Market Moves the Needle on 401(k)s, Not Workers

 

Americans with savings in retirement plans have something to celebrate: Average 401(k) account balances rose 10 percent in 2012, to $86,212, according to mutual fund company Vanguard Group.

But only 11 percent of retirement plan participants saved the maximum of $17,000 ($22,500 for those over 50), and they tended to be older, male, high-income workers with already high account balances, said Vanguard, one of the largest retirement plan providers, with $2 trillion in mutual fund assets.
The average contribution rate in 401(k) plans, which grow tax-free until withdrawal, remained steady during the period, at 10.5 percent, according to Vanguard's 2013 How America Saves report.
Positive market returns in 2012 helped boost balances in the accounts, with the S&P 500 up 13 percent last year. However, account contributions have also grown since 2006, up to $4,845 per employee in 2012 from $4,402 in 2006, according to Vanguard's annual study of more than 3 million participants.

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More retirement plan participants than ever are leaning on professionally managed investment options, Vanguard's data show. Thirty-six percent are invested in either a target-date fund, a balanced fund or a managed account advisory program, in which investments are selected and rebalanced without the participant having to take any action. Vanguard expects this number will rise to 55 percent by 2017.

Seventeen percent of assets were in target-date funds, which have investment plans geared toward a specific retirement date. That was up from 14 percent in 2011 and 3 percent in 2006, the first year these funds gained traction.

As target-date funds gain favor, investors are moving away from holding their own employer's stock. Those holdings were only 9 percent of invested assets at the end of last year, Vanguard said, down from 10 percent in 2006.

Diversified equity funds made up the bulk of accounts at 40 percent, for an overall equity allocation of 66 percent. Cash accounted for 15 percent of investors' portfolios. In 2006, by contrast, participants had 23 percent in cash.

Bonds accounted for 10 percent and other balanced funds for 9 percent.
There was a 3 percent decline in new loans against 401(k)s in 2012. Overall, 18 percent of investors had loans outstanding, with the average balance at $9,000, Vanguard said.

Surprised! Insider Trading in DC Just Got Easier

Insider Trading in DC Just Got Easier

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 Published: Tuesday, 16 Apr 2013 | 10:55 PM ET

By: John Carney Senior Editor, CNBC.com

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The Capitol Building in Washington D.C.

 

While almost no one was looking, a law making it easier for congressional and top executive branch staffers to engage in corrupt trading was signed into law Monday.

The law is a modification of the Stop Trading on Congressional Knowledge (STOCK) Act. The modification was passed by unanimous consent by the House and the Senate last week with no debate or even discussion.

The STOCK Act, which became law just a year ago, was designed to discourage insider trading by members of Congress and top government officials. In addition to outlawing trading based on non-public information gleaned by government officials during the course of their public duties, the law required extensive disclosure of financial holdings by Congressional staffers and 28,000 senior executive branch employees.

The financial disclosures of these officials were to be posted in an online database open to the public.
The disclosure requirements were an important part of the law. They would have allowed researchers to detect abnormally successful trading activity by unelected senior government staffers—just as similar disclosure requirements for Congressmen and Senators had allowed scholars to produce evidence that suggested members of Congress were benefiting from non-public information.

Currently, although the reports of staff financial positions are officially part of the public record, they aren't readily available. Often they have to be requested from individual agencies using the names of the individuals about whom information is sought. The result is that the public is effectively blocked from learning the information disclosed in the reports.

The public disclosure requirement was arguably too lax to begin with. There's good reason to prohibit trading by senior government officials altogether. Many lawyers, journalists and Wall Streeters who come into possession of sensitive, confidential information as part of their professional lives are barred from any short term trading. Some are barred from owning individual securities at all, allowed to own nothing but index and mutual funds.


The provision of the Stock Act was a compromise in which government officials were required to disclose trades to the public in exchange for being able to trade in the first place. If disclosure proved too burdensome, government officials could simply adopt personal no-trading policies and avoid the cost of disclosing trades altogether.


The new law scraps the disclosure requirements for the staffers, leaving them in place only for members of Congress, Congressional candidates, and the President and Vice President.

People who lament our bitterly divided political situation might want to reflect what bipartisanship and inter-branch government agreement has been able to so quickly accomplish here.

Original CBC Article

www.kevinddoty.com

Even Brief Spending Cuts Could Hit US Economy Hard

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The U.S. economy could take a big hit from automatic government spending cuts even if Congress only leaves them in place for a month or two.
The cuts were meant to be so painful that they would force Congress to find a more thoughtful way to tighten the budget.
But many analysts assume they will take effect as scheduled, forcing federal offices to furlough some of their 2.8 million workers and trim spending on everything from paper clips to missiles.
It is anyone's guess, however, how long lawmakers will be able to stomach the economic pain. The duration of the austerity measures will determine the force of the blow to the economy. Some analysts think having the cuts in place for more than a few months could trigger a brief recession.

