1. finance
2. investing
3. funds
4. mutual funds

D4 Business |
2R
| SUNDAY, JANUARY 18, 2015
MutualFunds
FEARLESS FORECAST
FOR 2015 FUND STORIES
three­year result.
That is a way for advisers
and fund brass to suggest
Chuck Jaffe
that the 13.7 percent gain
Syndicated columnist
on the Standard & Poor’s
The mu­
500 in 2014 represented
tual­fund
more of a down year than
business is
the sixth straight year of a
more obtuse
bull­market recovery.
and difficult
Domestic large­cap funds
to read than
are up about 19 percent
ever, from
annualized, on average,
new fund
over the last three years,
types and investment class­ while the average foreign
es to a market that has con­ stock fund is up double­dig­
founded pundits and inves­ its, despite a down year in
tors alike.
2014.
That doesn’t mean I can’t
The last three years have
try to get a reading on it.
been anything but average,
In 20 years of making my however; while the industry
calls on the industry, I typi­ will keep putting its best
cally have gotten about
foot forward, at some point
three­fourths of my annual
the music is going to stop
prognostications right;
playing and investors are
when I’m off, it’s often more going to have a year when
a case of being “early” than
they again think that funds
flat­out wrong.
failed to live up to expecta­
The big fund stories for
tions.
2015 will include:
Unpleasant tax surpris­
An alternative­fund
es from some big 2014
blowup.
winners.
Problems with GL Beyond
The tax­loss carryfor­
Income — a closed­end fund wards from the financial
that invested in illiquid
crisis have been exhausted,
consumer debt, and where
replaced by large gains that
the manager is now facing
will generate taxable distri­
fraud charges — show the
butions when longtime
worst of what could happen winners are sold.
in “alternatives funds,” but
Distributions aren’t a big
to call GL a fringe player
problem in good years like
may be giving it too much
2014, when funds, general­
credit.
ly, were up and the taxes
That said, the problems
feel like a cost of doing
show how hard it is for fund business.
boards, compliance officers
If there’s a market rever­
and others to get a good
sal, a significant decline or a
handle on a complex, illiq­
flat or single­digit year,
uid, potentially volatile or
however — and especially if
unstable asset class.
increased volatility pushes
Judging from the number managers to sell into appar­
of alt­fund false starts —
ent trouble — funds may
where firms have brought
find themselves generating
ideas to market and killed
tax bills that equal or eclipse
them quickly — some bad
their growth; investors
ideas haven’t survived long aren’t going to be happy
enough to get into trouble.
with oversized tax bills on
That changes this year.
mediocre results.
Some liquid alternatives
Better­than­expected
fund will prove to be not so bond­fund returns.
fluid, and as investors try to
Pundits have been saying
figure out how — and if —
for years that the moment
they can get their money
interest rates started to
out/back, the entire indus­
creep up, bond funds would
try will take a step back to
be crushed.
question whether “alterna­
That’s not happening in
tive” is actually a euphe­
2015. Sure, the Federal
mism for “too risky.”
Reserve is poised to hike
An SEC intervention on
rates, but it won’t happen
alternative funds.
until late in the year (if at
Whether or not the first
all), and it won’t be enough
scenario is correct, the Se­
to surprise a market that
curities and Exchange Com­ already is anticipating small
mission is working on a
increases.
review of alt funds, not so
More target­date funds
much because it expects
being closed for being
trouble but because regula­ off­target.
tors wonder whether fund
Several notable fund
boards are properly
companies shuttered their
equipped to oversee these
entire lineup of target­date
funds.
funds in 2014 — from
Expect them to decide
iShares closing ETFs to Legg
that trustees can’t be trusted Mason and Hartford shut­
on the most complex of
tering traditional funds.
these issues, not without
That wasn’t an anomaly so
some additional hurdles to
much as a start.
jump through.
