What your employer isn't doing to plan for Your Retirement

Creating your own Personal Pension
can provide you dependable, growing income.

Are you as prepared as you think?

According to your parents and grandparents, things were always better “back in my day.” While this might not be the case in every scenario, if they're talking about retirement, chances are they're right.

There has been an undeniable shift in the way companies handle their contributions to employee retirement. It's not just the farewell dinner and the gold watch we don't get anymore, although that tradition has certainly fallen out of common practice. The differences between the retirements of yesteryear and those of today are more serious—and unfortunately, often detrimental to the retiree.

The cultural effects of career-hopping

For several generations, the status quo for the typical American career path remained unchanged. People, for the most part, got a job either in the family profession or upon graduating college (or high school, if they weren't able to attend or afford college). Once they had a good job, they’d stay until retirement—often putting in 30 years or more at the same company.

However, as businesses became more competitive, there were shifts on both the employer and employee sides. Employers began to focus more on recruiting top talent, while employees started valuing higher personal satisfaction over longevity. Switching jobs in search of greener pastures has become commonplace.

During this shift, the traditional pension plan has suffered and in some cases been completely abolished.

The new face of pension plans

When lifetime of loyalty was the standard, employers offered attractive pension plans as part of a benefit package to attract and retain strong employees. For the most part, these plans were simple: Once you'd worked for the company a certain number of years, you'd continue regularly receiving a percentage of your salary when you retired. The longer you worked for the company, the greater the percentage.

These plans required little or no investment on the part of the employee. Because the brunt of the financial responsibility for a traditional pension plan falls on the employer, this option was far less attractive for businesses when short-term employment became the norm. 

Enter the 401(k). 

Introduced in the early 1980s, this alternative to pension plans was billed as having the potential to yield greater returns than a set pension while affording the employee the benefit of taking their account with them when they found a better job. The 401(k) retirement plan allows employees to contribute as much or as little to their retirement fund as they desire, and the account earns interest over time through an investment of the employee's choosing.

The first and most obvious drawback to this is the part about employee contributions. While pension plans were actually invested and paid out by the employer, 401(k)s are simply money that you've already earned, which is set aside for retirement. These plans, known as Defined-Contribution or Defined-Comp, have put the burdon of investment choice not on a professional Advisor, but on the client. What used to be the job of a department of professionals becomes your responsibility, saving the company money all along the way. 

From the corporate family to every person for themselves

In today's job industry, traditional pension plans are virtually nonexistent and when they are found they are woefully underfunded. Companies offer 401(k)s, IRAs, TSAs, and other income-dependent, interest-bearing retirement savings plans to offset the higher turnover rate—and to increase overall business profits, since these types of retirement “plans” are now what employees expect.

In any case, once you've retired, you're no longer the company's concern—you'll have to sink or swim on your own. It's important to understand the retirement investment options that are available to you in this more independent model, and make sure you're prepared to handle the burden of retirement through a plan that guarantees income throughout your golden years.

You can probably plan on buying your own gold watch, too.

To get more information on how Monolith Financial Group can help you plan for your Personal Pension give us a call (916) 367-6430

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Market Week: April 30, 2012

The Markets

Solid corporate earnings from some key tech and consumer companies encouraged investors to ignore dicey economic reports and push the S&P 500 back above 1,400. Despite a late-week downgrade to Spanish sovereign debt and a less-than-encouraging U.S. gross domestic product report, even the Global Dow was in positive territory, while a stand-pat stance by the Fed allowed bonds to remain relatively stable.

Last Week's Headlines

• U.S. economic growth slowed in the first quarter. The Commerce Department's initial estimate of gross domestic product was 2.2%, substantially lower than the previous quarter's 3%. Consumer spending picked up 2.9%, higher than the 2.1% of Q4 2011, but business spending was off. Another indicator of a slowing economy was durable goods orders, which plummeted 4.2% in March.
• Standard & Poor's downgraded Spanish sovereign debt by two notches to BBB+; the rating downgrade could increase the country's already steep borrowing costs in the future. S&P cited a lack of progress in reducing the country's budget deficit and the likelihood that financial assistance will be needed at some point. It also imposed a negative outlook, meaning further downgrades are likely. New unemployment statistics delivered a second blow by putting the country's unemployment rate at more than 24%.
• Another one bites the dust: Holland's prime minister and cabinet resigned after the coalition government failed to achieve budget cuts needed to reduce the country's deficit and comply with eurozone debt guidelines. Holland has supported the German-led campaign for tougher fiscal responsibility measures and financial assistance.
• Though it saw some hints of softening in the U.S. economy, the Federal Reserve's Open Market Committee essentially stayed the course, giving little indication of any potential post-QE2 actions and leaving interest rates intact.
• New home sales fell 7.1% in March, according to the Commerce Department. However, unseasonably warm weather may have accelerated some sales that would otherwise have occurred in the spring, since an earlier increase in February sales was revised upward.
• U.S. home prices hit their lowest level in almost a decade in February. The S&P/Case-Shiller index was down 0.8% for the month and 3.5% year over year, with Atlanta's 17.3% decline over the past 12 months leading the way. Seventeen of the index's 20 cities reported lower prices. However, Phoenix saw a 3.3% annual gain and its fifth consecutive monthly increase.

