Retirement. The word rings with endless possibilities. Will you start every morning with a round of golf or will you travel to Europe? The days of being confined to a desk and a work schedule are gone. But have you saved enough for your years of leisure? The Congressional Budget Office reports that baby boomers have more retirement savings than previous generations, yet one-quarter of them will be financially stretched in retirement. In this special issue of Portfolio we will explore the trends, trials and tribulations of retirement savings and the role REIT investing can play in securing and strengthening those savings.
For the "Road to Retirement," we sat down with nine retirement industry specialists and talked with them about the outlook of retirement for U.S. employees and how they should prepare. Not surprisingly, most of the panel talked about the importance of REITs in funding America's retirement needs. The panel also discussed the pros and cons of using indexed versus actively managed funds, the efforts needed to educate employees on diversification and how other countries are reforming their retirement funding structures.
In the same vein, we spoke one on one with investing experts such as Roger Ibbotson as well as retirement experts such as Francois Gadenne to receive their opinions on how to best prepare for the future. For example, adding REITs and real estate options can help balance your portfolio against swings in the stock market and the economy. Also, since individuals are living longer, the boomer generation will face the choice of working longer or relying on their own financial means during retirement. Be sure to read through these Q&As to learn more on smart decisions for retirement planning.
I assume that many of you read that President Bush signed the Pension Protection Act 2006 earlier this year. This new law requires companies to financially secure their underfunded pension plans and to deliver their pension promises to their employees. It also opens doors for defined contribution plans, through automatic enrollment and the provision of third-party investing advice to employees. Turn to "Security System" for details on how this law will affect our retirement future.
Let's turn the dial to a specific retirement topic. The decline of pension plans sponsored by private employers is continuing. However, high REIT allocations or real estate options in a defined benefit plan may extend its life. To read more, turn to "Problems Afoot in the Promised Pension Land."
On the other side of the playing field, REITs have been performing well in DC plans. For example, Principal Financial Group reports that its REIT fund has a 22.6 percent return in the past five years. "The REIT Choice" outlines why REITs will become a more common option in DC plans.
The road to retirement may not be paved in gold—yet. But with smart planning and the right investing decisions, retirees will certainly have a large nest egg to fund retirement endeavors.
Erin Corcoran
Managing Editor
