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Managing your money in the 21st Century

- Alan Lavine and Gail Liberman

The investment, savings and insurance world is changing for people over age 50. That's the word based on a report by Goldman, Sachs & Co. The report is titled "Asset Management in the 21st Century: New Rules, New Game."

For one thing, there will be a major population shift that is apt to affect the growth of mutual funds. The population most likely to save--those between the ages of 40 and 60--will peak at 35.7 percent of the adult population in the year 2006, based on U.S. Census Bureau data.

As the baby boomers start reaching age 65 and retire, they are likely to start withdrawing their retirement assets. They're also likely to shift strategies. While they've spent the last several years investing in stocks and stock funds, many will switch at least some of their assets to more conservative investments such as bonds, bond funds, CDs, money funds, Treasuries and annuities. They'll be faced with the challenge of keeping their investments growing, at least at the pace of inflation, while withdrawing their money to live on at the same time.

Also, look for more investment transactions to be conducted on the Internet. The authors cite data that predict 50 percent annual growth in mutual fund assets held in on-line accounts. The growth of investors doing business online will make it easier for any financial services provider with just a little bit of money to compete.

As a result of the slower growth of stock mutual funds, the challenge of managing money for more conservative retirees, and the influx of online offerings, the Goldman Sachs' paper indicates you can expect heavier competition. Investment managers no longer will be able to put your investments on automatic pilot and watch the money flow in. They'll need to market their funds more aggressively if they wish to grow.

Based on the Goldman Sachs report, you can expect mutual fund companies to place a high priority on new types of insurance and mutual fund investments aimed at the older retiree. This could be good news as more insurance companies come out with policies that cover long-term illnesses. Already, a new breed of variable immediate annuity guarantees your principal although you can invest in stocks.

Expect even more no-load investment companies to introduce loads or commissions and sell their mutual funds through brokers. This, even though the average load has dropped to about 4.5 percent from 8 percent in recent years.

Meanwhile, even if you stick with no-load funds, you can expect the costs of those funds to rise. While you may not pay front-end loads when you purchase your mutual funds per se, look for an increase in other types of fees. Check carefully for back-end loads or redemption fees, which are charged on withdrawals within a specific time frame; 12b-1 marketing fees and dividend reinvestment charges.

The paper says that more mutual funds will be managed by financial advisors for their clients.


Spouses Gail Liberman and Alan Lavine are syndicated columnists. You can purchase Alan Lavine & Gail Liberman's latest book Quick Steps to Financial Stability (QUE Publishing 2006) online at www.moneycouple.com or at your local bookstore. E-mail them at MWliblav@aol.com.

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