Financial Survey Finds: When it comes to investing for retirement,
many 50 plus Californians perplexed and overwhelmed...The Golden
State? Not when it comes to retirement investing; 36 percent of
those surveyed have accumulated less than $110K
Nov. 29 /U.S. Newswire/ -- Overwhelmed with too many choices,
turned off by complex prospectus language and not sure who to turn
to for advice, many Californians in their prime savings years are
falling behind in the retirement funding race, according to a survey
of Californians released today by AARP Financial.
"Investing for retirement has been made unnecessarily
complex, confusing and time-consuming," said Nancy M. Smith,
vice president of Investment Services at AARP Financial. "In
response, many investors save too little, too late or too
sporadically. Others throw up their hands in frustration and
stop saving altogether."
From Baja to Berkeley, Californians are under-saving. The
survey of 500 California residents age 50-plus found that 36 percent
of pre-retirees saving for retirement have accumulated less than
$100,000. "Our survey looked at Californians who are already saving
for retirement," Smith pointed out. "When you look at the general
population, the picture is even more discouraging."
Conducted in conjunction with the Life@50 plus annual AARP
member conference in Anaheim, the research was designed to explore
retirement investing issues among AARP members and non- members
The survey of 500 California residents was conducted via the
Internet between Oct. 4 and Oct. 16 by Data & Management Counsel,
Inc. Participants had to be at least 50 years old, have money saved
for retirement and own mutual funds in their retirement portfolio.
The margin of error for the 500 interviews is plus or minus 2 to 3
Industry Practices Contribute to Confusion
Fifty-four percent of the Californians surveyed think
investing is too complex for the average person and many cite
product design and industry practices as a source of confusion.
Reflecting the fact that investors are overwhelmed by too
many investment choices, the state of California recently reduced
the number of funds offered in its 401(k) and 457 savings plans from
20 to 15 in an effort to help participants "focus on an asset
"Research suggests that the fewer investment options in a
retirement savings plan, the higher the participation rate," Smith
The survey findings suggest that poor communication is also
an issue for many investors. More than three-quarters of
Californians surveyed believe that a car insurance policy,
instructions for a DVD player and prescription drug inserts are
easier to understand than a mutual fund prospectus. Not
surprisingly, then, only a third of those surveyed said they read
"all or most" of a prospectus before buying a fund.
"Too many of us take more time to read the ingredients on a
cereal box than we do to read a fund prospectus," says Smith. "Who
can blame them? Even with all the attention paid to language
simplification, many fund company prospectuses are hardly
user-friendly. As a result, many investors take action without
reading the prospectus at all. Investors need quality, not quantity,
Most investors would like help with their retirement
portfolios but aren't sure where to turn. More than half of
investors surveyed believe that mutual fund companies put their own
interests before those of their investors. Six out of 10 wish there
was someone they could talk to about investing who "isn't trying to
sell me something."
Fees and Expenses: Ignorance Isn't Bliss
Despite the fact that fees can make a tremendous impact on
returns, many investors don't check or don't know how to check,
mutual fund fees. Two out of five California fund investors surveyed
are "unaware" or "not sure" of the fees they pay for their mutual
"When it comes to fees and expenses, ignorance is loss, not
bliss," Smith said. "The difference in cost between a low-cost fund
and an average-cost fund is about 60 to 70 basis points a year. The
amount saved applied against a portfolio invested over 20, 30 or
more years may cover years more of living expenses in retirement."
"Investors are led to believe that they should pay for active
management. But studies show that most market indexes historically
outperform most actively managed mutual funds over the long-term,"
says Smith. "Investors who pay managers to beat the market
frequently turn out to make a losing and expensive bet."
Saving is Often Difficult, but Investing Shouldn't Be
To address Americans' concerns about investing for
retirement, AARP Financial created the AARP Funds -- a
straightforward investment approach that incorporates five
fundamental investing principles: low fees, indexing, rebalancing,
diversification and simple choices.
Consisting of three asset allocation mutual funds, each is
designed to serve as a complete investment portfolio for the mid- to
long-term investor. "It's time to demystify retirement investing."
says Smith. "Our funds provide investors with easy access to
low-cost mutual funds that provide diversification and professional
rebalancing. Our approach takes much of the guess work and angst out
of investment decision-making."
Understanding that individual investment advice is essential
to getting investors on the right track, AARP Financial has
knowledgeable, experienced investment counselors on staff to help
individuals make informed investment decisions.
"Our counselors are salaried, so there's no sales pressure,"
explains Smith. "They are evaluated on the quality, not the length
of each call. Our investment counselors have one objective: to help
callers identify their financial goals and invest more effectively
for retirement. Plain and simple."
"We are committed to delivering institutional quality
investment management to the retail investor at a low cost," adds
Smith. "At AARP Financial, our focus is on the investor."