FEATURE STORY
Don’t Over-Commit to Low Return
Investments as You Save for Retirement Financial crisis spurred rush to CDs and money funds, survey finds
The financial crisis triggered a rush by many investors to build up an emergency cash reserve, and many people still have a large portion—perhaps too large—of their retirement savings in bank CDs and savings accounts, as well as money market funds, despite very low short-term interest rates.
“Concerns about market volatility, a weak economy and high unemployment caused individuals and families to build up a cash cushion to meet possible emergencies such as a job loss or to help a family member or friend who had a financial setback. However, as the economy recovers, investors should reassess if they have the right balance of assets in their portfolios,” noted Vanessa Garza, financial services representative, Houston Financial Group, an office of MetLife.
A recent “Money on the Sidelines” poll conducted for MetLife by Harris Interactive and released in November 2010, found that investors 45 years old and up with $200,000 or more of investable assets parked significant sums in bank accounts and money funds, even though there was a high level of dissatisfaction with the yields provided. More than half of the respondents were unhappy with their
returns on CDs and savings accounts, and just under half expressed dissatisfaction with the yields on their money market funds. Still, 19% of those polled said they were making more investments in these same types of accounts.
Worries about the financial markets and about the type of investments to utilize for retirement saving were evident by the fact that seven in ten respondents to the poll said understanding their own tolerance for risk (71%) and understanding the various investment options (70%) were the most important factors to consider when planning for retirement today.
“While liquidity and a cash cushion certainly have an important role to play in a balanced pre- and post-retirement portfolio, it is important that people not put their future retirement goals at risk by over-exposure to what are still very low yielding investments,” added Garza. “Another key finding of the MetLife poll was that almost two-thirds (64%) of the respondents indicated that they did not want to run the risk of running out of money in retirement and so would prefer a predictable retirement income check each month, even if that meant giving up some
of their ability to take more income from savings if they needed it.
“There are various ways to achieve a measure of liquidity in addition to a bank account or money fund. A short term bond fund could be part of the answer. More fundamentally, the right mix of asset classes, such as stocks and bonds, and guaranteed products is important. Some annuities, for example, let people invest in potentially higher yielding assets, take a certain amount of immediate withdrawals to meet unexpected expenses, have a measure of protection in a down market, and generate predictable lifetime income,” Garza observed.
Article by Vanessa Garza, financial services representative for Houston Financial Group, an office of MetLife. MetLife, Inc. is a leading global provider of insurance, annuities and employee benefit programs, serving 90 million customers
in over 60 countries. Through its subsidiaries and affiliates, MetLife holds leading market positions in the United States, Japan, Latin America, Asia Pacific, Europe and the Middle East. For more information, visit
www.metlife.com.
Methodology: The MetLife Poll was conducted online for MetLife by Harris Interactive between September 9 and 20, 2010 among a nationally representative sample of 1,858 U.S. residents, with two quota groups—1,000 adults, 45 years of age or older and 500 adults, 45 years of age or older with investable assets of at least $200,000 (not including residence). Results for age, sex, race/ethnicity, education, region, employment, and household income were weighted where necessary to bring them into line with their actual proportions in the population of adults age 45+ in the U.S. (and, for second quota group, investable assets of $200K+ [excluding residence]). Propensity score weighting was also used to adjust for respondents’ propensity to be online. A full methodology is available.
Annuities issued by Metropolitan Life Insurance Company, New York, NY 10166 and its affiliates. Securities, including variable annuities, are distributed by MetLife Investors Distribution Company (member FINRA), Irvine, CA 92614 and sold by prospectus only. Both are MetLife companies. Investors should carefully read the prospectus and consider the product’s features, risks, charges and expenses. This and other information is available in the prospectus, which investors should read carefully before investing. Living benefits are available for an additional annual charge. Guarantees apply to certain insurance and annuity products (not securities, variable or investment advisory products) and are subject to products terms, exclusions and limitations and the insurer’s claims-paying ability and financial strength.
10 AUGUST 2011 | HOUSTON BUILDER | GREATER HOUSTON BUILDERS ASSOCIATION – BUILDING A BETTER FUTURE
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