The Rotten Deal: Managed Mutual Funds and Retirement Income

17 Pages Posted: 22 Aug 2017

See all articles by David W. Rasmussen

David W. Rasmussen

Pepper Institute on Aging and Public Policy

Date Written: August 18, 2017

Abstract

About 70 percent of mutual fund assets are in managed funds. These funds seek to earn an above average return for investors but, because of the up-front loads, fees and other costs, they generally earn less than the low cost index funds that only seek to get a return equal to that of the stock market. Investors can expect their retirement savings to be reduced by 25 percent or more by favoring managed funds over index funds. The costs imposed on investors in managed funds result in tens of billions of dollars in profit for the industry. Compromised retirement savings is of public concern if government programs are going to support elderly households in need. Two policy options are explored. One is focused on educating investors about the rotten deal offered by managed funds while the other is to impose a fiduciary responsibility on the industry that requires them to act in the best interests of its clients. There is ample evidence that the industry will vigorously combat such efforts.

Keywords: retirement, income pension, public policy, economics

JEL Classification: D14, G20, D18, H30

Suggested Citation

Rasmussen, David W., The Rotten Deal: Managed Mutual Funds and Retirement Income (August 18, 2017). Available at SSRN: https://ssrn.com/abstract=3022002 or http://dx.doi.org/10.2139/ssrn.3022002

David W. Rasmussen (Contact Author)

Pepper Institute on Aging and Public Policy ( email )

636 West Call St.
Tallahasse, FL 30306-1121
United States
904-644-8826 (Phone)
904-644-0581 (Fax)

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