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  • IBM 401(k) Plus PlanA Review of Investing for Your Financial Future Prepared by Vanguard for IBM

    January 2017 | Print or download the newsletter

    How to become a better investor

    Heres a surprise: Over the last 30 years, the typical U.S. stock investor earned an average of just 3.7% annually while the Standard & Poors 500 Index returned an average of over 10% annually.*

    How can you outpace the average investor and increase your chance of financial success? Here are four strategies to consider:

    1. Save more. 2. Keep expenses low. 3. Be balanced and stay the course. 4. Have a long-term investment plan.

    1. Save more.For many investors, saving more is the surest way to reach long-term financial goals. Your savings rate, after all, is one of the most important factors under your complete control. Choosing to be a strong saver could make a big difference in when you can retire, as this hypothetical example shows:

    Bob and Jane each want to retire after theyve added another $500,000 to savings. Both earn $80,000 a year. Bob decides to save 10% of his pay (his own payroll contribution plus his company match), while Jane elects to save 15%. Assuming they each earn a 7% average annual return, how much sooner do you think Jane would retire than Bob?

    A) One year B) Two years C) Three years D) Four years

    Jane could retire after 21 years of saving, Bob after 25. So, the answer is D. Four extra years at the start of retirement could add a lot of sunny days to Janes life.

  • 2. Keep expenses lowInvestment returns may be uncertain, but investment costs are much less so. Because costs subtract from returns, keeping costs low will tend to increase your investment returns.

    The costs associated with investing in the IBM 401(k) Plus Plans funds are among the lowest available anywhere. For example, the weighted average expense ratio of the investments in the plan are nearly one-fourth the mutual fund industrys average.

    An expense ratio is the cost of running an investment expressed as a percentage of its assets. Expense ratios are important because, quite simply, costs are subtracted from your investment returns. A lower expense ratio means you get to keep more of what you earn.

    You can find the most up-to-date expense ratio information for the funds in the IBM 401(k) Plus Plan by reviewing the Fund Flyers. They provide information on each fund, such as the funds objectives, risks, performance, and expense ratio.

    3. Be balancedand stay the course.Determining an appropriate asset allocationthe mix of stocks and bonds, such as, say, 60% stocks and 40% bondsis the first step to building a diversified portfolio.

    Not sure what an appropriate mix is for you? Consider investing in a Target Retirement Fund. Target Retirement Funds are professionally managed, broadly diversified, self-adjusting, low-cost funds that can serve you throughout your career and into retirement. Before you invest in a Target Retirement Fund, be sure to read the Fund Flyers for more detailed information about each fund.

    Once you have a diversified portfolio, stick to your investment strategy. Yes, there will be bumps along the way. The market dropped significantly during the Great Recession of 2007-2009, but it has also nearly tripled in value after touching bottom in March 2009. Selling out of the market during gloomy times can mean missing a powerful rebound, which is when long-term investors realize their greatest gains.

    Plan weighted average fund annual expense ratio*

    Mutual fund industry weighted average annual expense ratio*


    ($17 a year per $10,000 invested)


    ($63 a year per $10,000 invested)

    *Figures according to the 2016 Dalbar Quantitative Analysis of Investor Behavior.

  • 4. Have a long-term investment plan.

    He who fails to plan is planning to fail. --Winston Chruchill

    Having a well thought-out investment plan can help you weather the market storms (when its most tempting to change direction). A good plan is focused on achieving your goals (a comfortable retirement, for example) rather than timing the market.

    Your Plan offers several planning services that can help you create and stick to your investment plan. Whether you want professionals to manage your account for you or you just want a little guidance, the IBM 401(k) Plus Plan offers services that can help. Learn more about the services available to you.

  • Get help creating your financial plan

    The IBM 401(k) Plus Plan offers different planning services with every type of investor in mindfrom do-it-for-me to do-it-myself investors, as well as those in the middle who want some assistance.

