Summer 2006

Hello NAGDCA Friends,

Your Board of Directors has been working diligently to bring NAGDCA the best year ever. Some of the items you will be hearing more about include:

  • Arthur N. Caple Foundation – NAGDCA is in the process of setting up a foundation to receive funds and offer scholarships to further careers in retirement education. Look for more information and a fund raising campaign soon.
  • Another year with the student mentor program and scholarship.
  • A new Website review task force to work on www.nagdca.org.
  • Accreditation – NAGDCA will be offering educational credits for members attending sessions at the annual conference for CPA, CFP and CFA designations.
  • A new NAGDCA Ethics Policy has been developed for members to vote on at the annual meeting in September.

I want to stress the importance of completing the 2006 survey. It is a great value to our members and to the defined contribution industry.

Please help us reach our goal of 100% participation!

The survey was sent electronically on May 22, 2006 and is due back by June 30, 2006.

I am looking forward to seeing everyone at the annual conference in Kansas City. It is going to be GREAT!

As this HOT Summer approaches – here are some HOT investments to think about.

Target date retirement funds make planning easy

Determine the year you want to retire and find the "target date" mutual fund that matches your retirement date. Target date funds can eliminate the confusion some employees feel when faced with too many mutual fund choices in the typical deferred compensation account. Each fund is a mix of cash, bonds and stocks, including some foreign stocks. The fund's name includes the retirement year, and the funds are usually spaced five years apart (2010, 2015, 2020, etc.).

As the years go by, your fund will be rebalanced and become more conservative. The changing asset mix will provide for stability and growth as you pour your retirement dollars into that one fund

Plan Sponsors have to make sure that employees are given enough information regarding the philosophy behind target date funds and how they invest their contributions into these funds. The concept of one-stop shopping is becoming very popular with public plans. Communication is the key to making these funds successful. By educating employees who consider these funds, you can eliminate the confusion for many first time investors.

The asset allocation in a specific target date fund can vary from one firm to another. If you look at the 2015 target date funds from Fidelity, T. Rowe Price and Vanguard, you'll see quite a bit of difference among them in asset allocation.

The T. Rowe Price fund look to be the most aggressive of the three with more than 66 percent of the portfolio in stocks, a mix the company finds appropriate for someone 10 years from retirement. Throughout the life of the investor they stay in the one fund. At 2015, they don't move into an income fund. The funds portfolio continues to move down to a more-conservative mix until they reach 20- percent equities. Although Fidelity, T. Rowe Price and Vanguard have a good reputation, participants should check the performance of any target date fund to see if it at least matches the performance of a benchmark index or category as the track records of target date funds are limited.

Target date funds can relieve participants of the need to constantly monitor investments and rebalance asset allocation. Examine the asset allocation to be sure that it fits your risk tolerance. If the fund is too conservative or too aggressive for you, it may be best to consider another option.

A survey on usage of target dated retirement funds in public funds is on the website.