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The benefits advisors who spent the late 1990s using stories about 30% annual returns to drum up 401(k) business are now doing something else.
But experienced, knowledgeable retirement services experts say this can be as good a time as any to be selling 401(k) plans.
"The need for retirement plans is independent of what the market is doing," says Richard Glass, president of Investment Horizons Inc., Pittsburgh, a retirement plan education firm. "Regardless of what the market is doing, people have to start saving."
Stock prices might be down, and bond defaults might be up. But census figures show that 75 million U.S. residents will be reaching retirement age over the next four decades.
Mutual fund flow figures from the Investment Company Institute, Washington, suggest that consumers continue to understand the importance of continuing to save for retirement, even at a time when market indices look grim: ICI reported that U.S. investors shifted $53 billion out of stock funds in July. Net outflows amounted to 1.7% of stock fund assets.
But, grim as the numbers look, they mean that investors kept 98.3% of their stock fund assets in stock funds, during a month when stock prices looked as if they were sinking toward the earths molten core.
Sellers of retirement plans are facing some serious marketing headaches, partly because the modern 401(k) plan and modern mutual fund industry came of age together in the early 1990s, at the beginning of one of the longest, strongest financial booms in the history of the world.
Many of the advisors and money managers who entered the retirement industry during the period came to view the idea of putting 40% of a retirement portfolio in bonds as being as odd as the idea of investing 40% of the assets in gold coins or bomb shelters in Montana.
Now, the NASDAQ National Stock Market is down about two-thirds from its peak, and the Dow Jones Industrial Average is down about one-third. For most 401(k) plan participants, the grim joke that their plans are now "40.1(k)" plans is not literally true. But a recent survey commissioned by The Allstate Corp., Northbrook, Ill., found earlier this year that middle-income U.S. residents total retirement savings had fallen 22% between 2001 and 2002, to an average of $93,000.
"Before," Glass says, "people were bragging about how much money theyd made. Now, theyre scared. Theyre asking themselves how they can afford to retire."
Although members of Congress have passed some corporate governance reform legislation and continue talk about enacting additional reforms, many advisors, financial-services company executives and regulators say the most important changes will come from within the 401(k) industry.
