Designing an investment plan specifically for college savers

How the architects of CollegeBound 529 approached the challenge of keeping up with skyrocketing education costs

Designing an investment plan specifically for college savers

In 2015, the State of Rhode Island selected Ascensus College Savings as the program manager and Invesco as the investment manager for the state’s 529 college savings plan, which is available to investors nationwide. In this role, we at Invesco created a suite of investment options specifically designed to meet the unique needs of college savers, who face fast-growing college costs and a limited time to save.

Our plan has three tiers:

Continue

Payroll deductions: The key to less debt and a lasting retirement?

We may not like seeing those deductions on our paychecks, but they serve a valuable role

Payroll deductions: The key to less debt and a lasting retirement?

It was 43 years ago that I got my first “real” job working in a photo development plant on weekends cleaning chemical tanks. My pay was $1.60 per hour. That’s not a misprint; it was the minimum wage at that time. I was very excited to get my first real paycheck. In the past, I had worked mowing lawns and shoveling snow. This was to be a real working man’s paycheck.

It was simple math: 10 hours at $1.60 per hour – I should get $16.00. Imagine my surprise when my check was less, due to federal and state taxes and something called FICA.

“What are all these deductions?” I wondered. “And what is FICA?” It was easy to understand federal and state taxes, but taking money for my retirement? I was 17 years old – ludicrous, I said!

Payroll deductions are a valuable means of funding retirement

Continue

Understanding the growing universe of collective investment trusts

As CITs rise in popularity, we examine the top questions surrounding the investment vehicles

Understanding the growing universe of collective investment trusts

Collective investment trusts (CITs) — pooled investment funds designed exclusively for qualified retirement plans — have been garnering a lot of attention and assets in recent years. They account for $2.4 trillion (or 16%) of the $15 trillion invested in 401(k)s and pension plans, up from $1.3 trillion (12.7% of the total) in 2009, according to the Investment Company Institute and Cerulli Associates.1

One of the reasons I believe CITs are becoming more popular these days is the enhanced understanding plan fiduciaries and other decision-makers have about the investment vehicles. Such advisors, I believe, need to be well-versed in CITs to be able to objectively weigh their benefits and considerations. A lack of familiarity isn’t a good reason to ignore these investment vehicles, which may be appropriate for many plans.

To help with the information-gathering process, I’ve listed some of the top questions we receive from clients and prospects about CITs, along with answers I believe will help shed light on this growing investment trend.

Continue

DOL fiduciary rule faces a lineup of lawsuits

Part of Invesco Legislative Insights series

DOL fiduciary rule faces a lineup of lawsuits

Professional groups representing the brokerage and insurance industries filed suit last month challenging the Department of Labor’s (DOL’s) fiduciary regulation finalized in April. The rule requires financial advisors to act in the best interest of their clients in retirement accounts, but opponents say the costs of implementing this new standard would ultimately result in fewer investors receiving professional advice.

Who’s filing suit?

Continue

What the US can learn from the UK’s DC system

Analyzing the successes and challenges of ‘DC schemes’

What the US can learn from the UK’s DC system

The US defined contribution (DC) system is large by global standards, but most of us in the industry know that much improvement is needed. The good news is that there are other DC systems in the world that make good case studies on a variety of issues.

The surprising Brexit outcome may have overshadowed the business landscape for now, but plan sponsors and regulators in the UK have taken some noteworthy steps to help drive better outcomes for participants that should help the long-term financial health of the nation, in my view. The following information provides an overview of the positive aspects, and shortcomings, of the UK’s DC system in addition to highlighting ways to potentially help plans in the US.

Continue

College savings savvy: 529s versus Roth IRAs

Is there one right tool for saving for college?

College savings savvy: 529s versus Roth IRAs

In-state or out-of-state school? Public or private? Small or large? Long before families grapple with such college-related decisions, parents — and often grandparents — confront an important choice that could largely determine these later ones: how to save for college. And the earlier you decide the how, the better, because ABCs turn into SATs faster than you think.

Two college savings options

While there are various ways to invest specifically for college expenses, some families have begun to wonder whether Roth IRA retirement plans can do double-duty as college savings vehicles. Below, I compare Roth IRAs with 529 plans — a popular option for college savings — to help answer that question.

Continue