Active Non-Investment Grade Bond ETF Sports 8% Yield

An actively managed high-yield, non-investment grade bond exchange traded fund has held up remarkably well as interest rates rise. Bond investors should keep in mind that in a rising interest rate environment, various fixed-income assets will react differently.

The AdvisorShares Peritus High Yield ETF (HYLD) has gained 7.3% year-to-date.

HYLD has been steadily gaining traction and now has over $300 million in assets under management
“Certain sectors of the bond market react differently to rising rates,” according to Morningstar senior fund analyst Cara Esser. “For example, more-credit-sensitive bonds, like high-yield corporates, tend to react less negatively to rising rates than do bonds with more interest-rate risk, such as a U.S. Treasuries.”

HYLD has a 8.27% 30-day SEC yield and a 3.47 year duration – a low duration translates to a lower negative return if interest rates rise. The active ETF’s credit quality includes BB 3.7%, B 74% and CCC 19%. The fund leans toward riskier, but potentially more lucrative, debt securities.

Source:  Tom Lydon, ETF Trends

Peritus High Yield ETF (HYLD) is a component of the D2 Capital Management Multi-Asset Income Portfolio.

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Free Money!

Have you ever seen one of those funny videos where someone stands on a street corner and tries to hand out $10 bills? Many people refuse the money and keep walking. But what if there was a way to get far more than $10 in free money, and it is perfectly legal.

A recent Employee Benefit Research Institute study reported:

• One of the primary vehicles for retirement savings is an employer-sponsored retirement savings plan, like a 401(k). Eighty-two percent of eligible workers say they participate in such a plan, and another 8% of eligible workers report they have money in such a plan, although they are not currently contributing.
• Cost of living and day-to-day expenses are the leading reasons why workers don’t contribute (or contribute more) to their employer's plan, with 41% of eligible workers citing these factors.
• The report also said that only 10% of those working are contributing the legal maximum to their plan. The maximum annual contribution for a 401(k) is $17,500 ($23,000 if you are over 50). For a SIMPLE 401(k), the limit is $12,000 ($14,500 over 50). Also, many employers will match all or part of an employee's contribution.  That match is free money for your retirement savings.

Source:  Dennis Miller, Investopedia

D2 Capital Management offers fee-only consultations for persons enrolled in 401(k) plans.

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Boomers Making Bigger IRA Withdraws For Everyday Expenses

Retirement savings are an exercise in balance—take out too little money, and you forfeit the enjoyable retirement you worked a lifetime to earn; take out too much, and you may find yourself spending the last of your golden years in the red.

Yet for many boomers, that might be a welcome problem, as they appear to be drawing on their IRAs just to fund their everyday lives, in some cases long before they even exit the workforce.

That seems to be the conclusion of a new study by the Employee Benefit Research Institute: The institute analyzed data from the University of Michigan’s Health and Retirement Study, the nation’s most comprehensive national survey of older Americans, sponsored by the National Institute on Aging, and found some troubling trends.

While it may be obvious to some boomers living the problem, the research shows that younger participants between the ages of 61 and 70, who are not yet required to take distributions from their IRAs but who nonetheless made withdraws, made larger withdrawals than older households, both in absolute dollar amounts as well as a percentage of IRA account balance.

And that’s not because they’re using it to put in other saving or investment vehicles: A sizable majority (58%) used that money for everyday expenses, while just 10.9% put that money into savings. By contrast, 50% of older participants, aged 71 to 80, spent their withdraws and 31.5% put the funds into savings.

It may not be surprising that poorer boomers are more likely to raid their retirement funds to cover everyday costs: Forty-eight percent of the bottom-income quartile of this age group made an IRA withdrawal, and their average annual percentage of account balance withdrawn, 17.4%, was higher than the rest of the income distribution.

