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Week In Review


Investors Sticking With Their 401(k)s

Judging from the actions of the 11 million participants Fidelity Investments serves through their 401(k)s, investors remain faithful about saving for retirement.

"Despite unprecedented volatility in the capital markets, employees are staying the course in their retirement savings," said Scott B. David, president of workplace investing at Fidelity.

The average amount of money invested per individual in 2008 was $5,600, up slightly from the year before. That helped prop up average balance declines of 27%, to $50,000 from $69,200; the broader market fell 39% in the year. Hardship withdrawals also continue to rise, but the average amount decreased slightly to $6,000.

Further, Fidelity reported that the number of people making changes to their 401(k) even fell slightly in 2008, to 13.9%, from 14.2% in 2007. That said, investors flooded Fidelity's phone lines with more than 100,000 calls a day during the volatile months of September and October, as the Dow Jones Industrial Average fell below 9,000 for the first time in five years.

In addition, netbenefits.com, the website Fidelity runs for 401(k) participants, had 4.6 million unique visitors in October, 14% higher than a year before and a new record. Of these visitors, nearly one million used at least one of the retirement planning tools available on the site.

"Workers engaged with us more in trying to better understand their risk tolerance and an appropriate asset allocation and diversification strategy," David said.

Fidelity also found that due to the popularity of target-date funds, 401(k) investors today are better diversified. Only 16% had 100% of their portfolios in equities in 2008, down from 20% in 2007 and 37% in 2000. And whereas company stock accounted for 20% of the average portfolio's assets in 2000, that is now down to 10%. By the end of 2008, 60% of plans had target-date funds as a default option, up from 38% at the end of 2007 and 5% at the end of 2005. Auto enrollment also rose to 16% in 2008 from 11% in 2007. And companies using auto increases rose to 74% from 70% a year earlier.

Schwab Offers Advice For Those About to Retire

In light of the recent market downturn and the difficult position that has left millions of near-retirees, in Charles Schwab has launched a new suite of advice and tools specifically geared to investors within 10 years of retirement, called Real Life Retirement Services. Built as a type of social network, the accompanying website gives investors a place to ask questions and share their own experiences, including a survey that shows them how their retirement expectations compare with their peers.

"We have a different point of view from other financial firms in how we approach retirement," said Schwab Vice President Mark Jamison. "For most people, retirement isn't about hang-gliding or hitting the golf course every day. People dream of balance-enjoying a comfortable lifestyle, covering healthcare costs, spending time with family and friends, and making sure they won't run out of money. We chose to build a service that addresses real life challenges people are facing today, which typically don't involve a life sailing around the world."

The service begins with a complimentary consultation with a Schwab professional on what an individual can do to close the gap between income and expenses by focusing on how to build additional income streams into their portfolio-be that through a dividend-paying mutual fund, a fixed-income fund or an annuity. The Schwab financial adviser will also make recommendations on which investments to draw down first and when to begin taking Social Security payments. Schwab also conducted a retirement survey among 1,000 people in early January and found that 26% of people between the ages of 55 and 64 do not know whose retirement planning advice to trust. In addition, 33% said they were confused about weighing the immediate marketplace alongside their long-term goals.

Golden Age Expected for Environmental Investing

Investors overwhelmingly believe that environmental issues offer tremendous long-term investing opportunities, Allianz Global Investors found in a survey of 1,264 adults with household financial assets of at least $100,000 in December.

Seventy-eight percent said the nation is likely to see more environmentally friendly policies in the first year of the Obama Administration than in the entire eight years of the Bush Administration. Another 74% said they believe Congress is now more supportive of investing in environmental technologies than before. Ninety-one percent said that finding solutions to environmental problems will be a major issue for years to come, and as for the time being, 64% said the environment is the most attractive of 10 investment sectors.

"Barack Obama won this election on a platform of change, and the regulatory changes are likely to be very positive for environmental investing," said Bozena Jankowska, lead portfolio manager of the Allianz RCM Global EcoTrends Fund and head of sustainability research.