Eye on the Week Ahead

Unemployment data on Friday will be closely watched, especially in the wake of recent softer economic data. Additional earnings reports will vie for attention with consumer spending data and the Institute for Supply Management's manufacturing and services reports. Finally, Thursday will bring an announcement from the European Central Bank's meeting.

Key dates and data releases: personal income/spending (4/30); construction spending, U.S. manufacturing, auto sales (5/1); factory orders (5/2); business productivity/costs, U.S. services sector (5/3); unemployment/payrolls (5/4).

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Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.

Market Week: April 23, 2012

The Markets The Dow managed to top 13,000 once again, but the Nasdaq suffered from a hit to Apple's stock price. Less-than-disastrous Spanish debt auctions helped the Global Dow gain a bit.

Last Week's Headlines

• Manufacturers in the New York area reported substantial weakening this month. Though any number above zero is considered positive, the Federal Reserve's Empire State survey fell to 6.56 compared to 20.21 in March, hurt by disappointing numbers for shipments and unfilled orders. The Philadelphia Fed manufacturing survey also declined for the first time in five months, to 8.5 from 12.5 in March.
• March retail sales were up 0.8%, according to the Commerce Department. That put them 6.5% higher than the previous March. Building and garden equipment and supplies were up more than 14%, while nonstore sales rose more than 9% during the month.
• Housing starts slid 5.8% in March but were 10.3% higher than a year ago, according to the Commerce Department. However, building permits, an indicator of future activity, rose 4.5% during the month and were 30% higher than last year, though March single-family permits were down 3.5%.
• The Federal Reserve said industrial production remained flat for a second month in March, but was up 5.4% during the first quarter. And though manufacturing output declined 0.2% in March, it was up 10.4% for the quarter, driven in part by an almost 40% increase in cars and car parts. The percentage of the nation's manufacturing capacity utilized slipped slightly to 78.6% in March, 2.1% higher than last March but still below its long-term average.
• Demand at auctions of both short-term and 10-year Spanish debt could have been worse; the 10-year yield fell slightly to 5.74%. Meanwhile, the International Monetary Fund said it has received pledges of $430 billion in additional financial support for its loan fund to combat the European debt crisis. However, in the first round of French elections, President Nicolas Sarkozy, a key player in the eurozone's debt crisis battle plan, came in a close second to Socialist Party candidate Francois Hollande, whose support for the strategy is less certain. The two men face a runoff May 6.
• Buffetted all week: Legendary Berkshire Hathaway CEO Warren Buffett was not only diagnosed with prostate cancer, but legislation based on the so-called "Buffett Rule" failed to receive the necessary 60 votes for further consideration in the U.S. Senate. The legislation, which would have established a minimum 30% federal income tax rate for individuals earning at least $1 million annually, and its rejection will provide both parties with plenty of ammunition for the upcoming electoral shooting match.

Eye on the Week Ahead

Global investors will assess the French election's potential implications for the financial markets, and several U.S. tech and consumer bellwether companies will report earnings. The Federal Open Market Committee's Wednesday announcement is its next to last before Operation Twist is scheduled to expire. The first report on Q1 economic growth will suggest how well the first-quarter equities rally reflects the economy as a whole.

Key dates and data releases: new home sales, home prices (4/24); Federal Open Market Committee announcement/forecasts, durable goods orders (4/25); weekly new unemployment claims (4/26); Q1 initial gross domestic product estimate (4/27).

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Data sources: Includes data provided by Brounes & Associates. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice. Past performance is no guarantee of future results.

The Dow Jones Industrial Average (DJIA) is a price-weighted index composed of 30 widely traded blue-chip U.S. common stocks. The S&P 500 is a market-cap weighted index composed of the common stocks of 500 leading companies in leading industries of the U.S. economy. The NASDAQ Composite Index is a market-value weighted index of all common stocks listed on the NASDAQ stock exchange. The Russell 2000 is a market-cap weighted index composed of 2000 U.S. small-cap common stocks. The Global Dow is an equally weighted index of 150 widely traded blue-chip common stocks worldwide. Market indexes listed are unmanaged and are not available for direct investment.