Products May 3, 2010

Dow Jones Adds to Required Business Performance Indexes

Dow Jones Indexes has announced the addition of four new indexes to its family of Dow Jones RBP Indexes.
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The new series of indexes include three directional strategy indexes and one fundamentally weighted U.S. market index. The three strategy indexes are the Dow Jones RBP U.S. Large-Cap Aggressive Index, the Dow Jones RBP U.S. Large-Cap Defensive Index, and the Dow Jones RBP U.S. Large-Cap Market Index.  

The fundamentally weighted market index, the Dow Jones U.S. Large-Cap Total Stock Market Index (RBP weighted), provides market participants with additional rules-based information to measure the valuation of publicly traded companies included in the index. 

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Dow Jones RBP U.S. Large-Cap Aggressive Index, the Dow Jones RBP U.S. Large-Cap Defensive Index, and the Dow Jones RBP U.S. Large-Cap Market Index are licensed to Transparent Value LLC, a Guggenheim Partners Company, to underlie three mutual funds, according to Dow Jones Indexes. 

The Required Business Performance (RBP) indexes were designed to measure the likelihood that companies can deliver the performance required to support their current stock prices. The indexes are created using rules-based, published analytics, RBP probability scores, supplied by Transparent Value, LLC. Components of the Dow Jones RBP Indexes are selected based on their RBP probabilities.

Data & Research May 3, 2010

Workers Need 15x Final Pay in Retirement

The average U.S. employee will need 15.7 times their final pay in retirement resources to maintain their current standard of living during retirement, according to a new analysis by Hewitt Associates.
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A Hewitt news release said Social Security is expected to provide 4.7 times final pay, leaving employees responsible for accumulating the remaining 11 times final pay from other sources such as company-provided plans and personal savings. Hewitt said the latest data is consistent with its prior projection in 2008.

Hewitt’s analysis reveals that 18% of employees who contribute to a defined contribution plan and work a full career are expected to achieve the retirement readiness goal. On average, these employees are on track to accumulate 13.3 times their final pay (including Social Security) leaving a shortfall of 2.4 times pay, Hewitt said. In other words, they’re expected to meet just 85% of their financial needs in retirement. Nineteen percent are expected to have a shortfall of five time’s final pay or more at retirement.

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Meanwhile, as a result of recent market volatility, four out of five workers are still expected to fall short of meeting all their financial needs in retirement unless they take action to improve their savings habits or retire at a later age.

On average, workers who rely solely on a defined contribution plan to fund their retirement are projected to meet just 74% of their needs in retirement—compared to 91% for employees who are also covered by an active or frozen defined benefit plan.

“Employees have been able to recoup a good portion of the retirement assets they lost due to market volatility, but unfortunately most workers are still falling significantly short of meeting their retirement needs,” said Rob Reiskytl, Hewitt’s leader of Retirement Plan Strategy and Design, in the news release.

What Workers Need to Do

Hewitt’s analysis revealed that workers can significantly improve their situation by making a few small adjustments:  

  • Start saving: According to recent Hewitt research, 26% of eligible employees do not contribute to a defined contribution plan. Hewitt projects these workers will have saved, on average, less than half of what they will need by the time they reach retirement age.
  • Regularly increase your contribution rate: Hewitt’s analysis reveals that many workers who commit to increasing their retirement contributions by as little as 1% each year for five years will be on track to meet most of their financial needs in retirement.
  • Work longer: According to Hewitt’s analysis, employees who delay retirement to age 67 can significantly reduce their savings shortfall.

Hewitt examined the projected retirement levels of more than two million employees at 84 large U.S. companies for the study.

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