August 4, 2014 (PLANSPONSOR.com) – The funded status of U.S. corporate pension plans declined in July to 90.8%, according to BNY Mellon’s Investment Strategy and Solutions Group (ISSG).
The BNY Mellon Institutional Scorecard for July notes assets
for the typical corporate plan fell 1% during the month while liabilities rose 0.3%, leading to the net decline in funded status. The slight increase in
liabilities for corporate plans in July was mainly due to the Aa corporate
discount rate remaining at 4.32%. As ISSG researchers explain, pension plan
liabilities are calculated using the yields of long-term investment grade
bonds. Lower or flat yields on these bonds result in higher liabilities.
Andrew D. Wozniak, head of fiduciary solutions at ISSG,
estimates that the typical U.S. corporate plan is allocating around 26% of assets
to long-duration bonds as liability driven investing (LDI) programs are
instituted (see “Implementing
a Liability Driven Investing Strategy”).
“Funded status performance in July was a tale of two
markets, July 31 and the rest of the month,” he said. Year to date, the funded
status of corporate plans is down 4.4%, according to the ISSG scorecard.
Public defined benefit plans in July missed their return target by
2.0% as assets fell 1.4%. Year over year, public plans have exceeded their
target by 3.7%, ISSG says.
For endowments and foundations, the real return in June was negative 2.4%, as assets declined 1.7%. Sharp declines in small cap and private
equities drove the poor monthly performance, ISSG says.
The BNY Mellon Investment Strategy and Solutions Group is a
division of The Bank of New York Mellon.
August
4, 2014 (PLANSPONSOR.com) – Many single parents prioritize saving for their children’s college costs over saving for their own retirement,
according to an Allianz study.
When asked about their motivation for developing and
executing a long-term financial plan, nearly half (45%) of single-parent
respondents identified “saving for my kids’ education” as the top priority.
This is six points higher than the figure for “traditional families” (39%),
which Allianz identifies as married couples of the opposite gender with at
least one child younger than 21 living at home. Other household structures
examined by Allianz, i.e. “modern families,” prioritized children’s future education
costs 26% of the time.
The study suggests this savings strategy is proving
problematic for single parents, as more than three-quarters (76%) said that
preparing for retirement and their child’s college expenses at the same time
causes them a great deal or some amount of stress.
This response comes despite the fact that single parents
indicate they are on a relatively stable financial footing and exhibit strong
confidence in their financial planning skills, Allianz says. Single-parent
family respondents in the study had an average annual household income of
nearly $85,000—the study required a minimum of $50,000 for all cohorts—with an
average of 6% of income coming from child support. Nearly two-thirds (64%) of those
in the study receive no child support at all. Along with solid earnings, more
than four in 10 (41%) single-parent families reported having excellent or above
average knowledge regarding financial planning, compared with only a third of other
modern families.
Yet,
balancing retirement savings and college funding continues to be a complex
issue for this group, Allianz researchers explain (see “Linking
Student Debt and Retirement Savings”). Although more single parents
identify themselves as savers (62%) than spenders (38%), more than
three-quarters (76%) say they are worried about running out of money in
retirement—compared with only 70% of traditional families. And less than half
of single parents (45%) indicate they know exactly what steps to take to ensure
they have a comfortable retirement. This compares with nearly six in 10 (57%)
of traditional family respondents who believe they understand the steps
necessary to ensure a comfortable retirement, according to the Allianz data.
Katie Libbe, a vice president of consumer insights for
Allianz Life, explains that single parents are often forced to confront the retirement
equation by themselves, which places pressure on their ability to find the
right balance between saving for a child’s college expenses and saving for
their own future income needs.
“Because they are on their own, single parents often lack
the flexibility to address multiple goals, and therefore tend to have a more
narrow focus on their savings priorities,” she adds.
Although single parent respondents seem willing to
prioritize their children ahead of themselves, they also recognize that this
can have negative repercussions. More single parents (37%) agree that they are
putting their financial future at risk to take care of their children than
other modern families (32%). As a result, nearly half (49%) of all single
parents say they cannot possibly save enough for retirement, Allianz says.
Despite this, single parents remain dedicated to assisting
their children either through college funding or getting them started
financially. The study shows nearly half (45%) of single-parent families say it
is a parent’s responsibility to help adult children get started financially,
versus 37% of other modern families.
“While single parents have several options to help pay
college expenses—including grants, scholarships, and student loans—they’re
solely responsible for their own retirement savings,” Libbe says. “Depleting
their nest egg to fund education costs can be dangerous. To avoid sacrificing
retirement savings, a good plan may be to explore college saving and borrowing
options first, then determine how those tactics fit with their larger savings
strategy.”