529 Savings Plans Expand to Reach Students of All Ages
By Christina Kilroy
May 29, 2018
Today, on May 29—“5/29”—we mark 529 College Savings Day. Many people interested in saving for a child’s or grandchild’s future college costs are using targeted savings vehicles called 529 savings plans. The plans, which have grown in popularity over the past decade and a half as a way to save for a family member’s college expenses, may now also be used to cover tuition for elementary and secondary education....
TOPICS: Investment EducationSavingsTaxes
2018 Investment Company Fact Book: Letter from the Chief Economist
By Sean Collins
May 15, 2018
Those of us who wear glasses know that one of the most crucial elements in seeing the world is the right lens. A bad lens warps the light and distorts the signals; the right lens sharpens the image and enhances our understanding.
This is a useful metaphor for the work that ICI Research does in providing informed analysis to guide public policy. Through our voluminous collections and surveys, we gather large amounts of data—signals about the behavior of funds, markets, and investors. But finding the patterns in these signals requires the right lens—accumulated knowledge provided by context, economic insights, and understanding of institutions.
The Investment Company Fact Book is one very visible result of this process and its many elements...
TOPICS: Financial MarketsFund RegulationInvestor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder
A More Accurate Evaluation of Retirement Plan Participation
By Miriam Bridges
May 2, 2018
What’s the actual participation rate of Americans preparing for retirement through a workplace retirement plan? It’s an important question, and one that ICI economists Peter Brady and Steven Bass shed some light on in their new analysis of tax data, “Who Participates in Retirement Plans, 2014.”
The retirement plan participation rate—often used to evaluate the performance of the US voluntary employer plan system—understates the true scope and importance of these plans. In their careful analysis, Brady and Bass give two reasons for this understatement...
TOPICS: Retirement PolicyRetirement ResearchSavingsTaxes
Invest in Your Future Through an IRA
By Christina Kilroy
March 13, 2018
Nearly 44 million US households invest and save for their future through individual retirement accounts (IRAs). If your household isn’t one, now is a great opportunity to join them. And if you are already saving in an IRA, there are some advantages that you may not be aware of—and that are worth knowing about as Tax Day approaches...
TOPICS: Investment EducationMutual FundRetirement ResearchSavingsShareholderTaxes
Americans Rely on Stocks to Meet Their Financial Goals as Much as Ever
By Sean Collins
January 17, 2018
The following ICI Viewpoints is a letter to the Wall Street Journal by Sean Collins, ICI chief economist, in response to an article published on January 4, 2018:
Are America’s individual investors missing out on one of the biggest bull markets in history? No. The Wall Street Journal’s account (“As Dow Tops 25000, Individual Investors Sit It Out,” January 4) is based on anecdotes and selective use of data.
TOPICS: Exchange-Traded FundsFinancial MarketsFinancial StabilityMutual FundSavings
States Are Abusing Abandoned-Property Funds to Plug Budget Shortfalls
By Tamara K. Salmon
January 11, 2018
Imagine finding out that your investment account has been turned over to your state because it was considered “abandoned.” Imagine, too, that after the account was turned over to the state, the account received a capital gains distribution. As a result, you are liable for paying the taxes on that distribution—and can be assessed monetary penalties for not paying the taxes in a timely fashion.
TOPICS: Fund RegulationGovernment AffairsMutual FundRetirement PolicySavingsShareholderTaxes
Autumn Air, Playoff Baseball, and…National Retirement Security Week
By Christina Kilroy
October 17, 2017
The baseball postseason is well underway and the air has finally turned crisp. Perhaps that’s why—as we’re marking National Retirement Security Week—our thoughts have turned to the words of Yogi Berra, the great New York Yankees catcher. He was credited with so many pithy, wise, and witty sayings that, in classic Berra style, he remarked, “I really didn't say everything I said.”
TOPICS: 401(k)Investment EducationMutual FundSavingsShareholderTaxes
In Reality, Data Tell a Different Story of Old Age in America
By Sarah Holden
October 10, 2017
“The New Reality of Old Age in America” (September 30) portrays economic security in retirement by pairing anecdotes about workers who have fared poorly with selected statistics. Comprehensive data on how our system is working overall tell a far different story: America’s retirement system enables most of today’s retirees to maintain their standards of living.
TOPICS: 401(k)Investor ResearchMutual FundPolicy ResearchRetirement PolicyRetirement ResearchSavingsShareholder
A 529 Day Primer: Do You Know What State Your College Savings Plans Are In?
By Christina Kilroy
May 26, 2017
You might not know that May 29 is 529 College Savings Day, or even what a Section 529 plan is. But if you’re a parent or grandparent concerned about future college costs, the day presents an opportunity to learn how 529 savings plans can help you plan for—and pay for—your loved ones’ postsecondary education expenses.
