Federal workers lose big by pulling out of low-cost retirement plans

NEW YORK (CNNMoney)

The Thrift Savings Plan, used by millions of federal workers, is like a 401(k), except it's a lot cheaper. Last year it charged an average expense ratio of a mere 0.03%. That means just $3 in fees for $10,000 in savings, or $30 for a $100,000 portfolio.

IRAs or employer-sponsored 401(k)s typically charge more than 10 times that amount.

Nevertheless, federal workers are rolling billions in savings out of the low-fee plan when they leave their jobs, even though they don't have to.

Last year nearly half (45%) of participants who left federal service in 2012 had withdrawn all of their savings -- nearly $10 billion collectively.

Workers on government message boards cite a number or reasons for leaving, including frustration with the thrift plan's limited investment options and strict withdrawal rules.

Related: What I gave up to save $1 million

But some retirement savings experts suspect that a heavy sales pitch by private financial firms and advisers might also be a factor.

Gregory Long, the executive director of the agency that runs the thrift plan, wrote in a memo that he thinks some federal workers and retirees may be "swayed by the financial industry's marketing efforts" to roll their money out of the low-cost plans into higher-cost IRAs.

Spokespeople for Thrift Savings Plan did not respond to multiple requests for comment.

John Turner, an economist and director of the Pension Policy Center and a former federal worker himself, said he became troubled when he heard of friends who had pulled out of their funds only to pay thousands in fees.

As an experiment, Turner called up major IRA providers and asked for advice, explaining he was a former government employee with savings in the thrift plan. Only one firm acknowledged he could do better by staying with the plan's super low fees, while the rest all encouraged an IRA rollover.

Related: Is this retirement move right for you?

CNNMoney asked FutureAdvisor, an online investment advisor, to run some numbers to compare fees and investment returns:

FutureAdvisor created three sample portfolios to show how much more savers can pay in fees if they roll their money out of the Thrift Savings Plan.

Let's say a worker has $100,000 invested in the Thrift Savings Plan. Even if she rolled her money into the cheapest comparable ETFs on the market, she would still spend $54 more in fees each year despite getting similar returns.

If the worker were to roll that money into an IRA, invested in mutual funds with average fees of 0.74%, she would pay an extra $716, FutureAdvisor found.

And if she opted for a pricier portfolio, say one with fees of 2.4%, she could shell out more than $2,300 in extra fees in a single year.

"Over years, it's a substantial difference in what you end up with," Turner said. "It's not a trivial issue."

Related: Retirement plan providers misleading savers

To be sure, participants in the Thrift Savings Plan, which has five main funds, can find more investment options in private IRAs.

Yet Turner said the thrift plan offers enough stock and bond index funds that track domestic and international markets to give most savers what they need.

Military veteran Ryan Guina, who writes a military-focused personal finance blog, agreed.

"Unless they're advanced investors, I think they should leave their funds in the TSP because it's simple and it's easy enough that most investors can do it and do it well," he said.

FutureAdvisor, in its analysis for CNNMoney, found that typical investors can almost always get higher returns from the government plan compared to similar investments, especially after fees are taken into account.

Last year, for example, the thrift plan outperformed the sample high-cost portfolio by 3%.

So how does the government thrift plan keep fees so low? It partly subsidizes plan expenses with revenue from loans taken from the plan and forfeitures from employees who leave before fully vesting -- a practice termed "quite unique" by FutureAdvisor Chief Investment Officer Simon Moore.

"They are able to drive costs below market value, which is great for their investors," Moore said. "A corporation wouldn't do that."

First Published: October 1, 2014: 6:55 PM ET

12.08 | 0 komentar | Read More

Facebook will loosen policy for drag queens

Facebook's chief product officer Chris Cox issued an apology on Wednesday.

NEW YORK (CNNMoney)

Last month, Facebook made headlines for suspending the accounts of several gay and transgender entertainers because their accounts weren't in the holders "real" names.

The LGBT community started jumping ship and signing up for Ello, which doesn't have such a policy.

Wednesday's announcement came in the form of a Facebook (FB, Tech30) post (what else?) from chief product officer Chris Cox's Facebook (and has since been "liked" by CEO Mark Zuckerberg). But it isn't clear exactly how the policy will change to better respect users' rights.

