'The State of College Savings' Survey Finds Parent Confidence Crashing As They Rely on Loans, Shift Debt Burden to Their Children

'The State of College Savings' Survey Finds Parent Confidence Crashing As They Rely on Loans, Shift Debt Burden to Their Children - 529 Investors Still Most Successful Savers

/PRNewswire/ -- Parents' confidence in their ability to save for college plummeted over the last year, as they socked away less and relied more on the prospect of student loans and grants to fund their children's college education, according to the 2009 "The State of College Savings" survey of nearly 800 parents across regions and income levels conducted by the College Savings Foundation (CSF).

Forty-four percent of parents are "not very confident" that they will reach their college savings goals, up from 31 percent in 2008; while the number of parents who are "very confident" has plunged to 12 percent from 20 percent last year.

Reduced savings may be contributing to this malaise: one-third of parents said that they are saving less for college this year than last, with 43 percent of those prioritizing current living expenses and 29 percent suffering a cut in income. Of the total parents surveyed, 41 percent have saved nothing at all, and 28 percent have saved less than $5,000 per child.

The number of parents expecting student loans to pay for college soared to 47 percent from 37 percent one year ago. Those expecting financial aid spiked up to 73 percent from 62 percent last year. And, more parents are shifting the debt burden to their children: 68 percent versus 63 percent last year, with 46 percent expecting their kids to be responsible for up to one-third of their college debt - up from 34 percent in 2008.

Despite this behavior, parents haven't adjusted or changed their hopes and aspirations: 76 percent of parents don't expect to have to narrow their children's college choices; and 76 percent would be very disappointed if their child could not afford to go to college (at least 8 on a scale of 1-10).

Pointing to a clear strategy for bridging this gap between intention and action was the finding that parents owning 529 college savings plans were the most successful group in saving for college: 61 percent of parents with 529s have saved more than $5,000 per child, versus 22 percent of those without one.

"This survey is a call to action for parents to save early and often - even if they can only start with small amounts," said Kevin McMullen, Chairman of the College Savings Foundation, a leading nonprofit encouraging American families to save for their children's college education. "The economic reality is that parents cannot count on college loans and grants being available or affordable when their children reach college age. Any shortfall in college funding will cascade as debt burden onto their children's futures."

Parents realize that their dependence on debt will have a long term impact: 65 percent expect that it will take at least five years for them or their children to pay it off after graduation.

Those who can't get loans anticipate getting Federal or State grants: 28 percent of parents are relying on these as their primary source of college funds, compared to 20 percent last year. Seventeen percent expect financial aid to cover over two-thirds of all college costs - up from only ten percent last year. Thirty-four percent expect it to cover up to one third of college costs.

"Financial aid covers only a portion of college costs and families need to look for ways to close that gap," McMullen said. According to the College Board, in 2007-2008 undergraduate students received on average $8,896 in financial aid, including $4,656 in grant aid and $3,650 in federal loans. This represents a fraction of the average $14,333 cost of today's four-year public college, or $34,132 for a private college or university.

As in last year's survey, 22 percent of parents expect help from grandparents; and 72 percent expect no help in paying for college at all. Twenty-seven percent would ask friends and family to "trade toys for tuition," or contribute to college rather than in material gifts.

Three-quarters (74 percent) of parents do not even know how much they need to save, up from 70 percent last year.

"In the face of an economic climate that is clearly putting families under pressure, we as an industry including financial advisors and policy makers should redouble our efforts to raise awareness on how to save to stave off debt," McMullen said.

The survey showed that many parents are saving successfully through vehicles like 529 college savings plans and strategies like automatic savings programs, enabling systematic and regular contributions of funds for college savings.

Parents owning 529s were far more successful in saving than those using other investments: 34% of parents who have saved more than $5,000 per child invest in 529s as their primary savings vehicle, more than double that of the next most popular ones: 14 percent of parents who have saved more than $5,000 per child are primarily in mutual funds, and 14 percent are in cash.

The percentage of parents in 529 plans held steady from the 2008 report. Nearly one in four, or 23 percent, is invested in a 529 college savings plan, and one in five (19 percent) says that 529s are the number one college savings vehicle, exceeded only by cash at 25 percent. At the same time, in a question that permitted more than one answer, the 2009 survey found that those parents who are saving are also squirreling money away in general (57 percent) and emergency (31 percent) funds.