TOPICS: Investment EducationInvestor ResearchMutual FundSavings
Scratch That: Why Arguments of a Broken Retirement System Are Misguided
By Peter J. Brady
April 6, 2017
What if you were given the task of designing a retirement system from scratch? In a recent paper, New York University law professor David Kamin proposes a retirement system that combines a mandatory savings floor with tax incentives to encourage savings above the mandated minimum. He is not the first to propose a new mandatory retirement plan, with others proposing that either employers be required to offer a plan or workers be required to contribute to a plan.
TOPICS: 401(k)Investor ResearchMutual FundRetirement PolicyRetirement ResearchSavings
ICI Staff Take Local Students on an “Investing Road Trip”
By Christina Kilroy
March 31, 2017
Among the eighth graders who walked into Junior Achievement’s Finance Park were an aspiring filmmaker, a model, and a sports agent. But for their daylong budgeting simulation—where each student is assigned an age, family, debt, credit score, job, and salary—they would transform into an auto mechanic, an insurance agent, and a bus driver.
TOPICS: 401(k)Investment EducationMutual FundSavings
Exemptions from Investor Protections Put California Savers at Risk
By Paul Schott Stevens
March 22, 2017
The following ICI Viewpoints is a letter to the editor by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an editorial published on March 8, 2017, in the Los Angeles Times.
TOPICS: 401(k)Investor ResearchMutual FundRetirement PolicyRetirement ResearchSavingsShareholder
ICI Study: 55 Million US Households Own Mutual Funds
By Sarah Holden
February 24, 2017
Gathering and analyzing data about how shareholders purchase and use mutual funds are critical to ICI’s work to facilitate sound, well-informed public policies affecting funds, their investors, and the retirement markets.
TOPICS: 401(k)Investor ResearchMutual FundRetirement ResearchSavings
For “401(k) Pioneers,” No Reason for Regrets
By Paul Schott Stevens
January 10, 2017
The following ICI Viewpoints is a letter to the Wall Street Journal by Paul Schott Stevens, president and CEO of the Investment Company Institute, in response to an article published on January 3, 2017.
Dear Editor:
It may be, as you report, that “401(k) Pioneers Lament What They Started” (Page A1, Jan. 3). But the facts are clear: America’s retirement system is stronger today, in the expanding 401(k) era, than it was when defined benefit pensions were the primary vehicle for retirement savings.
TOPICS: Investor ResearchMutual FundRetirement PolicyRetirement ResearchSavingsShareholder
Secure Choice Is Risky for Workers and for the State
By Paul Schott Stevens
August 17, 2016
Millions of Americans save for retirement using employer-sponsored plans that offer tax advantages and excellent investment options.
TOPICS: Government AffairsMutual FundRetirement PolicySavings
Three Reasons Why You Should Consider an IRA
By Sarah Holden
March 8, 2016
April 18 is the deadline to file income tax returns with the federal government this year.
Getting Started in a 401(k) Plan—and Getting the Most Out of It
By Christina Kilroy
February 26, 2016
This week, ICI and the Investment Company Institute Education Foundation (ICIEF) joined thousands of corporations, nonprofits, and government agencies to celebrate America Saves Week.
TOPICS: 401(k)Investment EducationInvestor ResearchRetirement ResearchSavings
Correcting a Distorted Picture of Retirement Resources
By Peter Brady
October 21, 2015
Can 401(k) plans and individual retirement accounts (IRAs) provide the income that retirees need to supplement Social Security and enjoy a secure retirement?
TOPICS: EventsGovernment AffairsInvestor ResearchPolicy ResearchRetirement PolicyRetirement ResearchSavings
Small Savers at a Loss
By Brian Reid and Sarah Holden
September 25, 2015
As ICI has pointed out before, the proposed rule from the Department of Labor (DOL) to redefine what counts as a fiduciary relationship in the retirement market is fundamentally flawed. But it is no less flawed than the DOL’s justification for it—a Regulatory Impact Analysis that fails to demonstrate a market failure that supports the need for such a sweeping and costly rule.
TOPICS: Government AffairsInvestor ResearchPolicy ResearchRetirement PolicyRetirement ResearchSavings
Fresh Perspectives on a Changing World
By Miriam Bridges
May 29, 2015
Implications of globalization, the impact of the Millennial Generation on product development, the search for alpha in a world full of passive products—these were among the top priorities and concerns of the fund industry discussed by a panel of industry leaders at ICI’s 57th annual General Membership Meeting (GMM), held May 6–8 in Washington, DC.