As the fund industry
This, too, will slow the
struggles to figure out how
growth of new issues in the to best categorize and man­
alternatives space this year. age life­cycle funds — com­
Three­year track re­
panies that have failed to
cords being used to con­
gain much market share are
vince investors that
going to bail out, regroup
they’ve made a mistake
and figure out how to get
being cautious.
back into the market more
In 2014, the focus was on effectively as the industry
five­year records because
comes up with what it will
they looked good with the
market as a “better ap­
financial crisis completely
proach” to the problem.
out of the data.
Those ugly numbers from Chuck Jaffe is senior columnist for
MarketWatch. He can be reached
2008­09 are still in the 10­
at cjaffe@marketwatch.com or at
and 15­year records so the
P.O. Box 70,
number advisers and funds
Cohasset, MA 02025­0070.
Copyright 2015, MarketWatch
will focus on this year is the
Your Funds
Local man sues Pimco
over advisory fees
Bloomberg News
Pacific Investment Man­
agement Co. will fight a
lawsuit by a shareholder of
its Pimco Total Return Fund
alleging that the company
gouges investors with ex­
cessive advisory fees to
support billion­dollar bo­
nuses for top executives.
Pimco was sued Dec. 31
in Seattle federal court over
claims that fees totaling
$1.2 billion in 2013 are
unfair and excessive, bear
no reasonable relationship
to the services rendered and
couldn’t have been the
product of arms­length
negotiations, according to
the complaint.
Pimco breached its fidu­
ciary duties to investors and
should return fees and
improper compensation to
shareholders, investor Rob­
ert Kenny, of Clinton, Island
County, said in the com­
plaint.
“Pimco believes this law­
suit is without merit and
intends to vigorously de­
fend itself,” Agnes Crane, a
Pimco spokeswoman, said
Wednesday in an email.
Pimco paid more than
$1.5 billion in bonuses to
top executives while the
fund’s performance suf­
fered, said Kenny, who is
represented by attorneys at
Keller Rohrback, a firm that
has represented institution­
al investors in lawsuits over
LIBOR manipulation and
securities lending.
Bill Gross, who managed
the Total Return Fund, the
world’s biggest bond fund,
left in September to join
Janus Capital Group. He
received $290 million in
bonus pay in 2013, Kenny
said in the complaint.
Fund Tracker
Weekly spotlight on mutual fund performance
Winners and losers: A mutual­fund scorecard
Fund Wkly % YTD %
obj return return
Biggest funds
American Funds A AmcpA p
American Funds A AMutlA p
American Funds A BalA p
American Funds A BondA p
American Funds A CapIBA p
American Funds A CapWGA p