"While it is understandable that parents are keeping cash at hand in these uncertain economic times, families are continuing to recognize the benefits of 529 college savings plans in reducing taxes and reaching their college savings goals," said McMullen. "Parents have the option to keep 529 funds in cash as well."

The 2009 State of College Savings survey also offered these glimmers of good news:

-- Although 46 percent of parents said that they would like to save more
in general but can't because of this year's economic reality, one in
four parents - 24 percent - said that they were actually saving more
than before.
-- Parents seemed to understand that a little is better than nothing:
those who tried to save at least something edged up from last year:
28 percent have saved less than $5,000 per child - but that is up from
22 percent in 2008. Around 30 percent of those are invested in a 529.
-- Parenthood prompts saving and gives parents time to build savings
momentum: 25 percent of parents started saving when their child was
born, and 20 percent when the child was 1-5 years old. Those parents
with children 11-13 years old, and those with children 14-18 years
old, had saved more than those in other age groups. Approximately 42
percent of each of those groups has saved more than $5,000 per child,
versus 26 percent of those with children in younger and older
categories.
-- While 20% of parents used an automatic savings strategy, those that
did were successful savers. 63% of them have saved more than $5,000
per child. 35% have been able to save between $100-$300 per month.
57% of those utilizing an automatic savings strategy own a 529.

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Merrill Lynch Fund Manager Survey Finds Chinese Economic Optimism Fuelling Improved Growth Outlook

/PRNewswire/ -- Fresh optimism over China's growth prospects has led to a marked improvement in economic sentiment globally, according to the Merrill Lynch Survey of Fund Managers for February.

Investors are at their most hopeful about the year ahead since the credit crunch took hold in July 2007, with the number who forecast a worsening economy in the 12 months ahead falling to a net -6 percent. This compares with a net -24 percent in January. The majority recognises, however, that the world economy is in recession.

Fears of a prolonged slowdown in China appear to be fading. The number of investors who predict lower growth in China over the coming 12 months has fallen sharply, to a net 21 percent in February from a net 70 percent in January.

Similarly, severe pessimism about the outlook for corporate earnings has started to ease. A net 43 percent of respondents expect to see deteriorating profits over the coming year, significantly lower than the 63 percent who held that view in December. A net 49 percent of the panel predicts inflation will fall over the coming 12 months, compared with 64 percent in January and 82 percent in December.

"Fund manager expectations for Chinese economic growth rose dramatically to their highest levels since 2007, and faint global decoupling hopes now reside solely with China," says Michael Hartnett, chief Global Emerging Markets Equity strategist at Banc of America Securities-Merrill Lynch Research.

Commodities coming back as equity allocations shift into cyclicals

Commodities have enjoyed the sharpest pick-up in terms of changes to asset allocations in the past two months. Investors hold a net 15 percent underweight position in commodities, down from a net 32 percent underweight in December.

Bond weightings were trimmed while equity allocations fell back to a net 34 percent underweight - the same position as in December. Investors have been pruning back their allocations to traditional defensive sectors and moving into more cyclical sectors.

Weightings fell in Telecoms, Insurance, Staples and Utilities. At the same time investors increased positions in Technology, Energy, Materials, Industrials and Discretionary Spending.

"Higher risk appetite, rising commodity sentiment and a strong valuation case could encourage further investment in energy and materials sectors. We see this as best played out through sterling-denominated assets," said Gary Baker, Banc of America Securities-Merrill Lynch head of EMEA Equity Strategy.

U.S. in favour while Japan allocations fall

Appetite for U.S. equities has been reawakened in February, possibly boosted by poor market performance in January. The net overweight position in U.S. equities has risen to 15 percent this month, up from 7 percent one month ago. The U.S. benefits from having the best profits outlook, and 31 percent of respondents want to overweight U.S. equities in the next 12 months.

At the same time allocations to Japan have fallen starkly with investors who hold a net underweight position of 26 percent, compared to 15 percent in January. Traditionally, Japanese equities would benefit from a broad pick-up in sentiment. Japan also suffers from having an overvalued major currency, according to the survey.

For the first time, respondents view the yen as more overvalued than the euro. Pessimism over the euro has broadly moderated, while the region's macro-economic outlook is somewhat more favorable.

