There is currently $5 Trillion invested in Individual Retirement Accounts (IRAs), $4.7 Trillion invested in self-directed retirement plans provided by employers (401(k), 457, and 403(b) plans), and $2.3 Trillion invested in traditional pension plans offered by private companies. These numbers are stunning for a number of reasons. First, self-directed retirement plans (IRAs, 401(k)’s, etc.) dramatically dwarf the amounts invested in traditional pensions. This is part of a long-term trend, as employers move away from traditional pensions, but the magnitude of the shift is striking. With the assets in IRA’s surpassing the $5 Trillion mark earlier this year, the amount of money in individual accounts is moving ahead of employer-sponsored plans. What’s more, it is anticipated that IRA’s will continue to grow relative to employer-sponsored plans as people retire and roll their savings from their ex-employer’s plan into an IRA. This matters because investors in IRA’s have even less help in creating and maintaining their portfolios than investors in employer-sponsored plans. (more…)
Archive for December, 2012
Getting Help in Choosing and Managing a Portfolio
Posted in 401(k), Asset Allocation, Diversification, Financial Advisors, financial planning, Investors, Long-term investing, Low Cost Investing, Portfolio Investing 101, retirement planning, Risk, tagged individual retirement accounts, investment advice, IRAs, online brokers, self-directed investing, Target Date Funds on December 20, 2012 | Leave a Comment »
The Difference Between Marginal and Effective Tax Rates
Posted in 401(k), Taxes, Tid Bit, Wealth, tagged Bush-era tax cuts, effective tax, federal tax bracket, fiscal cliff, marginal tax, tax brackets on December 14, 2012 | 2 Comments »
Guest post by Contributing Editor, Matthew Amster-Burton, Mint.com.
Think you’re unlucky? I know a guy who’ll pay 99% of his income in taxes if the Bush-era tax cuts expire at the end of December. (more…)
Investing for Income vs. Total Return
Posted in Bonds, Dividends, Income Investing, Long-term investing, retirement planning, Risk, tagged bond yield, Larry Swedroe, longevity risk on December 10, 2012 | 2 Comments »
One of the most-discussed issues in long-term investing is whether to focus on income generation or simply to think in term of total return (price gains plus income). The discussion of this topic often focuses on whether investors should seek out stocks that pay dividends vs. simply planning to sell a fraction of their portfolio periodically to provide income. I recently wrote a long article on this topic, which has been cited in a very interesting discussion of this theme going on at Bogleheads. One of the most active participants in the debate on the Bogleheads forum and elsewhere is Larry Swedroe, a well-known advisor and author. As I read the Bogleheads discussion thread, it strikes me that there is considerable confusion around this topic, so I thought I would add a few more thoughts. (more…)
A Picture is Worth a Thousand Words: The State of the Economy
Posted in Asset Allocation, Bonds, Inflation, Retirement, tagged bond yields, Consumer Price Index, Federal Reserve Economic Database, labor participation rate, recession, Treasury bonds, unemployment, unemployment rates, US economy on December 7, 2012 | 1 Comment »
Availability of timely data is at the core of effective financial and economic analysis. The Federal Reserve Economic Database (FRED) provides a vast array of economic time series via an intuitive graphical interface. If you want to get a read on the U.S. economy, FRED is an outstanding resource. The ability to quickly create customized charts makes it quick and easy to examine a wide range of data. In this article, I am going to show a number of these charts, while exploring the overall economic U.S. economic picture. (more…)
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