Reading between the lines, one could argue that these participants are simply opting to spend their money now, when they are young enough to enjoy it, rather than dying with too much unspent in the bank. However, another alternative, supported by the fact that lower-income households are more likely to make withdraws, is that these boomers are struggling to make ends meet, not splashing out on big vacations and presents. Just 25.8% of the younger group that made withdraws spent the money on special purchases.

Source: Teresa Rivas, Barrons

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Marijuana Investments Attracting Scam Artists

When a growing industry gets a lot of ink, there are always plenty of crooks eager to make the wealth of naive investors sink.

The growth in legal pot is no exception, the Financial Industry Regulatory Authority (FINRA) warned today in an alert about marijuana stock scams.

Noting 20 states have approved medical marijuana and two are allowing recreational use, FINRA said fraudsters are trying to piggyback on the publicity to offer the unwary chances to ride the trend into financial oblivion.

“The offers almost always contain hallmarks of "pump and dump’ ploys,” FINRA warned. “Specifically, fraudsters lure investors with aggressive, optimistic—and potentially false and misleading—statements or information designed to create unwarranted demand for shares of a small, thinly traded company with little or no history of financial success (the pump). Once share prices and volumes reach a peak, the cons behind the scam sell off their shares at a profit, leaving investors with worthless stock (the dump).”

As an example of how unreputable marijuana stock scamsters can be, FINRA pointed to the case  of one thinly traded, yet heavily touted, company that purports to be in the medical marijuana business that hides the fact that its CEO spent nine years in prison for operating one of the largest drug smuggling operations in U.S. history.

FINRA said investors can avoid the traps by taking the usual recommended due diligence and by following the dicta that if an investment sounds too good to be true, it probably is.

Source:  Ted Knutson, Financial Advisor magazine

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

August-September Volatility

"...We should note that we are entering the worst seasonal period for the stock market... September is the worst month of the year for stocks.  But for over 25 years, August, and especially the last half of August has also experienced negative returns.  With the uncertainties about the fed Chairman and tapering with us for another 4 to 5 weeks, stocks could be in for a rough time.  If they survive the season without too much damage, the last quarter should provide a strong push to new high ground..."

Jeremy Siegel, Senior Investment Strategy Advisor to Wisdom Tree Investments.  He is also Professor of Finance at the Wharton School of the University of Pennsylvania

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Paying for college 101

As young kids head back to school, many parents find themselves realizing that they’ll soon be sending those same little ones off to college — and that they have no idea how they’re going to pay for it.

According to student loan provider Sallie Mae, college costs today consume about 27% of parents’ income, not including funds borrowed as student loans. The good news is that that figure is down from 37% in 2009, in part because “free” money — from scholarships and grants —now accounts for 30%, up from 25%.

But the key to covering the remainder without going into debt, some say, is savings.

When it comes to college savings, you’ve got many options, including Coverdell IRAs, Roth IRAs, savings bonds and other traditional savings vehicles. Most often used, however, is the 529 college savings plan, an account that comes with several advantages.

• Tax advantages. All earnings and growth are tax free if used for qualified education expenses, and some states may offer additional tax advantages, such as deductible contributions.
• Flexibility. A 529 is set up with an owner, usually a parent or grandparent, and a beneficiary, the child. Once funded, 529 assets can be moved from one account to another without penalty.
• Control. Because the parent or grandparent is the owner, they still own the assets, and make all decisions for how they are used. If the kid doesn’t go to college — too bad — they have no access to the funds and you can transfer them to someone else. (If used for something other than higher education, a 10% penalty applies, but that’s better than having it all spent on a shiny new Corvette!)
• Estate planning. The 529 plan offers unique estate-planning benefits. For instance, wealthy parents or grandparents can contribute up to five times the current gift tax exclusion amount (for a total of $65,000) in one year, per parent or grandparent, per student.

Finally, pick out a savings schedule that fits you. Monthly? Per paycheck? Annually? In one lump sum? Pick the method that’s most realistic for your family — and stick with it.