TOPICS: CybersecurityFund RegulationGMMICI GlobalMutual FundSavings
Opinion: The Tax Threat to Your Mutual Fund
By Mike McNamee
May 7, 2015
Vanguard Chairman and CEO Bill McNabb sent “an open letter to all mutual fund investors” in the opinion pages of Thursday’s Wall Street Journal. His message: fund investors face a clear threat of higher costs, weaker returns, and a bailout tax to salvage other failing financial institutions—all if regulators get their way in imposing new rules on funds or their managers.
TOPICS: 401(k)Federal ReserveFinancial MarketsFinancial StabilityFund RegulationMutual FundRetirement PolicySavingsShareholderTradingTreasury
On Fiduciary Rule, New York Times Relies on Fatally Flawed Research
By Paul Schott Stevens
April 8, 2015
Today I submitted the following letter to the editor of the New York Times:
TOPICS: 401(k)Fund RegulationInvestment EducationRetirement PolicySavingsShareholder
What’s Driving Retirement Plan Access?
By Peter Brady
October 17, 2014
Most workers who are likely to have the ability to save and who are focused primarily on saving for retirement have access to an employer-sponsored retirement plan—and nearly all of these workers choose to participate.
TOPICS: Government AffairsInvestor ResearchPolicy ResearchRetirement PolicyRetirement ResearchSavings
Statement of the Investment Company Institute at Senate Finance Committee Hearing on “Retirement Savings 2.0: Updating Savings Policy for the Modern Economy”
By Brian Reid
September 16, 2014
This statement was given on behalf of ICI by Brian Reid, chief economist, at the Senate Finance Committee’s hearing on “Retirement Savings 2.0: Updating Savings Policy for the Modern Economy.” For more information, see ICI’s full written testimony.
TOPICS: 401(k)Government AffairsInvestor ResearchMutual FundRetirement PolicyRetirement ResearchSavingsTaxes
Happy Birthday ERISA! Congratulations on 40 Years
By Sarah Holden and Elena Barone Chism
September 2, 2014
Today marks the 40th birthday of the Employee Retirement Income Security Act (ERISA). Signed into law on September 2, 1974, ERISA introduced bold steps to safeguard Americans’ employer-sponsored pensions and created the individual retirement account (IRA). Assets earmarked for retirement totaled $0.4 trillion at year-end 1974 (see the figure below). At this modest start, private-sector defined benefit (DB) plans accounted for 35 percent of the total; federal, state, and local plans for 34 percent; private-sector defined contribution (DC) plans for 17 percent; annuities for 13 percent; and there was a mere glimmer of IRA assets by year-end. Currently, total U.S. retirement assets are $23.0 trillion, and their composition has shifted considerably over the past 40 years.
TOPICS: 401(k)Fixed IncomeGovernment AffairsInvestment EducationInvestor ResearchPolicy ResearchRetirement PolicyRetirement ResearchSavingsTaxesTreasury
Unconventional Wisdom on Retirement Preparedness
By Peter Brady
August 4, 2014
How well are Americans planning and saving for retirement? This is an important question to answer—but also vexingly difficult.
TOPICS: EventsGovernment AffairsInvestor ResearchPolicy ResearchRetirement PolicyRetirement ResearchSavings
The Real Lessons to Be Learned from 1994’s Bond Market
By Brian Reid
July 29, 2014
A recent “Heard on the Street” column in the Wall Street Journal (“Heeding 1994's Bond-Market Lesson,” July 27, 2014) is correct in saying that there’s a lesson to be learned from the 1994 bond market—but it draws the wrong lesson.
TOPICS: Bond FundBondsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeFund RegulationInterest RateMutual FundRetirement ResearchSavingsTradingTreasury
Some Facts About Roth IRAs and the Investors Who Use Them
By Todd Bernhardt
July 17, 2014
Since the individual retirement account (IRA) was created as part of the Employee Retirement Income Security Act of 1974 (ERISA), it has become a resounding success, accounting for the largest pool of assets in the U.S. retirement market. By the end of 2013, Americans held $6.5 trillion in IRAs, with 45 percent of that total—$3.0 trillion—invested in mutual funds.
TOPICS: Bond FundEquity InvestingFixed IncomeInvestment EducationInvestor ResearchMutual FundRetirement ResearchSavings
Industry Leaders Address Evolving Industry Challenges and Opportunities
By Miriam Bridges
June 9, 2014
In conversations exploring outcome-oriented investing, the globalization of the fund industry, and the next generation of retirement plans, industry leaders offered their perspectives on serving investors in an evolving world during several insightful sessions at ICI’s annual General Membership Meeting, held in Washington May 20–22.
TOPICS: 401(k)EventsGMMInternationalMutual FundRetirement PolicySavingsShareholder
GMM Policy Forum: BlackRock’s Larry Fink Speaks with ICI’s Paul Stevens
By Todd Bernhardt
May 21, 2014
The fund industry needs to stop focusing on the moment and start focusing on outcomes when advising investors on their resources, said Laurence D. Fink, chairman and CEO of BlackRock, at ICI’s Annual Policy Forum, part of the Institute’s 56th General Membership Meeting (GMM).
