When I was pregnant with my first child, I went into sticker shock when I learned the cost of childcare. I had assumed it would be expensive, I just didn’t realize that my recent move to Massachusetts meant I would be paying prices that didn’t just rival – they exceeded -- New York and some other places I had previously lived in.
And the trend continues. A study by Child Care Aware® of America found that Massachusetts had the highest average annual cost for full-time infant daycare in the U.S. at an average $14,980 per year, and that top expense continues through age 4. It’s only when a child enters school that the state drops off the top 10 list.
Time to read your 401(k) statements: New regulations aim to make it easier for participants to understand the fees
If you participate in your employer’s 401(k) plan, you may have already noticed a change in the format of the statements that are provided to you, detailing your investments. If you haven’t, keep an eye out – by Aug. 30th, the information provided on there will be changing.
The U.S. Department of Labor is requiring that plan sponsors (your employer) provide more detailed information on fees and expenses related to 401(k) plans. It’s important to note that the fees listed are not new. They’ve always been there. It’s just that now the DOL is trying to make it easier for participants to see the administrative expenses charged for running a program, as well as the individual expenses – or those fees that may have been deducted from a participant’s account based on actions they may have taken, such as redemption or loan fees.
Plan sponsors must also notify participants about the existence of any revenue-sharing arrangements. This is a practice that involves using a portion of the investment-related fees paid by participants to help cover a plan’s administrative costs. It is this type of so-called “soft dollar” arrangement that has been the subject of some debate, and helped prompt the new fee disclosures. (To get a sense of the historical context around the fee debate, read this 2006 column by Bloomberg columnist John F. Wasik, “401(k) Fees Are Still Exorbitant, Buried Secrets.”)
Previously there was concern about administrators passing along fees to participants in the form of individual fund expense ratios, which is an annual percentage deducted from plan assets. The lack of transparent disclosure raised criticism that some plans may have been paying excessive administrative fees, and investors were buying into them without considering other, lower-cost options such as index funds. Other concerns included the potential for conflicts of interest: Plan sponsors and administrators may have an incentive to pick funds that pay more in revenue sharing, instead of evaluating funds for being the best investment. (SmartMoney highlighted this ongoing concern in a May 2012 article, “Will 401(k)s Abandon Revenue Sharing?”)
With school starting in just a month, parents and their kids are beginning to shop for those supplies, clothes, and other gear needed to make it through the upcoming year. The back-to-school shopping season is the second-busiest for retailers after Christmas, and the National Retail Federation, one of the bigger groups representing the industry, expects this year to be a banner year. Spending, according to the NRF, for combined K-12 and college, is expected to reach a record $83.8 billion.
The growth may be due, in part, to record levels of elementary and middle school enrollment, as about 3 in 10 Americans say they have children between the ages of 6 and 17.
But the bigger boost in spending may actually be from online shoppers, who are expected to spend 27 percent more than those who hit the actual physical stores. Internet shoppers are forecast to spend an average $874 for back-to-school supplies, compared with $688 for those in stores, according to an NRF survey, which polled more than 8,500 consumers.
Generation Y Adopting Age-Based Asset Allocation Retirement Programs at a Faster Pace Than Other Age Groups, Fidelity Says
Members of Generation Y appear to be embracing age-based asset allocation retirement programs faster than other age groups, according to an analysis done by Fidelity Investments in the second quarter.
The Boston-based investment firm analyzed the 401(k) accounts of about 2.2 million Gen Y participants – which the company defined as those born between 1979 and 1991 – and found that this age group has stronger adoption of target date funds and Roth 401(k) programs compared with others.
About 67 percent of Gen Y participants are within +/- 10 percentage points of the Fidelity Freedom Fund equity rolldown schedule, which is a gauge used by the company to determine appropriate age-based asset allocation. That compares with just 45 percent across all 401(k) participants, the company said.
Many Gen Y participants achieved the diversification through the adoption of target-date funds, which are often the default option for plans with auto enrollment. For those plans that offer target-date funds as investment options, about half of Gen Y participants allocated all of their assets in a target date fund compared to 30 percent of participants of all ages.