Source:  Jennifer Openshaw, MoneyWatch

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Investing Rationally if Markets Get Erratic

Market volatility is likely to pick up for a number of reasons, including increasing investor anxiety ahead of the Federal Reserve’s September meeting.

As a result, investors may be prone to three bad investing behaviors during periods of higher market volatility.

1. Blindly following others when it comes to making investment decisions. When uncertainty is high, as it is when markets are volatile, investors are more prone to copy the positions of other market participants, who they feel may have better quality information. This kind of behavior can lead to falling victim to market bubbles and crashes.

2. Trading excessively.  In general, the higher the uncertainty and volatility in the markets, the harder it is to infer whether one’s own past investment decisions were correct. During volatile periods, investors may remain overconfident longer than if they were able to more clearly learn their true investing skill level. As such, amid volatility, they may continue to trade excessively longer than they otherwise might, potentially hurting portfolio performance net of fees.

3. Remaining paralyzed in the status quo. While some individuals may trade excessively during volatile times, others, especially those with little investment experience and little confidence in their own investing abilities, may not wish to act at all. This is because they may fear potential losses, which loom larger during times of uncertainty, and the psychological pain from regret over any poor investment decisions.

The best suggestions for weathering volatile times rationally include focusing on longer-term investment goals, portfolio diversification and regular portfolio rebalancing at set intervals.

Source:  Russ Koesterich, CFA, iShares Global Chief Investment Strategist.

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Senior Loan ETFs: ‘Steady Returns and Higher Yields’

The popularity of bank loan Exchange Traded Funds (ETFs) continues to soar.

The current market environment seems to be right in bank loan ETFs’ wheelhouse as investors clamor for income while also guarding against the negative impact of rising interest rates.

“Steady returns and higher yields with secured claims to a business’s assets is the attraction for investor’s to this asset class,” S&P Dow Jones Indices said in a note Friday.

BKLN, which is managed by Invesco PowerShares, is the oldest ETF in the group, listing in March 2011. It is also the largest with about $5.2 billion of assets. The fund has a 12-month yield of 4.66%.

BKLN and other bank loan ETFs invest in floating-rate securities, which provide protection when interest rates rise.

“Senior floating-rate bank loans are variable-rate, senior secured debt instruments issued by non-investment-grade companies. Bank loans have a variable rate that adjusts every 30-90 days. The duration of a bank-loan fund is near zero because of the regular adjustment of interest rates. This rate is a fixed-percentage spread over a floating base rate–typically Libor,” explains Morningstar analyst Timothy Strauts in a profile of BKLN.

“Bank loans are the most senior security in the capital structure. They are secured by collateral such as equipment, real estate, or accounts receivable,” he added. “Bank loans are considered safer than traditional high-yield bonds because this secured collateral protects the investor in the event of a default.”

BKLN is one of the top-selling ETFs this year with inflows of more than $3.7 billion, according to IndexUniverse data.

Source:  John Spence, ETF Trends

PowerShares Senior Loan Portfolio (BKLN) is a component of the D2 Capital Management Multi-Asset Income Portfolio.

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

401(k) Investment Confidence Doubles With Advisor Help, Survey Finds

A nationwide survey of more than 1,000 401(k) plan participants released today by Schwab Retirement Services found that 89 percent of workers are counting on their 401(k) savings to support their retirement. However, the majority of workers lack the confidence to effectively manage their retirement savings.

When workers have help from a financial advisor, their investment confidence nearly doubles, the survey found. Sixty-one percent of the survey participants had confidence in making the right 401(k) investment choices when they made those choices with the help of an advisor. Only 32 percent expressed confidence when making investment choices based on their own ability.

The respondents said they would like guidance on everything from asset allocation to risk tolerance and retirement income planning, says Schwab.

“Participants who used third-party, professional 401(k) advice tended to increase their savings rate, were better diversified and stayed the course in their investing decisions,” said Steve Anderson, head of Schwab Retirement Plan Services.

