From the Editor's Desk

Welcome LTSave's quarterly Newsletter. This issue presents our review of the markets for the second quarter of 2005 along with our capital market expectations for the third quarter of 2005. The newsletter includes an article entitled, "Will Your Employee Have Enough Gold for Their Golden Years?" written by Sunil Bhatia, LTSave's CEO and founder. The article discusses the employer's role and fiduciary responsibilities related to helping employees plan for the future. We've also included some interesting statistics related to the positive impact that managed account programs have on savings, and to employees' lack of investment knowledge and need for help in this area.

Market Update: Second Quarter 2005

On the final day of the quarter, the Federal Open Market Committee (FOMC) increased short-term rates another quarter of a percentage point. This was the FOMC's ninth quarter point hike since it started its inflation fighting program a year ago. The federal funds rate is currently at 3.25%, and the latest increase had been anticipated by the markets. Unemployment has fallen to a four year low of 5%, and this has been pushing up labor costs. Learn More ...

Capital Market Expectations: Current Outlook

LTSave bases its portfolio advice on long-term expectations for the financial markets, not on what it might expect over short periods, like the coming month, or quarter, or even year. Most of LTSave's customers are investing for longer periods. Even when the customer is just one or two years from retirement, the best starting point for developing an outlook for the portfolio is still the long-term perspective. Learn More ...

Will Your Employee Have Enough Gold
for Their Golden Years?

Sixty million Americans face retirement over the two decades yet few have prepared for the financial realities of their later years. According to the American Savings Education Council, the life expectancy of Americans at birth in 2001 was a record high of 77.2 years. In addition, according to the 14th Retirement Confidence Survey 2004, very few workers have a firm financial grasp of their retirement needs. Learn More ...

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Newsworthy Advice

Contribution Rates Increase when
Employees Opt for Investment Advice

Recent research published by Schwab Corporate Services demonstrates that participants who utilize managed account advice services contribute more than 10% of their income to their 401(k) plan. This is almost 50% more than the national average of 7%.

Interestingly, these numbers do not appear to be biased towards a participant's salary or current account balance. However, there does appear to be a gender bias: Studies have shown that women are more likely than men to utilize advice when it is offered by an employer. In this study, 54% of women adopted advice versus 39% of men.

It is important for participants to keep increasing their savings rates, because this is an important factor for participants' in achieving their retirement goal. This considerable increase in the average participant savings rate with use of advice is significant.

Reference: Charles Schwab Corporate Services, News Release, April 28, 2005

Participants Need Help with
Managing Their Retirement Accounts

Many participants have little experience with investment concepts, and are overwhelmed with the choices provided within their 401(k) investment line-up. According to the results of a 401(k) quiz administered by JP Morgan Retirement Plan Services, 96% of the respondents could not correctly rank investments from conservative to aggressive.

Those who participated in the survey were asked to rank a stable value fund, bond fund, growth fund and company stock from conservative to aggressive. Interestingly, the 4% who answered the quiz correctly is the same number that would be expected if the question were answered at random.

Reference: 401kwire.com; JPMorgan Retirement Plan Services

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