American Funds A FdInvA p
American Funds A GwthA p
American Funds A IncoA p
American Funds A ICAA p
American Funds A N PerA p
American Funds A SmCpA p
American Funds A WshA p
Artisan Funds Intl
BlackRock Instl StrIncoOpp
BlackRock Instl EquityDv
BlackRock Instl GlbAlloc r
Dimensional Fds EmMCrEq
Dimensional Fds EmMktV
Dimensional Fds USLgVa
Dodge&Cox Balanced
Dodge&Cox Income
Dodge&Cox IntlStk
Dodge&Cox Stock
DoubleLine Funds TRBd I
FPA Funds FPACres
Fidelity Freedom FF2020K
Fidelity Freedom FF2030K
Fidelity Invest Balanc
Fidelity Invest Contra
Fidelity Invest GroCo e
Fidelity Invest LowP r
Fidelity Invest Puritn
Fidelity Invest TotalBd
Fidelity Spart Adv 500IdxAdv
Fidelity Spart Adv TotMktAd r
Frank/Temp Frnk A IncomA p
Frank/TmpFrnkAdv GlbBdAdv
Harbor Funds CapApInst
Harbor Funds Intl r
Loomis Sayles LSBondI
MFS Funds I ValueI
Metro West Fds TotRtBdI
Oakmark Funds I EqtyInc r
Oakmark Funds I Intl
Oakmark Funds I Oakmark
Oppenheimer Y DevMktY
PIMCO Instl PIMS AllAsset
PIMCO Instl PIMS TotRt
PIMCO Funds Instl Income
Price Funds BlChip
Price Funds CapApp
Price Funds EqInc
Price Funds EqIndex
Price Funds Growth
Price Funds MidCap
Price Funds N Horiz
Price Funds N Inc
Price Funds Ret2020
Price Funds Ret2030
Price Funds Value
Schwab Funds S&P Sel
Vanguard Admiral 500Adml
Vanguard Admiral GNMA Ad
Vanguard Admiral HlthCr
Vanguard Admiral ITAdml
Vanguard Admiral ITGrAdm
Vanguard Admiral LtdTrAd
Vanguard Admiral MCpAdml
Vanguard Admiral PrmCap r
Vanguard Admiral STIGrAd
Vanguard Admiral SmCAdm
Vanguard Admiral TtlBAdml
Vanguard Admiral WellslAdm
Vanguard Admiral WelltnAdm
Vanguard Admiral WdsrIIAd
Vanguard Fds TotIntBInv
Vanguard Fds DivdGro
Vanguard Fds STAR
Vanguard Fds TgtRe2015
Vanguard Fds TgRe2020
Vanguard Fds TgtRe2025
Vanguard Fds TgRe2030
Vanguard Fds TgtRe2035
Vanguard Fds TgtRe2040
Vanguard Fds TgtRe2045
Vanguard Idx Fds TotlIntl
XC
LV
BL
IB
BL
GL
LC
LG
BL
LC
GL
GL
LC
IL
GT
EI
MP
EM
EM
LV
BL
IB
IL
LV
MT
MP
MP
MP
BL
LG
XG
MC
BL
IB
SP
XC
BL
WB
LG
IL
GT
LC
IB
BL
IL
LC
EM
MP
IB
GT
LG
BL
EI
SP
LG
MG
SG
IB
MP
MP
LV
SP
SP
MT
HB
IM
IB
SM
MC
LC
SB
SC
IB
BL
BL
LV
WB
EI
BL
MP
MP
MP
MP
MP
MP
MP
IL
­0.7
­0.2
­0.4
+0.4
+0.8
+0.7
­0.8
­0.7
+0.4
­0.1
+0.3
­0.6
­0.6
+1.5
+0.2
­1.1
+0.5
+0.5
­0.2
­1.9
­0.9
+0.2
+0.7
­1.5
NA
­0.5
­0.3
­0.5
­0.8
­0.9
­1.3
­0.7
­0.8
+0.4
­1.2
­1.2
0.0
+0.4
­1.7
+1.8
0.0
­0.8
+0.4
­1.1
+0.4
­1.7
+0.3
NA
+0.6
NA
­1.4
­0.6
­1.1
­1.2
­1.4
­1.1
­1.0
+0.2
­0.3
­0.4
­1.5
­1.2
­1.2
0.0
+1.0
+0.6
+0.5
+0.4
­1.2
­0.3
+0.2
­0.9
+0.4
+0.2
­0.1
­1.6
+0.6
­0.1
­0.3
0.0
­0.1
­0.1
­0.2
­0.3
­0.3
­0.3
+1.2
­1.6
­0.8
­0.7
+1.3
+0.5
­0.3
­1.8
­1.8
+0.2
­1.0
­0.8
­1.0
­1.4
+0.8
+0.4
­2.3
­0.1
+1.0
+0.3
­3.4
­1.6
+0.7
­0.9
­2.7
NA
­1.2
­0.6