According to Cox, Facebook processes thousands of fake name reports every week -- and 99% of these are "bad actors doing bad things." But, recently, an "individual" reported several hundred "fake" accounts and Facebook didn't "notice the pattern," according to Cox's post. In turn, Facebook suspended the accounts and required flagged account holders to submit identification (gym membership, library card or piece of mail) to validate their identity (which is the company's standard protocol).

Related: Does Ello have what it takes to be the anti-Facebook?

San Francisco drag queen Sister Roma was one of the Facebook users whose account was temporarily suspended. She was particularly vocal about her opposition to the policy and led the use of the viral hashtag #MyNameIs.

"Until recently, [the policy has] done a good job of creating a safe community without inadvertently harming groups like what happened here," wrote Cox.

The real name policy isn't new -- it's existed for ten years and serves to ensure that Facebookers use names authentic to their real lives.

But this instance seems to have made Facebook realize it needs to fix the policy.

Cox writes that they're currently building a better system to work to authenticate the identity of the "Sister Romas of the world."

First Published: October 1, 2014: 6:30 PM ET

12.08 | 0 komentar | Read More

Adam Sandler is making 4 movies for Netflix

HONG KONG (CNNMoney)

The veteran comedian has agreed to produce and star in four feature films that will be released exclusively on the streaming video service.

The deal is yet another effort by Netflix (NFLX, Tech30) to bolster its content portfolio, and one that is expected to be a hit with users. Sandler is one of the few actors whose films consistently rank among the most viewed by subscribers, Netflix said.

"His appeal spans across viewers of all ages -- everybody has a favorite movie, everyone has a favorite line -- not just in the U.S., but all over the world," said Ted Sarandos, the company's chief content officer.

Netflix did not announce any additional details about the four films, or when they would be released.

Related: DirecTV, NFL renew Sunday Ticket deal

Sandler made full use of his unique humor in a statement released by Netflix.

"When these fine people came to me with an offer to make four movies for them, I immediately said yes for one reason and one reason only: Netflix rhymes with Wet Chicks," he said. "Let the streaming begin!!!!"

Related: 'Crouching Tiger' sequel to hit Netflix and theaters simultaneously

Netflix announced a deal earlier this week that will allow it to premiere a feature film -- the sequel to the 2000 hit "Crouching Tiger, Hidden Dragon" -- at the same time moviegoers can see it in theaters.

The deal is a first for the film industry, and yet another sign that Netflix plans to be a major player in original content.

First Published: October 2, 2014: 12:55 AM ET

12.08 | 0 komentar | Read More

Stocks: 'September slump' strikes again

NEW YORK (CNNMoney)

The "September stock slump" came back with a vengeance in 2014. The S&P 500 finished the month down over 1.5%, its worst performance since January. The Nasdaq -- the main gauge of tech and biotech stocks -- lost 1.9%. Even the Dow, the index that tracks America's large and well established companies, ended slightly in the red, down 0.3%.

How did things unravel?

It's a valid question to ask. There was so much excitement in September, what with Alibaba (BABA, Tech30) becoming the largest initial public offering in history, and the S&P 500 and Dow actually setting records. Then things turned sour.

Starting on Monday, September 22, investors hit the pause button and kept hitting it for much of the rest of the month. There were concerns again about how fast the Federal Reserve would raise interest rates. Would it move before next summer when most people expect it to take action? Fed chair Janet Yellen tried to soothe the markets, but the second guessing is back.

Related: Thank Janet Yellen or not?

Traders were also alarmed by a so-called "death cross" among small and mid-cap stocks that make up the Russell 2000 index. That's a technical term for when the 50-day moving average for an index falls below the 200-day average. In other words, the trend is down.

There's a clear polarization emerging again in the market where larger, more established companies are going strong and smaller, riskier ones are faltering. It was an excellent month for companies such as Nike (NKE) (up 13.5%), DuPont (DD) (up 8.6%) and Clorox (CLX) (up 8.4%).

So was September just a blip in an otherwise upward trend or is this a turning point? It depends on your perspective.

