| Benefit Briefs | Reforming Social Security to Increase Worker’s Retirement Income | Witnesses at a Senate hearing discussed Social
Security reforms that could boost potential retirement income for workers.
During the hearing, “The Strengthening Social Security to Meet the Needs of
Tomorrow’s Retirees,” before the U.S. Senate Committee on Finance’s
Subcommittee on Social Security, Pensions and Family Policy, Teresa
Ghilarducci, chair of the Economics Department at the New School for Social
Research in New York, New York, noted low and middle-income individuals are
particularly vulnerable to low levels of retirement readiness, pointing out
that these individuals are “more likely to take loans from their 401(k) or withdraw
monies from their 401(k) or individual retirement account (IRA).” Ghilarducci
also noted workers in these income ranges also tend to have more conservative
investment portfolios that produce lower returns. | | Economic Events | Sales of new
single-family houses in April 2014 were at a seasonally adjusted annual rate of
433,000, according to estimates released jointly by the U.S. Census Bureau and
the Department of Housing and Urban Development. This is 6.4% above the revised March rate of
407,000, but is 4.2% below the April 2013 estimate of 452,000.
THE
ECONOMIC WEEK AHEAD: Today,
the Census Bureau will release a report about durable orders for April and The
Conference Board will release its consumer confidence index for May. Thursday, the Labor Department will
release its initial claims report and the Commerce Department will reveal the
gross domestic product for the first quarter.
| | Market Mirror | Friday, the Dow was up 63.19 points
(0.38%) at 16,606.27, the NASDAQ increased 31.47 points (0.76%) to 4,185.81,
and the S&P 500 topped 1,900 (1,900.53) for the first time, with the
addition of 8.04 points (0.42%). The Russell 2000 climbed 12.32 points (1.11%)
to 1,126.19, and the Wilshire 5000 closed 98.73 points (0.49%) higher at
20,123.50.
On the NYSE, 3.2 billion shares changed
hands, with advancing issues outnumbering declining issues more than 2 to 1. On
the NASDAQ, 2.7 billion shares traded, with a near 3 to 1 lead for advancers.
The price of the 10-year Treasury note
was up 5/32, bringing its yield down to 2.536%. The price of the 30-year
Treasury bond increased 18/32, decreasing its yield to 3.398%.
WEEK’S
WORTH: For the week ending May 23, the Dow was up
0.70%, the NASDAQ climbed 2.33%, and the S&P 500 increased 1.21%. The
Russell 2000 gained 2.11%, and the Wilshire 5000 finished 1.31% higher.
| | Rules & Regulators | State Law Considered for QDROs for Domestic Partners | The Alaska Supreme Court ruled unmarried
domestic partners have a right to some retirement benefits via a qualified
domestic relations order (QDRO). The top Alaska court agreed with an earlier
ruling that insurance death benefits and 401(k) retirement accounts are not to
be considered domestic partnership assets and therefore should not be subject
to division through a qualified domestic relations order (QDRO). However, both
the upper and lower courts agreed that accrued union pension benefits can be
considered domestic partnership assets and are therefore subject to division
between separating domestic partners. The court followed the reasoning of another case that
because federal law does not define “marital property rights,” the court must
apply state law to define the term. | | Financial Sense | CalPERS Moves to Contain Contribution Increases | The California Public Employees’ Retirement
System (CalPERS) Board of Administration approved new actuarial policies to
contain rate increases for small public agency employers. A California law, the
Public Employees’ Pension Reform Act (PEPRA), closed existing benefit formulas
and created new benefit formulas for new state employees hired after January 1,
2013. As a result, PEPRA effectively closed the existing pension risk pools,
which would have prompted a general contribution increase for employers in
those pools. CalPERS acted in anticipation of these undesired increases by
making changes to the structure of risk pooling. | Foundations and endowments appear to be
transitioning portfolios away from their largest holdings, according to
eVestment, a provider of investment data analytics. The firm’s recent “Investor
Trends Report: Foundations and Endowments” finds that to mitigate the risks of
a U.S. equity market decline, large allocations have gone to international
markets via passive strategies. Additionally, recent large inflows into