­1.2
­1.2
­1.9
­1.3
­2.3
­1.0
+1.2
­1.9
­1.9
­0.4
+0.5
­2.4
­0.9
+0.1
­1.8
+1.2
­2.2
­2.1
­3.5
­0.7
NA
+1.6
NA
­1.9
­0.7
­2.5
­1.9
­2.2
­1.5
­2.1
+1.1
­0.6
­1.0
­2.2
­1.9
­1.8
+0.3
+3.3
+1.2
+1.6
+0.6
­1.7
­0.9
+0.5
­2.0
+1.4
+0.7
­0.3
­2.6
+1.1
­0.3
­0.6
­0.1
­0.3
­0.5
­0.7
­0.9
­1.1
­1.1
­0.3
XC
SP
XC
Vanguard Idx Fds TotStk
Vanguard Instl Fds InstIdx
Vanguard Instl Fds InsTStPlus
5­yr %
return
+14.4
+13.2
+11.6
+4.5
+8.8
+8.7
+12.5
+12.7
+10.9
+12.7
+10.0
+10.5
+14.2
+8.9
+5.4
+12.0
+6.2
+2.3
­0.6
+15.4
+11.8
+5.1
+7.1
+14.2
NS
+9.9
+7.8
+8.8
+11.0
+14.3
+17.3
+14.4
+11.0
+5.3
+14.5
+14.8
+8.9
+5.6
+13.8
+5.0
+8.0
+13.6
+6.7
+9.0
+8.3
+15.1
+5.1
NA
+5.1
NA
+16.2
+12.6
+12.1
+14.3
+15.2
+16.7
+20.5
+4.4
+9.7
+10.8
+14.9
+14.5
+14.5
+4.2
+20.3
+4.8
+6.3
+2.1
+16.1
+15.8
+2.9
+15.9
+4.4
+9.4
+10.9
+12.9
NS
+14.2
+9.6
+8.5
+9.2
+9.7
+10.2
+10.6
+10.9
+10.9
+3.7
Best performers
Columbia Cl I,T&G AbRtCurIn I
GAMCO Funds GoldAAA
OCM Funds GoldInv t
Fidelity Selects Gold r
Amer Century Inv GlGold
Wells Fargo Adv A PrecMtlA
Deutsche Trust Gold&Prc
First Eagle SGenGld p
Tocqueville Fds Gold t
USAA Group PrecMM
US Global Investors Gld&Mtls
Invesco Funds A GoldPrec p
Frank/Temp Frnk A GoldPrM A
Eaton Vance A GrIndia t
Invest Managers EuroPGld A
Midas Funds Perpetual t
Rydex Investor PrecMet
Midas Funds Midas Fd t
US Global Investors WldPrcMn
Matthews Asian IndiaInv r
ProFunds Inv Cl UltraIntl
Rydex Dynamic InvNasdSt H
ProFunds Inv Cl PrecMetal
Rydex H Class EurStratH
ProFunds Inv Cl UltShNq100
Fidelity Invest GNMA
Matthews Asian Japan Inv
Putnam Funds A IntlEq p
Frank/Temp Frnk A IndiaGrA p
ProFunds Inv Cl RealEst
Worst performers
AMG Managers FQGlbAlt S
CGM Funds Focus
Fairholme
ProFunds Inv Cl InternetUlt
HodgesFd
Berkshire Funds Focus
Fidelity Selects Comp
Legg Mason Instl CMOppor
Natixis Funds TargetEqA
MassMutual Select FocVal R5
ProFunds Inv Cl UltNasd100
JPMorgan Sel Cls DynSmCap
Fidelity Selects Brokr
Fidelity Selects Banking
Price Funds FinSvcs
CGM Funds Mutl
Rydex Dynamic NasdStrH
Snow Capital OppInst r
Ivy Funds ValueA p
Invest Managers TowleDpV
Allianz Fds Instl GlblTech I
Oak Assoc Fds BlkOkEm
Price Funds GlbTech
Waddell & Reed Adv ValueA p
Rydex Investor Internet
Invesco Funds A SmCpValA t
Jacob Funds Internt Inv
Kinetics Funds SmCap
Wells Fargo Adv A SpcTchA
Dreyfus TechGroA
­1.2
­1.2
­1.1
­1.9 +14.7
­1.8 +14.5
­1.8 +14.9
Fund Wkly % YTD %
obj return return
5­yr %
return
MP +14.4 +13.9 +2.8
AU +7.9 +18.8
­9.9
AU +7.3 +19.1
­9.6
AU +7.2 +20.0 ­12.5
AU +6.9 +18.1 ­12.0
AU +6.9 +17.8 ­10.4
AU +6.6 +16.8 ­13.6
AU +6.3 +15.5
­8.1
AU +6.0 +15.7
­7.9
AU +5.8 +18.2 ­12.9
AU +5.6 +16.3 ­14.0
AU +5.5 +16.6
­9.7
AU +5.3 +15.3 ­13.2
