What You Should Know About 401(k)s

December 4, 2012
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Just about everyone has heard the term 401(k). But does just about everyone know what the term means? No, they don’t, according to research by State Street Global Advisors (SSgA).  If they have a vague idea of what the terms means, they don’t know how to use that knowledge and actually invest. Most people find the jargon used by financial planners and other related professionals confusing. Even such words as asset allocation, equity, and fund are incomprehensible to the vast majority of people. Plain English is the key says a group of retirement plan participants whom were surveyed by SSgA. The survey was conducted jointly with the Boston Research Group in April 2012. Responses came from more than 1,000 people who actively contributed to a 401(k), 403(b), or a 457 plan. (Joyce, Hanson, “Think 401(k) Investors know what ‘Fund’ Means? Think Again,” Investment Advisor, September 2011.
Interestingly, SSgA uncovered some surprising information in their investigation. First, they found that 83% of retirement plan participants were willing to invest about 5%  of their income in a retirement plan; 64% said they would be willing to invest 10%. What stopped them? There was confusion about how to go about it. Comments such as this emerged from the study. “I don’t understand if the options available to me are really good investments, and I have no idea of what they consist of,” said one 27-year old engineer. Nor did she know what the S&P 500 was or what proportion to allocate her investments. Even young investment professionals had some questions on the matter. Brigitte Madrian, a Harvard professor at the Kennedy School of Government, reported that in a study she conducted for TIAA-CREF, even Wharton MBA students had difficulty figuring out the cost of some S&P 500 Index funds. Furthermore, Dr. Madrian reported that, “In terms of portfolio fees, investors do slightly better than if they had thrown darts in choosing their mutual funds. Very few choose the lowest fee portfolio.” (Joyce, Hanson, see above)
So what is the solution? Resoundingly, it appears that investment advisors must use simple English, explain terms, and repeat their message. With simple terms and repetition, people will be better informed to make the right decisions for them. The other piece of advice is–if you don’t understand something, ASK. Isn’t that what we tell our own children? The attorneys and staff at the Hook Law Center are available to assist with your retirementl and estate planning needs.
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Hook Law Center: Kit Kat, why do people mistreat animals?

Kit Kat: Well, if I knew the answer to that, everyone in the whole world would be knocking at my door. I can tell you, though, that many good people are working to prevent cruelty to animals when they see it. For example, on June 21, 2012, the NYPD and the ASPCA worked together in removing 50 dogs and puppies from a Bronx basement. I am proud to say that the ASPCA also assisted with collecting forensic evidence. That was some operation! There was a fighting arena, multiple pet carriers, and a shopping cart full of raw chicken meat. The dogs were then moved to a temporary shelter where the ASPCA spent months rehabilitating the dogs with good food, medical care, and therapy. By late August, 33 of the 50 dogs were able to be transferred to various shelters in the NY-NJ area for adoption.
Meanwhile, the court case against the building superintendent is proceeding. If convicted, he faces up to four years in jail. The ASPCA Legal Advocacy team is working with the Bronx District Attorney’s Office to prosecute the case. It’s good to know that, in the end, there is some justice in the world! (ASPCA Action, Fall 2012, p. 4)

Happy Holidays for the Troops
Hook Law Center is supporting our troops during this holiday season by collecting items for our service men and women who do not receive packages or letters from home. If you’d like to participate with us, please drop off your donations at a Hook Law Center office close to you: 295 Bendix Road, Suite 170, Virginia Beach or 5806 Harbour View Blvd., Suite 203, Suffolk. We will be collecting donated items through 12 NoonMonday, December 10, 2012 at either location. 
Help put a smile on a forgotten soldier’s or sailor’s face during this Holiday Season!
Thank You
UPDATE:  As of December 3, 2012, over 85 lbs. of donated items have been collected and shipped to our service men and women!

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Upcoming Seminars

Hook Law Center is presenting a Veteran’s Aid & Attendance Seminar at The Ballentine, 7211 Granby Street, Norfolk, VA 23505 on December 12, 2012 at 6 p.m. To r.s.v.p., please call 757-440-7400 or 757-399-7506.
Hook Law Center is presenting a Long-Term Care Planning and Estate Planning seminar at Lake Prince Woods, 100 Anna Goode Way, Suffolk, VA 23434 on January 25, 2013 at 2 p.m.To r.s.v.p., please call 757-923-5500 or 757-399-7506.
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This newsletter is not intended as a substitute for legal counsel. While every precaution has been taken to make this newsletter accurate, we assume no responsibility for errors, omissions, or damages resulting from the use of the information in this newsletter.