The pessimist's case: The bears of the investment world see stocks that are expensive and a market overdue for a correction. This is already the fourth longest bull market since 1928, according to Bespoke Investment Group, and we haven't had a true correction where the market dips 10% or more since 2011.

"We've had one record after another on the Dow and the S&P and yet the underlying economic and geopolitical fundamentals are still worrisome," well known investor Mohamed El-Erian told CNN last week.

Layer on top of that concerns about the Federal Reserve raising interest rates, a flat-lining European economy and ongoing strife in many parts of the world from Ukraine to the places ISIS is terrorizing in the Middle East. Furthermore, there's a case to be made that many companies have been boosting their bottom lines by cost cuts, not genuine growth and innovation for the future.

Related: Is it time for Wall Street to issue a correction?

The optimist's case: Most investment strategists that CNNMoney hears from are sticking with U.S. stocks. They believe the slow, but steady growth will continue. Consider this: despite the lackluster September, the S&P 500 is still up 6.7% for the year.

Optimists see an economy that is getting gradually better with manufacturing and employment picking up, among other positive signs. For example, FedEx (FDX) was one of the best performing stocks in September. The company is often seen as a beacon of corporate health.

They also see companies with a lot of cash. Even if there are headwinds, they're a lot easier to deal with when you have a rainy day fund. Corporate cash and short-term investments (some companies temporarily invest their cash to get a little extra bang for their buck) are near all-time highs, according to FactSet.

"We don't go into bear markets because stocks are too expensive. Typically, it's because of a policy error by the Fed or government," reminds Robert Landry, a fund manager for USAA.

The market always has bumps in the road, even during a bull run.

First Published: September 30, 2014: 5:22 PM ET

12.08 | 0 komentar | Read More

House Dems want NY Fed hearings, too

A frustrated ex-Fed investigator provided several news outlets with apparent secretly-made recordings from her time as a Wall Street regulator.

NEW YORK (CNNMoney)

The three members — Reps. Maxine Waters of California, Al Green of Texas and Keith Ellison of Minnesota — signed a letter Tuesday urging hearings on the Federal Reserve Bank of New York and whether it's too close with the banks it supervises.

They were responding to a collaborative This American Life and ProPublica story centered around the experiences of a frustrated ex-Fed investigator who said her bosses refused to get tough with investment bank Goldman Sachs (GS). The news outlets posted audio she apparently secretly recorded when meeting with her supervisors.

Sen. Elizabeth Warren of Massachusetts called for such hearings late last week. None have yet been scheduled.

The Republicans addressed in the letter -- Reps. Jeb Hensarling of Texas and Patrick McHenry of North Carolina -- are senior members of the House Financial Services Committee. Hensarling, as the committee's chairman, has the authority to call hearings. Representatives for neither congressman immediately responded to requests for comment.

"The article ... suggests that additional scrutiny is needed to ensure that management practices and workplace culture at the FRBNY do not serve to undermine the effectiveness and integrity of the FRBNY's supervision of the financial institutions under its purview," the Democratic congressmen wrote in a statement.

Related: Dodd-Frank financial reform bill only halfway done

Their appeal mentioned Hensarling and McHenry's criticism of the Consumer Financial Protection Bureau, another financial regulatory body, over data privacy issues.

"We hope that you will honor this hearing request given the extensive resources and attention this Committee has dedicated to reviewing the management culture at the [CFPB]," they wrote.

First Published: September 30, 2014: 7:41 PM ET

12.08 | 0 komentar | Read More

This app is helping Hong Kong protesters organize without a cell network

HONG KONG (CNNMoney)

Pro-democracy protesters in Hong Kong -- who need functioning phones to organize -- appear to have found a solution to this problem.

More than 100,000 people in Hong Kong downloaded an app called FireChat in a recent 24-hour period. The app allows protesters to keep chatting, even when their phones lose mobile network connectivity.

FireChat works by connecting users in a daisy chain, or mesh network, via Wi-Fi and Bluetooth. No mobile network is required, and users can choose to remain anonymous.

"With FireChat, it's completely decentralized," said Micha Benoliel, CEO of Open Garden, the app's developer. "And that means you can get connectivity from the people and devices around you -- directly."