Almost two-thirds of the respondents reported that their 401(k) is either their only source of retirement savings or the largest source. However, 52 percent find their 401(k) investments to be more confusing than their health-care benefits.

Fifty-seven percent of the respondents wished there were an easier way to figure out how to choose the right 401(k) investments. Forty-six percent didn't know what their best investment options were and one-third felt a lot of stress over correctly allocating their 401(k) dollars.

Source:  Financial Advisor magazine

D2 Capital Management offers fee-only consultations for persons enrolled in 401(k) plans.

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Plan for college at each stage of a child's life

College planning is not just a “set it and forget it” event.

Especially as children age, parents and their advisers need to stay on top of how much has been saved per student and figure out exactly where each dollar will come from to cover tuition and the other bills that make earning a college degree such an investment.

Here's what clients should be doing at each stage of their child's life to remain on track for graduation. The upcoming days, as kids return to school, are a great time to direct parents' attention to college planning.

Starting as early as possible and continuing through middle school, families should be focused on saving and investing as much as possible, according to Marina Goodman, an adviser with Brinton Eaton LLC. Section 529 college savings plans are typically best for this, though keeping an eye on fees associated with the state-sponsored savings plans is important. It's hard to beat the tax-free growth the plans offer, she said.

“There's still long enough to invest in other-than-ultrasafe investments, and the 529 plan is a good vehicle to start with in younger grades,” Ms. Goodman said.

Parents also should look at prepaid-tuition plans if they believe that their children will remain in-state for college.

As children enter high school, it's time to de-risk the portfolio as much as possible.

Families should consider cutting back on spending and looking for any extra dollars for college, including directing students to apply for scholarships and work study programs. Also, this is the time to think about whether the student should spend two years at a local school to save on tuition and living expenses before transferring to a school to complete his or her education and receive a degree.
During high school is also when families need to evaluate whether they will need loans to pay for college and what type will work best for them.

Troy Onink, chief executive of Stratagee.com, which provides college-planning approaches to families and their advisers, said he tries to help families avoid debt to pay for college and recommends that students don't take out more over the four years of school than the annual starting salary for their intended major.

If families have to borrow, the student's first option should be the federal Stafford Loan, which typically has lower rates than private loans and better repayment terms. Students don't start paying back these loans until after earning their degree, in contrast to the Parent Loan for Undergraduate Students, or PLUS, loans that parents take out for their dependent children and must immediately begin to repay, Mr. Onink said.

Some parents also take out home equity loans because they can get a tax deduction on that interest, but that move puts the home at risk, he said. He recommends that parents keep in mind any younger children that will be coming along to college in a few years when they consider loans to pay for a student's higher education.

This is also the time when parents should make sure they aren't putting too much away in a 529 plan, because they will have to pay a 10% tax penalty to get their money back if the funds are not used for college expenses. Advisers recommend having some money saved for college outside 529 plans to cover extra college expenses not allowed by the plans.

Even after the student begins college, parents should continue to strategize as they pay for school.

For instance, if the 529 plan has enough to cover only two years, use money from other accounts to pay some of the early bills to keep that investment plan growing tax-free even longer, Ms. Goodman said.

Also, see if the school that the student has chosen and been accepted to offers prepaid tuition for a whole year or, if possible, the full four years, she said. Typically, those who pay upfront save on tuition increases for future years and can effectively get about a 6% discount. However, funds saved in a 529 plan have to be used to pay costs of a particular year, not a bill for all four years, Ms. Goodman said.

Source:  Liz Skinner, Investment News


The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

A Preferred Route

With yields of 6% or more, preferred securities have become a popular choice for yield-hungry investors willing to expand beyond plain vanilla bonds. Yet the hybrid nature of these securities often leaves investors pondering which side of the portfolio to put them on.

“Some people think of preferred securities as an alternative investment that falls somewhere between equity and debt,” says William Scapell, manager of the Cohen & Steers Preferred Securities and Income Fund. “I tend to view them as part of a fixed-income allocation because they are more like a bond than anything else.”

