Data and Research October 20, 2015

COUNTRY Financial Indexes Americans' Fears

Retirement and health care are Americans’ biggest financial fears, followed by affording their rent or mortgage.
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The biggest financial fears keeping Americans up at night are being able to retire comfortably, cited by 30%, followed by health care expenses (19%) and affording their rent or mortgage (11%). Financial issues are so critical to Americans that 59% said they would rather discuss “the birds and the bees” with a stranger than their own financial situation. Among women, this jumps to 63%, compared with 55% of men. This is according to the latest COUNTRY Financial Security Index.

For those 65 or older, health care is the biggest worry, cited by 43%, followed by affording rent or mortgage and a child’s education. On the other end of the spectrum, Millennials are focused first and foremost on their job security, then paying for housing and being able to retire comfortably.

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“As Americans meet financial goals throughout their lifetime, they have less financial hurdles to worry about,” says Joe Buhrmann, manager of financial security at COUNTRY Financial. “However, even at earlier stages in life, it’s important to take a long-term view and make sure to plan ahead for retirement and health care expenses, as these concerns become front of mind at older ages.”

Overall, 83% of Americans have some kind of anxiety about their finances. For these people, COUNTRY Financial recommends that they create a budget, contribute to an emergency fund and start saving early. “Taking a long-term view and having a game plan can really provide a solid sense of security,” Buhrmann says.

The COUNTRY Financial Security Index is based on a survey of 1,000 adults conducted by GfK.

Investing October 20, 2015

Is Retirement Industry's Focus on Costs Too Much?

“Cost is not dispositive of prudence,” says Eugene Maloney with Federated Investors.
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Retirement plan fee litigation over the past decade, in addition to fee disclosure rules, has some plan sponsors placing too much importance on cost when deciding what investment decisions are prudent, asserted Eugene F. Maloney, executive vice president at Federated Investors, Inc. in Pittsburgh, Pennsylvania.

One of the things plan sponsors fear most is a notice from the Department of Labor (DOL) about a plan investigation, but process and documentation should protect them. “Committee minutes are very important,” Maloney told attendees of the American Retirement Association’s 2016 ASPPA Annual Conference.

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He pointed out that in its decision in Tibble v. Edison International, the U.S. Supreme Court noted that the Employee Retirement Income Security Act (ERISA) was based on then decades-old trust law. “Cost is the sixth factor to consider in determining whether something is prudent, based on trust law,” Maloney said. “Cost is not dispositive of prudence.”

Yet, many of the excessive fee lawsuits that have been filed have been lost or settled. Maloney believes this is because ERISA attorneys are only ERISA attorneys and may not be as familiar with trust law. “And they don’t bother to ask their trust law counterparts about the definition of prudent, or reasonableness or best interest,” he added.

While the industry is focused on lowering fees for retirement plan participants, Maloney contended that focusing too much on low fees could lead to overlooking better performing funds for participants.

On another note about prudence with retirement plan investing, Maloney pointed out that there is no absolute duty to divest underperforming funds in retirement plans. “If you have a prudent process in place dealing with the treatment of underperforming investments, you are covered; the law will protect you,” he said.

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