PR +5.1 +6.3 +4.2
AU +5.0 +13.1
NS
BL +5.0 +6.1 +1.5
AU +4.7 +15.8 ­12.9
AU +4.6 +14.1 ­22.4
AU +4.2 +10.3 ­17.8
PR +4.0 +6.3 +11.7
SQ +3.7 ­0.6 +0.6
SQ +3.5 +4.3 ­36.1
SQ +3.5 +16.5 ­22.7
SQ +3.4 +0.1 +0.3
SQ +3.3 +4.0 ­36.3
MT +3.3 +3.6 +4.9
PR +3.2 +2.9 +8.6
IL +3.2 +0.7 +5.5
PR +3.1 +4.7 +7.9
SQ +3.0 +9.6 +22.3
Fund Wkly % YTD %
obj return return
MP
XC
XV
SQ
XG
XG
TK
XC
LC
XC
SQ
SG
FS
FS
FS
BL
SQ
XV
LV
SV
TK
TK
TK
LV
TK
SC
TK
GL
TK
TK
­8.7
­5.8
­5.1
­4.2
­4.1
­3.7
­3.7
­3.7
­3.7
­3.6
­3.5
­3.5
­3.5
­3.5
­3.4
­3.4
­3.4
­3.4
­3.2
­3.2
­3.2
­3.2
­3.1
­3.1
­3.1
­3.1
­3.1
­3.0
­3.0
­2.9
­7.4
­8.3
­8.5
­7.1
­6.4
­3.1
­4.5
­5.1
­5.0
­5.7
­4.7
­3.5
­7.0
­8.6
­6.4
­4.5
­4.6
­6.0
­5.0
­7.4
­2.8
­2.7
­4.5
­5.1
­3.9
­5.4
­3.1
­3.6
­2.8
­3.2
5­yr %
return
­4.6
+4.3
+5.6
+25.4
+13.0
+17.9
+14.4
+13.1
+8.3
+15.8
+33.3
+15.5
+9.1
+10.3
+10.8
+5.8
+33.5
+10.8
+12.2
NS
+15.8
+11.0
+18.5
+12.3
+13.9
+15.6
+13.7
+11.4
+15.2
+13.7
Footnotes: e: Ex capital­gains distribution. f: Previous day{rsquo}s
quote. n or nl: No upfront sales charge. p: Fund assets are used to
pay for distribution costs. r: redemption fee or contingent deferred
sales load may apply. s: Stock dividend or split. t: Both p and r. x: Ex
cash dividend. NE: Data in question. NS: Fund did not exist at the
start date. NA: No information available.
Key to abbreviations and footnotes:
Fund objectives: AB: Long­term top­grade corporate and govern­
ment bonds. AU: Gold oriented. BL: Balanced. EI: Equity income.
EM: Emerging markets. EU: European region. GL: Global (includes
U.S.). GM: General municipal bond. GT: General taxable bond. HB:
Health and biotech. HC: High­yield taxable bond. HM: High­yield
municipal bond. IB: Intermediate­term investment­grade corporate
bond. IG: Intermediate­term Treasury/government debt. IL:
International (outside U.S.). IM: Intermediate­term municipal bond.
LC: Large­cap core. LG: Large­cap growth. LT: Latin American. LU:
Long­term Treasury/government debt. LV: Large­cap value. MC:
Mid­cap core. MG: Mid­cap growth. MP: Mixed portfolio (stocks and
bonds). MT: Mortgage. MV: Mid­cap value. NM: Insured municipal
bond. NR: Natural resources. PR: Pacific region. SB: Short­term
investment­grade corporate bond. SC: Small­cap core. SE: Sector
(specific industries). SG: Small­cap growth. SM: Short­term munici­
pal debt. SP: S&P 500. SQ: Specialty diversified equity. SS: Single­
state municipal debt. SU: Short­term Treasury/government debt.
SV: Small­cap value. TK: Science and technology. UN: Unclassified.
UT: Utility. WB: World bond. XC: Multi­cap core. XG: Multi­cap
growth. XV: Multi­cap value
5­year % return: Annualized performance over the past five years.
