Products October 16, 2013

Vanguard Streamlines Funds, Expands Admiral Shares

October 16, 2013 (PLANSPONSOR.com) – Vanguard announced intentions to streamline its investment offerings by merging five funds that have similar objectives and investment strategies.
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The mergers will affect two index funds—an actively managed growth fund and two retirement income funds. The following is a breakdown of the proposed changes, which are expected to take place over the next several months:

  • Vanguard plans to merge the $16.3 billion Vanguard Developed Markets Index Fund with the $18.4 billion Vanguard Tax-Managed International Fund. The funds share similar holdings and seek to track the same benchmark—the FTSE Developed ex North America Index. The merged fund will be named Vanguard Developed Markets Index Fund.
  • Two funds that track the Standard & Poor’s 500 Index will also merge. The $3 billion Vanguard Tax-Managed Growth and Income Fund will merge with the $143 billion Vanguard 500 Index Fund.
  • A merger of the $738 million Vanguard Growth Equity Fund and the $4.4 billion Vanguard U.S. Growth Fund is also planned. The two actively managed large-capitalization growth funds seek to provide long-term capital appreciation and employ a fundamental stock-selection process that emphasizes stocks with strong earnings potential.
  • The three portfolios of the Vanguard Managed Payout Fund series will also be consolidated into a single fund. Two funds—the $804 million Vanguard Managed Payout Distribution Focus Fund and the $110 million Vanguard Managed Payout Growth Focus Fund—will merge into the $531 million Vanguard Managed Payout Growth and Distribution Fund, which will be renamed Vanguard Managed Payout Fund.

The five funds slated for merger have already been made unavailable to new investors. Existing shareholders, though, are permitted to make additional investments in these funds prior to the mergers.

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More on the fund mergers is available here.

In a separate announcement, Vanguard suggested it will work to make the low-cost “Admiral Shares” of its index funds available to more individual, adviser and institutional clients. The firm also plans to streamline its share class offerings by gradually phasing out its Signal Shares classification.

Here is a brief rundown of the changes to Admiral Shares, which Vanguard introduced to provide shareholders lower fund expense ratios:

  • For eight of its index funds, Vanguard changed the name of Signal Shares to Admiral Shares, a move that enabled retail clients with a minimum investment of $10,000 to qualify for the lower-cost shares.
  • Vanguard also eliminated Admiral Share minimum investment levels for 24 funds, marking the first time these funds will be available to advisers and institutions without a minimum.

Additional information on the changes to Admiral Share availability can be found here. 

Benefits October 16, 2013

Retirement No Longer An Exit from Work Force

October 16, 2013 (PLANSPONSOR.com) – Older Americans’ views on retirement are changing, with fewer people seeing it as a complete exit from the world of work, according to a new survey.
Reported by

The survey, conducted by the Chicago-based Associated Press-NORC Center for Public Affairs Research, found the line between working and retirement is shifting. Eighty-two percent of people aged 50 or older, who are currently working and not yet retired, said it is likely or very likely that they will do some work for pay during their retirement. One-third of retired Americans said they did not have a choice in the matter. That figure increased to 54% for retirees younger than 65.

The recession has affected retirement planning. Before the recession, most people planned to retire at age 57, while the average age now is 62. Forty-seven percent of current workers now plan to retire at a later age than they expected to when they were 40. Financial need, health and the need for benefits were cited as the most important factors in their retirement decisions.

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Thirty-nine percent of workers aged 50 or older said they had $100,000 or less saved for retirement, not including pensions or homes. Twenty-four percent said they have less than $10,000 saved.

“The survey illuminates an important shift in Americans’ attitudes toward work, aging and retirement,” said Trevor Tompson, director of the center. “Retirement is not only coming later in life, it no longer represents a complete exit from the work force. The data in this survey reveal strikingly different views of retirement among older workers today than those held by the prior generation.”

 

According to research by the center, the portion of the U.S. population aged 50 or older is not only growing, but becoming healthier. Projections show those ages 65 and older will increase to 19% of the population by 2030, up from 13% in 2010. At the same, those ages 55 and older make up the quickest growing segment of the work force; by 2020, about one-fourth of American workers will be aged 55 or older.

The survey also found:

  • With older workers, 61% favor raising the cap on income subject to Social Security taxes, and 41% favor reducing Social Security benefits for those with higher incomes. In contrast, 29% favor gradually raising the minimum Social Security age, and 21% favor changing the way benefits are calculated so cost-of-living increases are smaller;
  • Twenty percent of working Americans aged 50 or older said they have experienced age discrimination in the job market or at work since turning 50. Forty-four percent of those who experienced such discrimination have looked for a job in the past five years, compared with 16% who did not experience such discrimination;
  • The nature of a person’s work shapes his view of whether age is an asset or liability. Twenty-eight percent who work in professional services see age as an asset, while only 3% of those in manufacturing agree; and
  • About half of workers aged 50 or older said their boss is younger than they. Those with bosses older than they are less likely to cut back on hours than those with younger bosses (9% vs. 23%). Those with older bosses are more likely to consider age an asset to their career (39% vs. 20%).

Research for the survey was conducted nationally by phone with 1,024 adults aged 50 or older. The phone interviews were conducted between August 8 and September 10.

More information, including the survey results, can be found here.

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