Benefits February 5, 2004

Lack of Education Fuels Confusion Over 401(k)s

February 5, 2004 (PLANSPONSOR.com)-A lack of education about 401(k) plans and retirement planning leaves many afraid of the stock market and unsure of how to plan for retirement, a Nationwide Financial survey revealed.
Reported by

The survey polled 2,600 workers was broken down into three categories: workers who currently participate in a 401(k) plan, workers who have access to but choose not to contribute to a 401(k) plan, and workers who are uncertain if their employer offers a 401(k) plan.

Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.

The survey revealed many respondents were not familiar with what a 401(k) plan is or how to use one in their financial planning. Additionally, those who were not participating in a 401(k) plan were15% less confident in the stock market than those who participate.

Some respondents were unsure if they had access to the option, with 29% responding they had not asked if their employer offered one because they didn’t know what a 401(k) plan was. Other reasons they did not know if one was available were “I don’t need one anyway,” “I don’t know who to ask,” “I’m too busy,” and “I’m reluctant to ask.”

Some respondents acknowledged that a 401(k) plan was available to them, but they decided not to participate. Most, 42%, responded that they had not taken part in a 401(k) plan because they cannot afford it, and 22% said they plan to invest in the future, but haven’t started yet. Nearly a third, 30%, said Social Security would be the largest source of funding for their retirement, while 20% hadn’t contributed to a 401(k) because they are planning to use “other personal savings” A smaller fraction,17%, replied they had no need because they did not plan to retire and would always work, while 12% said there are other saving priorities.

Although those participating in 401(k)s were more likely to know the basics, many were unfamiliar with some common terms, such as asset allocation. The survey found nearly half, 48%, of respondents believed it pertained to company match, which some said it was choosing a percentage of salary to invest in a 401(k) plan, or having money taken out of their paycheck to go into a 401(k) plan.

The survey was conducted by BIGresearch, a consumer market intelligence firm based in Columbus, Ohio.

Investing February 4, 2004

Master Trust Turns in 22.61% 2003 Performance

February 4, 2004 (PLANSPONSOR.com) - The median return for the 498 corporate, foundation/endowment, public and Taft-Hartley funds in the Russell/Mellon US Master Trust Universe roared ahead by 22.61% in 2003.
Reported by

According to a news release, the Universe’s median total fund also beat the 20.87% annual return of its benchmark (Russell 3000 Index 50%, LB Aggregate 40%, MSCI World ex-US 10%). Approximately 64% of the plans outperformed the benchmark for 2003.   The US Master Trust Universe represents a market value of $1.4 trillion with an average plan size of $2.7 billion.

“Strong performance in the overseas markets helped fund sponsors achieve a strong recovery in 2003,” said Tim Clark, Russell/Mellon senior client relationship manager. “Public plans had the highest returns of all plan types for the year and quarter.”

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

All but one asset class beat their respective benchmark last year, according to the announcement.   Leading the way, the median plan in the non-US Equity asset class showed a 37.85% gain and still bested the MSCI World ex-US Index (40.01%).  

Next, the US Equities, which returned 32.02%, outperformed the Russell 3000 Index (31.06%).    Fixed Income brought up the rear with non-US Fixed Income (23.37%) outperforming the Citigroup World Government Bond Index non-US (18.52%) and US Fixed Income returned 5.61%, beating the LB Aggregate return of 4.10%. In the final quarter of 2003, the 8.73% median return of the US Master Trust Universe beat the benchmark of 8.05%. Approximately 66% of the plans outperformed the benchmark during the fourth quarter.

Non-US Equity drove fourth quarter performance with a 15.91% return but lagged the MSCI World ex-US Index’s 17.04% return. The median plan in the US Equity asset class followed with a 12.62% performance compared to the Russell 3000 Index’s 12.43%.   Non-US Fixed Income (6.46%) underperformed the Citigroup World Government Bond Index non-US (6.71%) and US Fixed Income returned 0.74%, which beat the LB Aggregate return of 0.32%.

The average asset allocation in the US Master Trust Universe for the fourth quarter changed slightly mainly because of increases in overall plan performance.   The average now is US Equity 42%, US Fixed Income 24%, non-US Equity 19%, non-US Fixed Income 2%, Alternative Investments 5%, Real Estate 3%, Cash 2%, and Other (Private Equity, Oil, Gas, etc.) 3%.

«