Read More of the CNBC article: http://www.cnbc.com/id/100441227/

Unemployment to Hit Record High in 2013: ILO

  

  Published: Tuesday, 22 Jan 2013 | 12:00 AM ET

By: Katy Barnato

World unemployment could top record levels this year and continue rising until 2017, the International Labour Organization (ILO) said on Tuesday in its annual employment report.
2009 currently stands as the worst recorded year for world unemployment, with 198 million people across the globe without work.

In its 2013 Global Employment Trends report, the ILO forecasts unemployment numbers will rise by 5.1 million in 2013 to reach 202 million, topping 2009's record.  The report also predicts unemployment will rise further in 2014 to reach 205 million."Unemployment remains as dire as it was during the crisis in 2009," Ekkehard Ernst, chief of the employment trends unit at the ILO, which wrote the report, told CNBC.

While the crisis may have originated in the developed world, the report noted that 75 percent of 2012's newly unemployed came from outside it, with East Asia, South Asia and Sub-Saharan Africa being the worst affected.

Ernst attributed this to the "spillover effect" of weak growth in advanced economies, and in particular, the recession in Europe.  "The main transmission mechanism of global spillovers has been through international trade, but regions such as Latin America and the Caribbean have also suffered from increased volatility of international capital flows," the report said.  It also blamed incoherence between monetary and fiscal policies and a "piecemeal approach to financial sector and sovereign debt problems, in particular in the euro area."

"The indecision of policy makers in several countries has led to uncertainty about future conditions, and reinforced corporate tendencies to increase cash holdings or pay dividends, rather than expand capacity and hire new workers," the report said.

Ernst added that labor markets can lag other economic indicators, meaning they might not reflect recent upturns in the world economy.  "Labor markets reflect what has happened in the last year… it takes some time for improvement in output to be reflected," Ernst said.

In addition, the ILO is recording rising numbers of people who choose not to search for jobs because they think the situation is hopeless. These people, officially classified as discouraged workers, may choose instead to rely on a partner's earnings or claim welfare benefits, if available.   "The labor market situation has been so bad for so long, discouragement has grown out of proportion," he said.
Despite the gloomy forecast from ILO, some people see a turnaround for the global economy. Pimco CEO and co-CIO Mohamed El-Erian said the world economy could be nearing the end of its "new normal" of high unemployment and slow growth.

"We said in 2009: three to five years," El-Erian told CNBC on Thursday, referring to how long the phenomenon of "new normal" might last. El-Erian coined the term in 2009.

 -By CNBC's Katy Barnato

Think Only the Rich Will Pay More Taxes? You're Wrong

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Think Only the Rich Will Pay More Taxes? You're Wrong
 
Because neither the Democrats nor the Republicans wanted to defend it, the temporary payroll tax cut enacted under Obama died at the end of 2012, which means that everyone in the country will see a bigger tax bite out of their paychecks this year.




You followed all of the debate over the fiscal cliff and were relieved to hear that taxes were only going up for the rich this year.

Well, you were wrong.

Because neither party wanted to defend it, the temporary payroll tax cut enacted under Obama died at the end of 2012, which means that everyone in the country will see a bigger tax bite out of their paychecks this year. So when you get your first check of the year, look at the amount charged under "FICA" – you're going to be paying more than you did in December.
How big a bite is it? For many middle class workers, it will work out to a trip to the grocery store or a tank of gas less every two weeks this year.

Here are the numbers.

For a single person making $60,000 per year who's paid bi-weekly, gross income in a paycheck is $2,307.69.

In December, you would have had to subtract from that federal withholding taxes of $403. 56. FICA taxes were $96.93. Medicare was $33.46. State withholding for a person living in Maryland was $177.35.

That gives the taxpayer net pay in one check in December of $1,596.39.
So what happens this month?

Gross pay is the same, as are the Medicare and state taxes. But FICA taxes go up sharply – to $143.08. That's a $46.15 bite from the political decision to allow the payroll tax cut to expire.
But here's the good news – federal withholding from this paycheck are down by about 4 bucks, to $399.18, due to the way the federal government calculates inflation.
That gives our taxpayer net pay of $1,554.62, or $41.77 less than he or she made for each paycheck in December. And that's money that could have gone to that bag of groceries or tank of gas.

Read More: http://www.cnbc.com/id/100372837/