In Practice November 18, 2006

Caregivers Tap Retirement, Other Sources, to Cover Expenses

Many Americans who are caregivers for ailing family or friends frequently have to pay for it by tapping their retirement savings, according to a new John Hancock Life Insurance Company survey.
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According to a John Hancock news release, 15% of those polled admitted to using money they had set aside for retirement to help cover caregiving expenses. Other responses to a question about funding the caregiving activities included:

  • 27% used money set aside for immediate goals such as a new car or vacation.
  • 13% used current income/money out of pocket.
  • 12% gave up a job to care for them.
  • 7% used savings.

Not surprisingly, almost half (45%) said that caregiving significantly affected their work while nearly seven in 10 (69%) said it had a notable impact on heir personal lives and 62% said that it had a significant impact on their family. Nearly four in 10 (37%) said it “significantly changed ” their financial situation.

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“Providing care for our parents or other loved ones is a growing phenomenon and will become even more commonplace as our population ages,” said Laura Moore, senior vice president, John Hancock Long Term Care Insurance, in the news release. “Our survey finds that providing this care can take a real toll on the caregiver, both financially and emotionally.”

Of those who provide financial assistance, over one third (36%) pay more than $1,000 per month and, of those, 1% pay $3,000 or more per month.

As a testament to how widespread the trend is, nearly two-thirds of respondents (or their spouses) are providing long-term care. Almost one-third provide or have provided financial assistance to help pay for it.

The survey of 1,000 people ages 21 to 75 was conducted by Greenwald & Associates in 2006 for John Hancock. More information is at http://www.jhancock.com.
The Markets November 18, 2006

Equities Finally Pull Ahead to Win 401(k) Assets

While the number of net transfers by 401(k) participants was equally split among fixed income and equity funds for the month of October, overall net assets moved toward equities, according the Hewitt 401(k) Index.
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Though Mid US Equity and Small US Equity offerings each saw relatively small negative net transfers in October, Large US Equity offerings had the highest transfers in at over $133 million, the Hewitt data showed. The Large US Equity asset class had positive flows for the first time this year in September, but still had lost $900 million to participant transfers year-to-date as of the end of September.

Lifestyle funds followed Large US Equities closely, winning over $130 million of assets transferred by 401(k) participants in October. In the past four months lifestyle funds have seen positive net transfers of over $440 million, the highest amount for any four month period in the history of the Index, Hewitt said. Participants moved nearly $77 million to International Equity offerings in the month.

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GIC/Stable Value offerings saw a reversal of participant favor in October, with a negative net transfer amount of nearly $87 million for the month. As in September, company stock was the biggest loser with net transfers out of over $311 million. Company stock funds, however, continued to hold the largest percentage of participant 401(k) assets among asset classes at 21.48%.

Participants’ exposure to equities continued to inch up with the help of strong market performance to 68% of 401(k) assets, compared to 67.4% in September. Large US Equity funds held 20.92% of participant assets as of the end of October, followed by GIC/Stable Value offerings with 20.72% of total 401(k) assets.

Large US Equity funds gained 20.62% of overall contributions to 401(k) accounts in October, followed by company stock at 16.47% and GIC/Stable Value at 16.37%. Almost 22% of participant contributions went to Large US Equity funds during the month. Participant contributions to Lifestyle/Pre-Mix funds were at an all time high of 15.8% of contributions, Hewitt said.

Hewitt 401(k) Index results for October can be viewed here

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