TOPICS: 401(k)BondsEventsFinancial MarketsFund RegulationGMMInternationalInvestment EducationMutual FundRetirement PolicySavingsShareholderTreasury
Washington: Put Your (Retirement) Money Where Your Mouth Is
By Mike McNamee
March 4, 2014
When President Obama announced a new effort to expand access to retirement savings opportunities, ICI was among the first to applaud. The Administration’s “myRA” looks to provide a new option for Americans who want to put money aside for retirement, but who might not have access to a retirement plan through their workplace. These accounts would complement the wide array of investment options already available to these workers.
TOPICS: 401(k)Government AffairsInvestment EducationRetirement PolicySavingsTaxes
America’s Retirement System Is Strong
By Sarah Holden
December 18, 2013
One year ago, ICI released its landmark study, The Success of the U.S. Retirement System, a compilation of research from a wide range of sources, which found that the country’s retirement system is fostering economic security in retirement for Americans across all income levels.
TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes
ICI’s Guide to Avoiding a Common 401(k) Tax Trap
By Mike McNamee
December 9, 2013
A tax trap for retirement savings is catching many smart people unaware. If allowed to go unchecked, it could harm the retirement savings of millions of Americans. A columnist for the Washington Post was just the latest in a long list of victims.
TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes
Yes, DC Follies Hurt Retirement Savers—But Let’s Not Overstate
By Brian Reid
October 10, 2013
“Debt ceiling follies” certainly do put retirement savers and their assets at risk. On that, ICI agrees with a recent Washington Post blog.
TOPICS: 401(k)Financial MarketsMutual FundRetirement ResearchSavings
Revenue Estimates of Restricting Tax Deferral: It Ain’t Necessarily So
By Peter Brady
September 20, 2013
Fifth in a series of posts about retirement plans and the policy proposals surrounding them.
In previous Viewpoints posts, I explained that retirement contributions are neither tax deductions nor tax exclusions, but rather are tax deferrals. I also explained why, in my opinion, the two most prominent proposals to restrict qualified deferred compensation are flawed (post three and post four).
TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes
Tax Reforms Should Not Favor DB Plans over DC Plans
By Peter Brady
September 19, 2013
Fourth in a series of posts about retirement plans and the policy proposals surrounding them.
In The Tax Benefits and Revenue Costs of Tax Deferral and in two previous Viewpoints posts (post one and post two), I explained the benefits that workers get from deferring tax on compensation set aside for retirement.
TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes
A ‘Modest’ Proposal That Isn’t: Limiting the Up-Front Benefits of Retirement Contributions
By Peter Brady
September 18, 2013
Third in a series of posts about retirement plans and the policy proposals surrounding them.
In two previous Viewpoints posts (post one and post two), I explained the benefits that workers get from deferring tax on compensation set aside for retirement.
TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes
Marginal Tax Rates and the Benefits of Tax Deferral
By Peter Brady
September 17, 2013
Second in a series of posts about retirement plans and the policy proposals surrounding them.
In a previous Viewpoints post, I discussed the difference between tax deferral—the tax treatment applied to retirement savings—and tax deductions and exclusions, such as the mortgage interest deduction or the exclusion of employer-paid health insurance premiums from income. The difference is often overlooked or misunderstood, leading to inaccurate analysis and harmful policy proposals.
TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes
Retirement Plan Contributions Are Tax-Deferred—Not Tax-Free
By Peter Brady
September 16, 2013
First in a series of posts about retirement plans and the policy proposals surrounding them.
In today’s fiscal and political climate, taxes are never far from politicians’ minds. Whether to achieve comprehensive tax reform or to raise revenue to meet budget deficits, members of Congress are now considering changes to a range of tax code provisions—including those governing retirement policy. Any comprehensive effort to address fiscal policy or tax reform should examine every option, but some discussions of retirement policy have been misguided. The tax treatment of retirement savings—tax deferral— too often has been lumped together with tax deductions (such as the deduction from income of mortgage interest expense) and tax exclusions (such as the exclusion from income of employer-provided health insurance premiums).
TOPICS: 401(k)Investment EducationMutual FundRetirement PolicySavingsShareholderTaxes
CAP Claims About the 401(k) System Are Misguided
By Paul Schott Stevens
September 4, 2013
The concerns of the Center for American Progress about the 401(k) system (covered August 20 in “A Better Way to Save for Retirement?”) are mistaken.
GMM Panelists Discuss Retirement Savings and Financial Education
By Miriam Bridges
May 17, 2013
Americans need greater access to savings vehicles and better financial education to help ensure that they use them effectively, fund industry experts told attendees at the 55th Annual General Membership Meeting.
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