AARP PRODUCTS & SERVICES
HEALTH
FINANCIAL
TRAVEL
DISCOUNTS
INSURANCE
|
AARP.ORG HOME |
 Join AARP
|
Tewksbury, MA — Overwhelmed with too many mutual fund choices, annoyed by complex prospectus language, and unsure of where to turn for investment advice, a sample of Phoenix area residents in their prime savings years are falling behind in their efforts to achieve a more secure retirement, according to a survey by AARP Financial Inc.
"Investing for retirement is unnecessarily complex, confusing and time-consuming," said Richard M. Hisey, Chief Investment Officer at AARP Financial Inc. "As a result, many investors save too little, too late or too sporadically, while others stop saving altogether."
The survey of under 200 Phoenix metropolitan area residents age 50-plus found that 38% of pre-retirees saving for retirement have accumulated less than $100,000. "Our survey looked at those who are already saving for retirement," Hisey pointed out. "Yet, when you look at the general population, the picture is even more discouraging."
Designed to explore retirement investing issues among AARP members and non-members alike, the survey of 176 residents in the Phoenix metropolitan area was conducted via the Internet between October 4 and October 16, 2006 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 interviews is plus or minus 2 to 3%.
Industry Practices Contribute to Confusion
Fifty-eight percent of those surveyed in Phoenix think investing is too complex for the average person, and 63% are overwhelmed by the numerous investment options available in the marketplace. "Too much choice can stymie investors. In fact, research suggests the fewer investment options available in a retirement savings plan, the higher the participation rate," Hisey observed.
The survey findings suggest that poor shareholder communication is a concern for many investors. More than three-quarters of those surveyed believe prescription drug inserts, a car insurance policy, and instructions for a DVD player are easier to understand than a mutual fund prospectus. Not surprisingly, then only 11% read all of the mutual fund prospectus, while nearly 20% do not read it at all before buying a mutual fund.
Most investors would like help with their retirement portfolios but aren't sure where to turn. More than half of investors surveyed believe mutual fund companies put their own interests before those of their investors; and 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. Forty five percent of Phoenix area investors surveyed are "unaware" or "not sure" of the fees they pay for their mutual funds.
"Too often, investors don't pay attention to the fees they pay," Hisey said. According to the Investment Company Institute, the average stock fund charges 1.13% on assets annually. Over the course of 30 years that adds up to $124,857 on a $100,000 investment, assuming a compounded average annual return of 5%.
The same amount of money invested in a fund that charges 0.50% annually would save $64,516 in fees over 30 years. "Opting for low-cost funds is one of the simplest ways to improve your long-term investment results," Hisey added. "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 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 Hisey. "And investing in index funds is often a more cost effective approach for investors."
Saving is Often Difficult, but Investing Shouldn't Be
To address Americans' concerns about investing for retirement, AARP Financial Inc. created the AARP Funds -a straightforward investment approach that incorporates five fundamental investing principles: low fees, straightforward investment choices, indexing, diversification and rebalancing.
The AARP Funds are a family of five mutual funds designed to meet the needs of investors at any life stage, offering a mix of principal conservation, income generation, and asset accumulation. "Our Funds offer 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."
The AARP Funds' award-winning prospectus is a well-designed, straightforward way for investors to make more informed decisions. And understanding that individual investment advice is essential to getting investors on the right track, AARP Financial Inc. has knowledgeable, experienced Investment Counselors on staff. "Our counselors are salaried, so there's no sales pressure," explains Hisey. "They are evaluated on the quality, not the length of each call and are here to help callers identify their financial goals and invest more effectively for retirement."
At AARP Financial Inc. "Our absolute focus is on the investor," adds Hisey.
# # #
About AARP Financial
AARP Financial Inc., founded in 2005, is a subsidiary of AARP. Based in Tewksbury, Massachusetts, AARP Financial Inc. is dedicated to helping people prepare for a more secure financial future by offering products and services designed to meet their retirement needs.
AARP Financial Inc. offers a carefully chosen array of investment products and guidance, including the AARP Funds, a group of five mutual funds, designed to meet the needs of investors at any life stage. AARP Financial Inc. also makes available to AARP members auto and home insurance through The Hartford; credit cards through Chase; life insurance and lifetime income annuities through New York Life; and mobile home and motorcycle insurance through Foremost. Visit us at www.aarpfinancial.com for more information.
AARP Financial Inc. won the Mutual Fund Education Alliance's 2006 STAR Award for Best Investor Fulfillment/Prospectus Kit and Best Retail Retirement Kit by a small company.
Asset diversification cannot guarantee a profit or protect against a loss. If an investment is sold for rebalancing purposes, it may be subject to taxes.