Related: Hong Kong protesters willing to pay economic price

The benefits of FireChat have caught the attention of demonstration organizers, many of whom are encouraging protesters to download the app.

"Before you go near the government headquarters, please go to the App Store and download FireChat," Joshua Wong, the 17-year-old leader of a student protest group, urged supporters on Facebook. "Use this app to broadcast our situation to the outside world."

Photo essay: Police use tear gas as 'Occupy' comes to Hong Kong

Benoliel, who was in Hong Kong as protests escalated over the weekend, said the protesters were well prepared and well organized, and had anticipated that large crowds would complicate communication.

"They knew that at some point the cellular networks would be shut down or would just be overloaded by a number of people gathering in the same place, so they know that Firechat is a way to remain connected and communicate," Benoliel said.

While Benoliel said that FireChat was not designed specifically with protest movements in mind, it does seem to be catching on at demonstrations. In Taiwan, "Sunflower Movement" protesters also used the app earlier this year as they protested closer ties with Beijing.

First Published: September 30, 2014: 11:05 PM ET

12.08 | 0 komentar | Read More

Bank to pay everyone at least a 'living wage'

First Green Bank's "living wage" policy will raise payroll costs, but CEO Kenneth LaRoe said he expects it will make the bank money over time.

NEW YORK (CNNMoney)

It also will apply to workers' pay.

On Wednesday, 17% of First Green's 66 employees will be getting a raise under the company's new "living wage" program.

Under that policy, no one will be paid less than $30,000 a year, or the hourly equivalent for part-time workers. That means the base pay at the bank will be roughly $14.40 an hour, or nearly double the Florida state minimum wage of $7.93.

"We don't believe in low wages. We don't need them to make money," Kenneth LaRoe, the bank's founder and CEO, told CNNMoney.

His payroll costs will go up, but not by much. LaRoe estimates initially it will cost the bank an additional $16,000 and then about $30,000 by the end of the year.

That's partly because he expects that employees who already make a little more than $30,000 will get larger-than-usual raises during their year-end reviews.

But over time, he believes the new policy will make the bank money by attracting and retaining the best workers.

By next year, LaRoe's goal is for 75% of his employees to earn an income that falls in at least the 90th percentile of pay for their positions and geographic location. In 2016, he wants that to be the case for 85% of his staff.

LaRoe expects to hit those goals in part by eliminating salary caps at the bank.

Until now, he said, if somebody hit the pay ceiling for their position, she couldn't get a raise without a promotion.

"That's just dumb," LaRoe said. "If you've got the best teller in the world, why don't you want to pay them the best wages?"

Imitation is sincerest form of flattery: LaRoe's living wage program is identical to one implemented this past spring by C1 Bank (BNK), another Florida-based business.

Trevor Burgess, C1 Bank's CEO, was raised by a single mother who worked as a secretary.

"I saw firsthand that you need a living wage. My bank was doing quite well. And I had 26 people [all women] who earned under $30,000. It was just the right thing to do," Burgess said.

What determines a living wage: There's no single definition, number or formula for a "living wage." It depends on factors like where you live, how big your household is and whether you're the sole breadwinner. It also depends on what you assume it should be able to pay for.

Most agree, however, that a living wage is very often higher than the minimum wage, especially for adults supporting children.

In arriving at $30,000 for their living-wage base, First Green and C1 Bank relied in part on a calculator created by Amy Glasmeier, a professor of economic geography at Massachusetts Institute of Technology.

The MIT calculator estimates the minimum needed to cover basic costs such as housing, food, childcare, transportation, medical care and taxes, not including potential government assistance.

Other living-wage and cost-of-living calculators exist, but they each use somewhat different assumptions.

Meanwhile, some cities have passed living wage laws that govern the minimum that employers must pay staff for city-contracted jobs.

Gap and other companies raising their minimum pay

Ikea lifting minimum wage to nearly $11 an hour

Small business owner: Seattle $15 wage plan is unfair to me

Are you a small business owner who has implemented a living-wage policy, or thought about it? We'd love to hear your perspective. Please email us at #YourEconomy.

First Published: September 29, 2014: 6:51 PM ET

12.08 | 0 komentar | Read More