long/short and event-driven hedge funds likely include allocations from
foundations and endowments. | | The Feeling’s Mutual | What Drives Mutual Fund Managers to Perform? | A recent analysis from Gerstein Fisher
challenges the notion that mutual fund managers don’t have as much incentive to
outperform as peers running other fund types. A paper from the investment
services provider shows a mutual fund that earns 10% more than the
size-weighted average of its style group in one year will, on average,
experience a 5% excess asset growth in the subsequent year—mainly by attracting
new investors. The findings were consistent across nearly all fund styles and
sizes, researchers explain, except for startup funds and very large
fixed-income vehicles. Researchers say this result debunks the common notion
that mutual fund managers aren’t driven to outperform because they are
typically compensated solely based on asset levels in their fund—with no
performance incentives per se. | Charles Schwab Founder Talks About Index Investing | Don’t call index investing passive. Charles
Schwab, founder and chairman of Charles Schwab, says that does a real disservice
to investors. Schwab is so passionate about the value of index investing that
the Schwab Center for Financial Research released “The Wealth-Building Power of
Equities and the Elegance of Indexing,” a report to help investors better
understand index investing and its role in wealth accumulation. Index funds
have a false reputation of being static, Schwab says. | | Small Talk | ON
THIS DATE: In
1647, Achsah Young, a resident of
Windsor, Connecticut, was executed for being a “witch.” It was the
first recorded American execution of a “witch.” In 1907, the Bubonic Plague broke out in
San Francisco. In 1937, the Golden
Gate Bridge, connecting San Francisco with Marin County, California, officially
opened amid citywide celebration. In 1941,
President Franklin D. Roosevelt announced a state of unlimited national
emergency in response to Nazi Germany’s threats of world domination. In 1969, construction of Walt Disney World
began in Florida. In 1972, Soviet
President Leonid Brezhnev and U.S. President Richard Nixon, meeting in Moscow,
signed the Strategic Arms Limitation Talks (SALT) agreements. At the time,
these agreements were the most far-reaching attempts to control nuclear weapons.
In 1972, Mark Donohue won the
Indianapolis 500 with an average speed of 163.645 miles an hour, six miles an
hour faster than the previous speed record.
TUESDAY
TRIVIA: Los Angeles’ full name is ‘El Pueblo de la
Reyna de los Angeles,’ according to the name on the first handwritten map in
1785.
| TRIVIAL PURSUITS:
Which four state capitals are not served by the U.S. Interstate system? | SURVEY SAYS: Finances Affecting Vacation Plans | Last week, I asked NewsDash readers, is
financial stress affecting your vacation plans, and what are you doing to
reduce that expense? Responding readers were evenly split, with 50% saying
financial stress is affecting their vacation plans, and the other half saying
it is not. Asked which steps they are taking this year to reduce vacation
costs, 23.1% of readers said they are cooking rather than eating out while on
vacation. Nearly 18% each indicated they are driving rather than flying and/or
taking a shorter vacation this year. Fifteen percent of responding readers are
taking a “staycation,” staying at home instead of traveling somewhere, and 13%
reported they are not taking a vacation at tall. Ten percent are staying with
friends or family while on vacation rather than in a hotel, and 7.7% plan to do
fewer activities while on vacation to save on cost. More than 20% said they are
not taking any of these steps, and 15% listed other steps they are taking,
including staying closer to home to reduce travel expenses, taking one longer
vacation rather than two shorter trips, and cruising. I asked NewsDash readers
to share any tips they have for reducing vacation expenses. Responses included:
“For the last several years, I’ve put my flexible spending account reimbursements
into a separate savings account, and that funds most of the summer vacation;”
and “I research free activities in the areas that we travel to. Usually you can
find a bunch of free activities even with a family.” | Thanks to everyone
who participated in the survey! | Share the good news with a friend! Pass the Dash along – and tell your
friends/associates they can sign up for their own copy. | News from PLANSPONSOR.com
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