Coin Dropping Into Piggy Bank

Mandatory Retirement Savings is a Concept You Might Want to Investigate

We wrote in an August 3rd Blog on how employers take automatic deductions from employee’s paychecks and place into Department of Labor approved Target Date Funds that carry high fees and poor performance. Many employers are already taking 3% of salary for many employees that do not “Opt Out” of the deduction. You probably were not even aware of this, as it was probably given to you in a long disclosure document in Size 4 font, that you did not have time to read.

Just where is your paycheck going?  Time to investigate.  The answers will shock you; very little of the deduction is going into your retirement fund!  In last week’s Blog we analyzed the costs of being in a “default option” Target Date Fund.

Compare the Results of a Not On My Nickel researched fund to a Target Date fund.

Take a look at the shocking analysis below, Comparison of State Farm Target Date Fund with Not On My Nickel Researched Fund.

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On a $10,000 investment in your 401(k) with the State Farm Target Date Fund (NLHAX) you lose money in the first year. After five years, you generate a gain of $715! Note, this $715 could diminished to nothing or negative if you are paying typical advisor fees from .25% – 2.50% asset under management fees. With a Not On My Nickel researched fund, after expenses, you earn approximately $3860 for the same period. That is 5 times greater than your employer selected Target Date Fund, designed and created by BlackRock.

Wall Street is Pushing a Mandatory Savings Model – Up to 10% of your Paycheck Annually

“CEO Larry Fink thinks Americans are not saving enough for retirement. Fink said on CNBC Wednesday morning that the U.S. needs a mandatory savings policy to help Americans accumulate wealth for lengthening lifetimes that will require more retirement income. “ Now there is a push by Wall Street to take out another 9 -10% of your salary automatically to fund your retirement or is it Mr. Fink’s retirement?

Remember from our (August 3 Blog), Mr. Fink is CEO of BlackRock, a creator of mutual funds and exchange traded funds (ETF’s) held in many retirement accounts. State Farm’s Target Date fund advisor works for Mr. Fink at BlackRock, who selected principally BlackRock ETF’s for the fund, as we reported in last week’s Blog.

Screen Shot 2013-07-30 at 4.44.46 AMThe fact remains that many Americans are already having 3% deducted from their payroll and have no idea where it is.

If the financial services industry is now pushing to have 9% or 10% taken directly from your paycheck, annually, it may be time to take charge, take control and monitor where your life savings is going.

Let’s assume you make $60,000 per year and your spouse makes $30,000.  You would immediately have $9000 taken from your earnings, assuming the financial services industry gets their way.  While one cannot argue the need to save more for retirement, one can argue you must stand up and choose and understand where that $9000 is going.  As the August 3 Blog Post showed you, your lack of inaction will cost you thousands upon thousands of dollars each year.  Forget clipping coupons.  This is real money to go after and it really belongs to you, not to an asset manager firm or sales person who calls themselves an ‘asset manager’ or  ‘advisor’.

Above,  is a reaction on Twitter to BlackRock’s Mr. Fink’s pronouncement about mandatory retirement savings, in this Twitter post by Zerohedge.