Generally speaking, if 401(k) and 403(b) plans are meant to be used to supplement retirement income they may be considered a success. However, if they are expected to serve as the primary source of retirement income (along with Social Security), success is proving to be elusive for most participants.

A recent Employee Benefit Research Institute study focuses on retirement feasibility for Baby Boomers and Gen Xers. The conclusions are not encouraging. One takeaway is that these groups will have insufficient retirement income even if they delay retirement past age 70. Moreover, the study indicated that factors like layoffs, mergers, and poor health may prohibit employees from working past age 65.

Over the last three decades, plan design has expanded, technology has improved, investment options have broadened, and service providers have enhanced their services. But participant decision making does not appear to have made these same strides. Multiple industry studies indicate that today's participants are making all the same retirement planning and investment mistakes they were making 25 years ago.

With the effective demise of defined benefit plans, much of the attendant costs, administrative complexities, regulatory, and investment and funding responsibilities have been removed from the employer's shoulders and essentially shifted to the participant. Now it is the less sophisticated participant who is expected to know how to determine the appropriate savings and investment strategy for their retirement. Unfortunately, to date all evidence indicates that this is not happening.

While most employers make a matching contribution and shoulder the administrative workload, there are a growing number of plan sponsors who are going beyond this to focus on their employees' retirement readiness. These sponsors are interested in considering ways to improve the successful outcomes of their plans, many of which require a commitment of time, effort, and additional cost.

Montgomery Retirement Plan Advisors is available to assist you in exploring all areas of plan analysis. From design considerations through implementation of personalized Participant Retirement Readiness solutions, we look forward to discussing options that support successful outcomes for you and your participants.

Can Plan Participants be Successful Timing the Market?

Market timing involves frequently switching between mutual fund asset classes to take advantage of the predicted future direction of the market. Market timing is the practice of attempting to consistently buy low and sell high with hopes to outperform a buy-and-hold strategy.

During periods of volatile market fluctuations, it is tempting to try to avoid the declines and take advantage of the inevitable rebounds as the stock market swings dramatically in both directions. But market timing is a difficult and risky practice. Trying to time the market and missing a few of the best days can significantly affect returns; the chart below shows that jumping in and out of the markets can be hazardous to your financial health. If your timing is off - even for just a few days - your results can be impacted significantly compared to a long-term buy-and-hold strategy.

Why market timing doesn't make sense
History proves that investing for the long-term and remaining invested through market fluctuations is appropriate for many retirement plan investors. For more information about market timing, contact David Montgomery at 813.909.9305 or email info@m-rpa.com.

2011 Trends and Experience in Defined Contribution Plans

AON/Hewitt recently released the results of a survey they conduct every couple of years on trends and experiences in Defined Contribution (DC) plans. This year's survey included 546 employers of various sizes and industries. About 30% of the Fortune 500 was represented in the survey. Not surprisingly, DC plans now constitute the primary source of retirement income for retirees. Additionally, automation in DC plans, which includes auto enrollment, auto escalation, and auto rebalancing, is becoming a standard retirement plan feature.

Investments continue to be a key area of focus for plan sponsors. Most employers offer investment options and advice tools to assist participants in making better investment decisions. Target date funds are now found in 8 of 10 plans. Additionally, outside investment advisory services (investment guidance, advice, managed portfolios) continue to grow to assist both plan sponsors and participants.

Plan expenses are the top concern of plan sponsors. With legislation focusing on expenses, plan sponsors are actively seeking to understand fees better and develop effective ways to communicate fees to plan participants. Additional highlights from the survey include:

• 93% of plans include employer contributions.
• 85% of plans include employer matching contributions.
• 43% of plans vest immediately.
• 56% of plans have auto enrollment.
• 78% of plans default into age appropriate target date funds.
• 51% of plans offer auto deferral escalation.
• 83% of plans employ an outside investment consultant.
• 87% of plans have an investment policy statement.

Communication Corner: The Case Against Market Timing

This month's sample participant communication memo discusses Market Timing and why this particular investment strategy is discouraged. In a nutshell: investors who sell at the wrong time often miss significant portions of future recoveries.

Email info@m-rpa.com for a copy that you can print and distribute to employees.

News from MRPA

• Montgomery to Speak at Center for Due Diligence Conference (CFDD)
  Mike Montgomery will be addressing the Center for Due Diligence conference in Chicago on October 17 and 18, 2011. On Monday, October 17, he will participate in a panel discussion on qualifications for independent fiduciaries "3(38) Investment Management Services: Are You Qualified?", and the following afternoon, on "Multiple Employer Plans: A Fiduciary Risk Solution?"

This material is intended for informational purposes only and should not be construed as legal advice and is not intended to replace the advice of a qualified attorney, tax adviser, investment professional or insurance agent. Montgomery Retirement Plan Advisors does not warrant and is not responsible for errors or omissions in the content of this newsletter.

Securities and investment advisory services offered through Financial Telesis Inc. Member FINRA / SIPC. Montgomery Retirement Plan Advisors and Financial Telesis Inc. are not affiliated.