    Active IBMers: Earn a 2017 wellness incentive by completing an Online Advice investment assessment or arranging a session with an IBM MoneySmart coach. For more information on the incentives, log onto CafWell at

    Do it for meYou can turn over the management of your investments to professionals with these two options: Target Retirement Funds and Managed Accounts.

    Target Retirement Funds require a minimum amount of your time and effort to manage. In fact, you only need to choose one of these funds to build a complete portfolio. Just consider the Target Retirement Fund that most closely aligns with the approximate year you expect to retire or start withdrawing your retirement savings. These funds are designed to provide you with a professionally managed, low cost, self-adjusting investment mix that can serve you throughout your career and into retirement.

    Before you invest, be sure to read the individual Fund Flyers for more detailed information about each fund.

    Do it for me Help me do it Do it myself

    Target Retirement Funds Online Advice Online tools

    Managed Accounts IBM MoneySmart Plan education materials

  • Managed Accounts puts Financial Engines in charge of your IBM 401(k) Plus Plan portfolio. With Managed Accounts, Financial Engines will, for a fee*:

    Create a personalized Retirement Plan for your IBM 401(k) Plus Plan account. You can also personalize the advice you receive by making adjustments to your desired retirement age or your risk profile.

    Select your funds and make transactions on your behalf.

    Keep you on track and appropriately allocated and diversified over time, adjusting your investment mix as you approach retirement.

    *The fee for Managed Accounts is 0.30% per year for the first $375,000 in assets and 0.20% per year for assets over $375,000. The fee is deducted directly from your 401(k) account each quarter, per the Terms and Conditions.

    For more information about Managed Accounts or to get started, log on to

    Help me do itYou can obtain expert guidance on how to manage your investments from these two services: Online Advice from Financial Engines and MoneySmart Coaches.

    Online Advice from Financial Engines will enable you to complete a personalized assessment to help you evaluate whether your IBM 401(k) Plus Plan investments are aligned with your age, personal goals, and other financial assets.

    This service may be right for you if you enjoy managing your 401(k) Plus Plan account. With no additional cost to you, Online Advice can:

    Use powerful online tools to enable you to build your strategy, project your retirement income, and explore ways to improve your retirement outlook.

    Receive independent, personalized investment recommendations for your IBM 401(k) Plus Plan account. Online Advice can also help you evaluate changes before you make them.

    Log in anytime to see if you are on track; note that you are responsible for requesting transactions for your account, including rebalancing.

    For more information about Managed Accounts or to get started, log on to

    IBM MoneySmart provides IBMers access to MoneySmart Coaches who are available for confidential, one-on-one financial planning sessions. MoneySmart is offered at no cost to active IBMers in the U.S.

    Coaches are available to discuss topics such as investment planning, saving for retirement, IBM benefit plans, plus generalized financial planning and wellness. Your session can be brief or result in several follow-up sessions at your request.

  • You have two options:

    Call Ayco at 877-543-7678 for broad-based financial counseling (Monday through Friday, 9 a.m. to 8 p.m., Eastern time) or register on the MoneySmart portal.

    Call Fidelity at 800-976-1054 for retirement planning (Monday through Friday, 8 a.m. to 8 p.m., Eastern time).

    Do it myselfDo-it-yourselfers can build a well-balanced portfolio from your Plans many investment offerings. You can use IBM tools and educational materials, such as Fund Flyers, to help you construct and maintain your investment plan.

    Before investing in any investment option of the IBM 401(k) Plus Plan, please carefully consider its investment objectives, risks, charges, and expenses. For this and other important information, or to obtain a free copy of the Fund Flyers for the All-in-One Life Cycle/Core Building Block/Expanded Choice Institutional funds or a mutual fund prospectus or, if available, a summary prospectus, call the IBM Employee Services Center at 800-796-9876. Service Center representatives are available Monday through Friday (excluding New York Stock Exchange holidays) from 8:30 a.m. to 8:30 p.m., Eastern time. Read and consider all fund flyer and prospectus information carefully before you invest.

    Advisory services, including Managed Accounts and Online Advice, are provided through Financial Engines Advisors L.L.C. or its affiliates, a federally registered in