Top 5 mutual funds by objective, year­to­date % return
Emerging markets
Voya Funds Cl A
Frank/Temp Frnk A
Columbia Class Z
Goldman Sachs Inst
WM Blair Fds Inst
RussiaA p
T BRIC A t
EmgMkt r
EmMEq
EmMkGrI r
Equity income
StrValDvIS
Div&Inc N
Utilities p
StrDivVal
DivOpptyA
Federated Instl
City Nat Rochdale
Invesco Funds A
Hussman Funds
Columbia Class A
Health | biotech
Rydex Investor
Fidelity Selects
Fidelity Advisor A
Kinetics Funds
Frank/Temp Frnk A
Biotech
Biotch
Biotech A
Medical
BioDisA p
Global
Lazard Instl
Invest Managers
Hartford Fds Y
Vanguard Fds
Mkt Mster100
GblInfra I
KnoLdr Ins
GblEqInco
GblMnV Inv
IntlValue
IntlMgdVol
AcnIntSIZ
IntlFrntr r
IntlGrw I
Fidelity Invest
BMO Funds
Invesco Fds Invest
Bragg Capital
Virtus Funds A
Wright Funds
Davenport Funds
Vanguard Fds
Hartford Fds A
MassMutual Select
YTD %
return
Small­cap core
+1.9
+1.4
+1.1
+0.8
+0.5
Invesco Funds A
GoldmanSachsInst
Allianz Funds C
TouchstoneFamily
TouchstoneFamily
YTD %
return
+5.2
+5.1
+4.9
+4.9
+4.2
+3.1
+1.2
+1.1
+1.0
+0.7
Eaton Vance A
Matthews Asian
Frank/TempFrnkA
EuroPac Funds
ColumbiaClassA
StrDvIn e
LowVolEq I
Exch
QValue
GrIncA
+1.1
+0.6
+0.3
­0.1
­0.2
SmallC p
SmCapEqty
Opport
SCCore Inst
SmCapGr Y
GrIndia t
IndiaInv r
IndiaGrA p
AsiaSmCoA
GrChinaA
AsiaSciTInv
CommA p
Telcm
SciTech
Telcomm
Gold oriented
Fidelity Selects
OCM Funds
GAMCO Funds
USAA Group
Amer Century Inv
+0.3
­0.4
­1.0
­1.1
­1.2
YTD %
return
­1.2
­2.0
­2.2
­2.2
­2.5
YTD %
return
Science | technology
Matthews Asian
DWS Invest A
Fidelity Selects
USAA Group
Rydex Investor
­0.9
­1.0
­1.3
­1.3
­1.4
YTD %
return
GlbCmdty r
Income A
NatResA
GlNtRs p
New Era
Fidelity Invest
Oppenheimer A
Dreyfus
Putnam Funds A
Price Funds
Pacific region
+2.9
+1.9
+1.7
+1.7
+1.6
SlBlCh
EqtyOpps
StratEq
MdValueA
S&P MidC I
Natural resources
YTD %
return
YTD %
return
Large­cap core
YTD %
return
Mid­cap core
+3.6
+2.4
+2.2
+2.1
+2.1
YTD %
return
International
EuroPac Funds
Allianz Fds Instl
Columbia Class Z
Westcore
John Hancock Fds
YTD %
return
Gold r
GoldInv t
GoldAAA
PrecMM
GlGold
+6.3
+6.3
+4.7
+4.0
+3.7
YTD %
return
+0.7
+0.3
+0.1
­0.2
­0.6
YTD %
return
Sector
NewAlt
Invest Managers
AQR Funds
Price Funds
Rydex Investor
MgdFutSt I
MgdFutSt I
RealAsset
MgdFutStr
YTD %
return
Balanced
Perpetual t
StrTotRet r
StrReRt r
RetInc
LifeInc
Midas Funds
Hussman Funds
Fidelity Invest
AdvanceCapital I
Vanguard Fds
Intermediate bond
ITExQual
ITBdAdml
StraFxdP
TotRtBond
TotRt
Dimensional Fds
Vanguard Admiral
PACE Funds P
AMG Managers
PIMCO Instl PIMS
Long­term bond
Vanguard Idx Fds
Vanguard Admiral
Del Inv Instl
GuideStone Funds
PIMCO Instl PIMS
LTBnd
LTGrAdml
ExtDurI
ExtDrGS4 x
InvGrCp
Long­term U.S.
