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3 Retirement Trends for 2012


Several important changes go into effect this year which may be of interest to those planning for — or nearing — retirement. Encore talked to Tom Gonnella, senior vice president of corporate development for Lincoln Trust, to get an idea of the retirement industry trends for 2012.

1. 401(k) Fee Disclosure: A February 2011 study by AARP found that 62% of participants were unaware of how much they were paying in fees.  A new Department of Labor regulation that goes into effect on April 1, 2012 – probably the most significant of the 2012 trends — may help change that by requiring plan sponsors to reveal this information to participants.

While these new rules are a “step in the right direction, they fall short of full fee disclosure,” says Gonnella. The reason: “Notably, the disclosure of investment costs actually incurred by participants—typically the single largest plan expense—is not required by DOL regulation,” he says. The DOL only requires the disclosure of the expense ratios and the amount per $1,000 that it would cost participants to be invested in the fund, leaving the burden on the participant to perform the calculations to determine their investment expense.

Bottom line: “This is a good first step, but it’s just a baby step,” says Gonnella. For a detailed explanation of what this means and how it will impact you, click here.  For more information about how to dig into the fees you may be paying,  click here.

2. Rise of 401(k) Evaluation Services: The 401(k) disclosure rules will most likely lead to increased demand for services that will help plan sponsors evaluate the true cost of 401(k) offerings, says Gonnella.  “Plan sponsors may hire more advisers so they can uncover fees,” he says.  Furthermore, 401(k) evaluation services will be offered by a range of service providers, not just advisers, —from plan consulting firms to insurance agents, he adds.

3. Lowered Popularity of Target Date Funds: Many advisers predict that, at least in the short-term, volatility is the “new normal.” This potential for volatility “ will continue to push plans out of the ‘one size fits all’ target date fund offering and into customized asset allocation models that more accurately reflect plan and participant needs,” says Gonnella.


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About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.