"Eurozone growth expectations picked up to the highest level in 12 months in February," said Baker. "But in contrast with the global picture, the number of European portfolio managers overweight cash spiked to the highest level since October 2001."

Survey of Fund Managers

A total of 212 fund managers, managing a total of US$599 billion, participated in the global survey from 6 February to 12 February. A total of 177 managers, managing US$372 billion, participated in the regional surveys. The survey was conducted by Banc of America Securities-Merrill Lynch Research with the help of market research company Taylor Nelson Sofres (TNS). Through its international network in more than 50 countries, TNS provides market information services in over 80 countries to national and multi-national organizations. It is ranked as the fourth-largest market information group in the world.

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S&P 500 Dividends Projected to Decline 13.3% in 2009; Worst Annual Decline Since World War II

/PRNewswire/ -- Standard & Poor's Index Services announced today that it expects 2009 S&P 500 dividends to decline 13.3%, the worst annual decline since 1942 when dividends fell 16.9%. The $24.60 dividend rate translates into an expected $214.66 billion in payments for S&P 500 companies in 2009 versus the $28.39, or $247.9 billion, paid in 2008.

"Given the current economic climate and growing concern over dividend cuts, dividend increases for the S&P 500 companies are expected to slow in 2009," says Howard Silverblatt, Senior Index Analyst at Standard & Poor's. "Unless companies believe that their financial future will improve, their need to conserve cash will outweigh their desire to pay dividends."

Standard & Poor's Index Services also announced today that it is decreasing the indicated dividend rate on the S&P 500 from $27.35 to $24.90.

"Due to recent events, including potential congressional action that might limit dividend payments, we are reducing the indicated dividend rate on the S&P 500," continues Silverblatt. "Standard & Poor's expects the indicated rate to decline further during the year as the full economic impact is felt by companies, and then move upward as corporate confidence leads to higher future commitments."

Standard & Poor's Index Services data shows that sixty-two S&P 500 companies decreased their dividends in 2008 by an aggregate $40.6 billion with forty-eight of the decreases coming from Financials ($37 billion). Over the previous five years (2003-2007), there were only 12 dividend decreases in the Financials sector amounting to $5.1 billion.

So far in 2009, fourteen issues (nine of which are Financials) have decreased their dividend rate by over $13.5 billion. "Actual January dividend payments for the S&P 500 were down 23.9%, which speaks to the Q4 decreases, the $13.5 billion cuts year-to-date speaks to future payments," warns Silverblatt.

While dividend decreases and warnings are now prevalent in sectors, Financials remain the primary (but not only) concern. At the end of 2007, 96.7% of the Financials paid cash dividends, accounting for 29.1% of the dividend payments. Currently 84.5% pay, accounting for 15.0% of the dividends.

"The bottom line is that investors need to do a lot more homework than in years past as the prospect for future dividends remains extremely cautious," continues Silverblatt. "On former President Ronald Reagan's 98th birthday, his words still ring true today, Trust but Verify."

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Keeping Your Balance as Markets Wobble: Advisor Suggests Re-Jigging Your Portfolio Now to Help Your Outcome When Shares Pick Up Again

/PRNewswire/ -- For many investors, the market's recent swoon has not only shaken their confidence, but thrown their portfolio out of alignment. According to Don Patrick, an independent financial professional, over time, even the most carefully constructed portfolio can become unbalanced as the riskier asset classes outperform the more conservative ones, but serious unbalancing can occur more quickly in sudden, steep declines like we've seen in recent months.

"Having an unbalanced portfolio can be very harmful," says Patrick. "Think of a car when it's out of alignment. Sure, it still works, but that tug to the side inhibits its optimal operation. So, just as taking in the car for a routine tune-up, the process of rebalancing can bring a portfolio back to original asset allocation to both maintain a comfortable risk level and provide a better chance of meeting short- and long-term goals."

According to Patrick, getting a portfolio back in sync is simple. Patrick says the first step is to identify the winners that occupy a larger piece of the overall portfolio and sell some. "Then, buy the poorest performing asset class-probably equities in this market," Patrick says. "Rebalancing seems counterintuitive in a stable market -- and it can be downright frightening in a volatile market. But experienced investors buy when the market seems at its lowest."

