A Look at the Middle Class Boomer - in Two Parts

According to the most recent Investment Company Institute Factbook, the fund industry, based on what they refer to as emergence of fund entrepreneurs have made the middle class the money class.  With 90 million households owning mutual funds, either in their 401(k)s or some other type of defined contribution plan available n the workplace or through their investments in various types of IRAs, a picture of a mature and developed industry has emerged.

With 90 million Americans holding $12.2 trillion in assets in these investments, the ICI study, the 50th anniversary of this industry marketing factbook, points towards the ability of these funds to achieve a wide range of investment strategies that have helped 44% of households move closer to their financial goals. Admittedly, this increase in investment activity is the direct result of the creation of defined contribution plans and IRAs as pensions became less prominent in for retirement income.

While households have found the use of mutual funds to their liking, so have institutional investors and businesses found the tool a good place to park cash and short-term assets.  This increase, while not noted in the research may be contributing to the length of the recent economic downturn as business is reluctant to invest in their own operations, preferring to keep cash (which the ICI does note as a record) in money market accounts instead. Many of these entities have employed ETFs to a greater degree to keep those assets even more liquid.

But not all is well in terms of who offers these products. More here along with part two in this series.

Paul Petillo is the managing editor of Target2025.com/BlueCollarDollar.com and a fellow Boomer.

Sometimes, Your Retirement Plan Needs a Different Approach

What if you knew there were going to be more risks, more downturns and more recoveries?  What would you do?  Run from the danger? Go even more conservative?  Or would you run towards the risk instead?

If you are in your fifties, the best you can do in the face of increased market risks is to increase your contributions and get your financial house in order. This is prime time to make concrete plans about what you envision your retirement will be like, how much you will need and how much you have. Refinance your mortgage and pay off your debts. (Easier said than done; but if you don’t focus on that now, you will not come close to where you want to be, healthy portfolio or not. Good advice for all of the previously mentioned age groups, but doubly so for this group.)


Risk isn't going away.  In fact the new retirement plan may be to run towards the danger.


Paul Petillo is the Managing Editor of Target2025.com and a fellow Boomer.

Scaring You into Investing More

This article previously appeared as a new feature at Target2025.com: Repercussion- A Retirement Review.

These days, if you really want to scare someone, use the words retirement and poverty in the same sentence. David McPherson used those words in a recent article published at ABC News.  Unfortunately, his suggestions may just help you get only a hair's breadth away.

Just a couple of thoughts on his suggestions: The sooner we think of the money we put away as an "investment" and not savings, the sooner we will get over the shock that we might lose a little ground along the way in order to gain more over the long-term. Far too many writers make this mistake.

He also suggests that a 1% contribution is the best place to start. I strongly disagree. A five percent jumping off point, match or no match, will not, in all most every instance, have any effect on a person's take-home pay.  And that is usually the focus of concern for most beginners whose focus is on the prize at the end of the week; not the end of the career.

The last thought: Don't be conservative about this effort.  Risk is the only path to reward over a long period of time.  If you are young, assume a lot of it.  As you age, assume less.

Read his thoughts here.

Will More Plan Participants Ruin Your Retirement?

It was often thought that the laws of scale would solve everything.  The more the merrier so to speak.  When applied to your 401(k) plan although, the opposite might be true.


Auto-enrollment in 401(k) retirement plans was mandated in the Pension Protection Act of 2006. The PPA saw the idea as a way to help ensure that employees at least had a jump start at retirement. By enrolling new employees automatically, the theory of getting more workers involved in the plan sooner would them an opportunity to grow their future right from the first day (in some cases). At the time, it was thought to solve the under-use of these plans by a great many workers.

Is a lower company match going to impact your retirement future?  Will you increase your contribution to offset the lower match or do as some have historically done, reduce your contribution in kind?

Read more about the high cost of autoenrollement on your retirement plan.

From Paul Petillo, Managing Editor of Target 2025.com and a fellow Boomer.

Turning Time into Retirement Investments

It is getting towards the end of the year. And while this past ten months has been a scary ride for those that are still employed, it might be possible to turn it into a boon for Boomers close to retirement. Chances are, you have worked harder this past year than you have in any within recent memory. Chances are, this included not taking vacation time or tapping any of that sick pay your employer might give you.

Is it possible that this could be your chance to max out your 401(k)?

We have found that 2009 was not so kind to those investing in their 401(k). Employers have reduced or eliminated their matching contribution and many recent surveys have suggested that this will be slow to return. What was once considered the competitive lure for many employees has no simply become a sidebar in the search for a job. For many, and employers know this all too well, just landing employment is benefit enough.

But what about those who already have a job? What if you are a long-term employee? Many of us, as we have noted numerous times in this blog (post about matchless strategies) and on BlueCollarDollar.com, have taken the wrong path when confronted with this issue. Far too many of us reduced our contribution to our defined contribution plans when this occurred. Some have even determined that if the employer doesn't match, you shouldn't contribute either. And just as bad for your retirement future, you did nothing to help make up for that plan shortfall.

As we have noted, the best way to make up for this decrease in contribution is to increase the one you are making. For older workers, the higher salary they receive may make this possible. For younger workers, the decision becomes one of increased frugality, living well within their means and doing without some of the luxuries they may have built into their budget. If your employer contributed 3% and you contributed enough to make the match effective, your best move is to make up for the employer's shortfall.

Yet, there may be another way that your employer might be willing to allow. In an effort to get more people contributing more to these all-important accounts, the Obama administration has allowed retirement investors the option of rolling unused vacation pay or accrued sick pay into their plans.

This past year may have seen an increased workload at your job because of employee cut-backs. This may have forced you to defer a much needed vacation in favor of staying right where you were. Fear of seeming dispensable at a critical time, even though the need for vacation has been proven the best way to increase productivity. But this leaves you with an account full of unused vacation time.

Contributing this sort of payment to your 401(k) requires your employer to make some changes to their plan. Even as some have reduced the availability of their matching contributions, some have added this provision to their plans to allow exiting employees to have their unpaid time put into their 401(k) plan prior to rollovers and to allow those who did not use what they had, to use the time to contribute to existing accounts. The later can only be done if you have not maxed out your account (currently at $16,500 for those under 50 and $20,000 for those over that age).

Companies may find this incentive very alluring. Not only does it make them slightly more competitive (for one, employees are on the job more throughout the year) but it offer the illusion of a benefit increase without the actual pay increase.

If your company currently does offer this or is considering it, keep in mind that it will not come with or apply to any matching benefits the company offers. And they may also see it as a temporary offering rather than a fixed part of the plan. The only thing that is certain is the option must be nondiscriminatory.

Paul Petillo is the managing editor of BlueCollarDollar.com and a fellow Boomer