Often called preferred stock, preferred securities have characteristics of both stocks and bonds. Like bonds, they are sold at par value, and their prices fluctuate with changes in interest rates or upgrades and downgrades to a company’s credit ratings. The dividends on these issues, which are usually paid quarterly, typically exceed what investors can get from a company’s common stock or straight bonds. That income is subject to taxes, of course, at either the favorable rate for qualified dividends or at ordinary income rates, depending on the security.

The securities also lie between stocks and bonds in a company’s capital structure. If the issuer goes bankrupt, the preferred shareholders stand ahead of common stockholders but behind senior debtholders in the payback line. A company running short on cash would stop the income spigot to common stockholders before ceasing payments to preferred stock shareholders. Senior debtholders would be the last to feel the pinch.

A Better Value Than Bonds

Scapell believes that even though preferred securities have been discovered by more people over the last few years, they remain one of the few values left among income-oriented investments. They have a yield advantage of about 4% over 10-year Treasury securities, well above the average 3% spread over the last 15 years. Their yield spreads over investment-grade bonds are also currently high by historical standards.

“In our view, the difference in current versus long-term historical yield spreads suggests that preferred securities are relatively cheap,” he says. “And that yield advantage offers a potentially higher cushion against rising rates.”

Source:  Marla Brill, Financial Advisor magazine

iShares S&P 500 US Preferred Stock Index Fund (PFF) and the PowerShares Preferred Portfolio (PGX) are components of the D2 Capital Management Multi-Asset Income Portfolio.

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

Pre-Retirees, Retirees Have Different Ideas About Life After Work

Survey results released Thursday by the insurance company ING U.S. found that pre-retirees may be in for a rude awakening when they stop working. Although just 8% said they expect to have a lower standard of living in retirement than they do currently, 33% of retired respondents said they’ve had to cut back now that they aren’t working.

In a separate survey conducted online by ING in June, 80% of respondents said they would rather tighten their purse strings now to guarantee income in retirement. Almost 40% still expected to run out of money in retirement. That might not be very surprising, though, considering over a third of respondents think they can retire comfortably with $500,000.

ING found that advisors were a significant factor in respondents’ confidence. Almost 90% of respondents who work with an advisor said they’ve calculate what their current savings mean for their monthly income in retirement, compared to 59% of those without an advisor. While 37% of respondents thought it likely that they’d run out of money in retirement, among those without an advisor, 41% had the same fear.

“Don’t get me wrong; change is good and we all hope to get to that point at some time, but without some help, a retiree can easily get thrown off course,” Rich Linton, president of individual markets for ING U.S., said in a presentation discussing the surveys’ results.

Source:  ThinkAdvisor

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association. 

401(k) Loans Drain Retirement Dollars

Investors in 401(k) plans who take loans from their accounts are more likely to save at a lower contribution rate than their counterparts, and are not likely to repay the loan when leaving their employers, according to New York Life Retirement Plan Services’ first annual "State of the Retirement Industry" report.

When it researched its defined contribution platform, New York Life found that the average contribution rate for a participant who takes loans from a 401(k) is 5.63 percent, while the rate is 7.23 percent for participants without loans. The study also found that more than two-thirds of participants with outstanding loan balances on their 401(k)s will cash out of their plans if they leave their employers rather than paying back the loans.

“Americans are not saving enough for retirement, and compounding this problem is the fact that loans can drain precious retirement dollars,” said Rachel Rice, the managing director of marketing and product development at New York Life Retirement Plan Services. “As an industry, we need to reverse the ATM mentality that has developed around 401(k) savings by encouraging sponsors to rethink loans from a plan design perspective, and enabling participants to differentiate between everyday, emergency and retirement savings.”

Loans against 401(k) balances have often been offered as an attempt to increase plan participation and allow participants access to their money in times of financial hardship.

Source:  Financial Advisor magazine

The information contained in this article does not constitute a recommendation, solicitation, or offer by D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 

The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association.