Critics of the defined contribution retirement system -- which makes individuals responsible for saving wisely for their retirement -- are bound to have a field day with this one.
A survey of 1,000 Americans that was conducted for investment firm Edward Jones found 63 percent do not know how rising interest rates will affect their portfolios.
More women (29 percent) than men (19 percent) admitted they have no understanding at all about the subject. This matches with the findings of other surveys indicating that women are more willing to admit they need help with investing than men.
People in lower income brackets were less likely to have a clue about interest rates shifts than those in households with incomes of $100,000 or more. Those between the ages of 18 and 34, and 65 or older were more in the dark than those in between.
Interest rates and bond prices move in opposite directions. Most analysts and economists expect rates to move higher from record low levels, something they have done since May, when Federal Reserve chairman Ben Bernanke signaled the central bank could soon begin curbing its $85 billion monthly purchases of federal securities.
Higher rates mean a couple of things for investors, according to Tom Kersting, Edward Jones fixed income strategist. Buyers of newly issued bonds will get higher income because of the higher rates on their bonds. However, those who hold existing bonds will see the value of their holdings drop. The longer the term, or maturity, of the bond, the more the value will drop, Mr. Kersting cautions.
If Mr. Kersting's bond primer makes sense and you're still following the bouncing Eat'n Park Smiley Cookie, perhaps there's hope for your retirement.
While more workers will have to increasingly rely on income from 401(k), IRA and other defined contribution plans in retirement, the job of managing those funds is not getting any easier.
Not only must they be sure to save enough -- especially if their employer is not contributing to the cause -- they must make sure their money is invested in stocks, bonds, mutual funds and other securities that meet their needs and tolerance for risk. They must also balance the performance of their investments with the fees and expenses associated with them.
Understanding the impact of interest rates is only one aspect of that difficult task. But it's a job that individuals are responsible for as more companies decide they cannot afford the cost of or assume the responsibility for saving for your retirement.
Fortunately, more companies are taking an interest in helping employees structure their retirement investments appropriately. But, as the results of the survey indicate, the education effort still has a way to go.
Exports expected to boost U.S. economy
An increasing manufacturing cost advantage offers the potential for the United States to capture $70 billion to $115 billion in exports each year from other countries by 2020, according to a new study by Boston Consulting Group. The consulting firm identified chemicals, machinery and transportation equipment as three of the industries that are expected to benefit most from the trend.
The report comes one year after Boston Consulting said the U.S. economy could add 2.5 million to 5 million new manufacturing jobs by the end of the decade because of higher U.S. exports and more companies shifting production from China and other traditionally low-cost countries back to the United States. That would reduce the U.S. unemployment rate, currently 7.4 percent, by as much as two or three percentage points, the firm said.
"The United States is steadily becoming one of the lowest-cost countries for manufacturing in the developed world," the report stated.
Michael Zinser, a partner of the firm and coauthor of the report, said several major companies have already announced plans to target exports by boosting production at U.S. plants. They include: Toyota, which is exporting sedans assembled in Kentucky and minivans made in Indiana to South Korea; Michelin, which is expanding production in South Carolina; and Honda, which is adding shifts at plants in Indiana and Ohio.
"It will take several years for the full impact of improved U.S. competitiveness to translate into significantly more jobs and higher industrial output," Mr. Zinser said in a statement.
The Obama administration has been highlighting exports as a bright spot in an otherwise lackluster economy. In early 2010, the White House set a goal of doubling U.S. exports by 2014.
Since 2009, exports have increased 40 percent to a record $2.21 trillion last year. Exports accounted for nearly 14 percent of the U.S. economy over the last two years, up from 13 percent in 2008.
But that performance is not as impressive as it sounds.
Over the same period, imports also jumped 40 percent to $2.75 trillion. Consequently, the U.S. trade deficit was $534.7 billion last year, down 4 percent from 2011 but well above the $383.7 billion shortfall in 2009, when the recession curbed demand for imports.
Len Boselovic: email@example.com or 412-263-1941.