VanguardInstlFds
Wasatch
Vanguard Admiral
Fidelity Spartan
Dreyfus
YTD %
return
Mortgage
+20.0
+19.1
+18.8
+18.2
+18.1
Fidelity Invest
Victory Funds
Legg Mason A
Wright Funds
JPMorgan R Cl
+4.4
+3.1
+2.4
+1.9
+1.7
ExDurTreas
USTryFd
LTsyAdml
SpLTTrAd r
UST Lng
+6.1
+3.7
+1.5
+1.0
+0.8
YTD %
return
+2.1
+2.1
+1.9
+1.7
+1.6
YTD %
return
+3.6
+3.0
+2.9
+2.8
+1.7
YTD %
return
+7.8
+6.8
+5.3
+5.3
+5.2
YTD %
return
GNMA
FundFInc I
WAMtgBkA
CurIn
MtgBckd
+3.6
+1.3
+1.2
+1.2
+1.1
HOW
SOCIAL
SECURITY
SUMS UP
BENEFITS
Investing
Scott Burns
Syndicated columnist
Q: My
wife and I
are 57
years old.
We have a
net worth
of
$1.1 mil­
lion. The bulk of this is in
IRAs managed by Fisher
Investments and equity in
our home.
I recently changed jobs,
and my income is consider­
ably less. It will be two or
three years before my
income increases to its
former level.
When looking at my
Social Security benefits
online, I noticed a note
below the benefits section.
It said my benefits would
remain the same as long as
I make $113,000 per year
until I retire.
Since this won’t happen,
what kind of decrease in
benefits should I expect?
A: Social Security bene­
fits are calculated from
your highest 35 years of
earnings. Each year of
earnings is adjusted to
produce your average
indexed monthly earnings.
That figure, in turn, is
treated by a formula that
determines your primary
insurance amount (PIA).
That figure, your PIA, is
the basis for your actual
benefit.
The PIA formula gives
credit to your contribu­
tions at three levels of
income. At the first level,
currently up to $816 a
month, you get 90 percent
credit.
Between that amount
and $4,917 a month, you
get 35 percent credit. And
for PIA over $4,917 a
month, the crediting rate is
only 15 percent.
The result of this sharp
reduction in the crediting
rate as your income rises is
that your benefits don’t
increase rapidly after you
hit what in Social Security
language is the second
“bend point” of $4,917 a
month.
So you’ve got some
perverse good news: You
can earn a good deal less
than $113,000 in coming
years, and your ultimate
Social Security benefit
won’t be dramatically
affected, particularly since
the number of years of
lower earnings added to
your record will be a small
portion of the 35 years
used in the calculation.
It is also possible that
your PIA will actually rise.
If that happens, your bene­
fit will increase even
though the last years of
earnings were lower than
recent years.
How can that be?
Simple: If some of the
next few years replace
earlier years with zero
earnings or relatively low
earnings, your PIA calcula­
tion will increase because
the better earnings will
push out the lower earn­
ings.
Q: Unfortunately, my
wife is a teacher at a Cath­
olic school where the only
savings plan that has a
match (3 percent of salary)
is a TIAA­CREF 403(b)
plan.
How can my wife liqui­
date the 403(b) plan,
either before or after she
stops working at the
school?
A: The plan your wife
has is probably better than
the vast majority of the
offerings out there for
teachers in both private
and public schools.
When she stops working
at the school, she can do a
1035 exchange and enjoy a
tax­free transfer of her
403(b) account to her
brokerage rollover IRA
account.
If you have other ques­
tions about 403(b) plans,
visit www.403bwise.com.
Questions:
scott@scottburns.com
Copyright 2015,
Universal Press Syndicate