Even with current declines, Patrick believes there's reason to assume that, over the long-term, stocks will continue to produce the inflation- and bond-beating returns they have for more than a century. "We read the same 'This time it's different' headlines in 1974 but the market eventually recovered from the damaging stagflation of the 1970s, as well as the more than 20% one-day decline in 1987, the savings-and-loan crisis of the early 1990s, the Asian crisis of the late 1990s, and the tech bubble."

Using history as a guide, Patrick also warns that the market gets better before the news gets better. So, Patrick says, it's good to rebalance and prepare for the inevitable turnaround now.

"There are a number of ways to rebalance," says Patrick. "If an investor has a surplus of cash, it may be a good idea to purchase new investments for the under-weighted asset categories. For those making continuous, automatic contributions to the portfolio, consider altering the contribution percentages so that more of those dollars are directed into the under-weighted asset categories until the portfolio is back into balance."

Because, as the behavioral finance literature suggests, investors experience more extreme negative emotions when they suffer investment losses than they do positive emotions when they enjoy investment gains, volatility can destroy the discipline necessary for successful investing. Rebalancing the portfolio according to an individual plan can help investors make investment decisions based on reason, not emotions, and maintain the diversification necessary for the best chance at meeting personal goals.

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Consumers Can Detect and Fight “Madoff-Style” Ponzi Schemes:

(BUSINESS WIRE)--Thousands of large and small investors will suffer from Ponzi schemes such as those perpetrated by Bernard Madoff and Lou Perlman – but few investors will know how to avoid them in the future or how to recover any of their losses, says Lunelle Siegel, executive director of the Association for Fraud Recovery and Prevention (AFRP) (http://www.fraudrecovery.org).

“Ponzi schemes are insidious and can go on for years, and affect both the wealthy and not-so-wealthy,” says Siegel. “For most investors, the chance of a direct recovery is very slight. However, there are special tax code provisions that will allow them to recover up to 30 percent of their losses. AFRP can help them understand their options.”

AFRP is a consumer advocacy association formed to investigate fraudulent schemes, inform members of scams, provide information on how to evaluate opportunities before investing, help individuals recover a portion of their losses and advocate for stricter penalties for those convicted of investment fraud.

Following are some tips AFRP offers for individuals considering an investment:

* Is the annual return the same in up and down markets? Many fraudsters promise a number and don’t change it despite the volatility of the market and how investments react to it.
* Is the investment salesman registered in your state or with the Securities & Exchange Commission (SEC)? Ask to see their license. Individual states and the SEC govern the sale of investments in their jurisdictions. If the salesman isn’t registered, he or she is likely a scam artist.
* Is the accounting firm that is providing financial statements for the investment registered with the state in which they are located? Legitimate sounding frauds often include audited financials from a fictitious CPA firm.

“The old saying that if something seems too good to be true, it probably isn’t, is often right,” says Siegel. “Sadly, some investors will fall prey to investment scams more than once – a situation that can be devastating for older individuals living on a fixed income. And in today’s difficult economic times, there’s less and less leeway for loss in anyone’s portfolio.”

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Roberts Realty Investors, Inc. Announces Receipt of Warning Letter From American Stock Exchange Due to Death of Director

PRNewswire-FirstCall -- Roberts Realty Investors, Inc. (AMEX:RPI) announces that as a result of the death of director Dennis James on September 2, 2008, the company has received a warning letter from the American Stock Exchange (the Amex). The death of Mr. James left the company with only one independent director serving on its audit and compensation committees rather than the requisite two or more members. The company received the letter from the staff of the Amex on September 16, 2008 advising the company that it was not in compliance with Section 803(B)(2)(c) and Section 805(a) of the Amex Company Guide, in that Roberts Realty's audit committee and compensation committees are comprised of only one director. In the letter, the Amex gave the company 75 days or until November 17, 2008 to regain compliance with the Amex requirements.

The staff of the Amex advised the company in the letter that the staff had determined not to apply at this time the continued listing evaluation and follow-up procedures specified in Section 1009 of the Amex Company Guide. The letter further noted, however, that because the company was not currently in compliance with the Amex continued listing standards, the letter constituted a "Warning Letter" pursuant to Section 1009(a)(i) of the Amex Company Guide and notice of failure to satisfy a continuing listed standard. The letter advised the company that failure to resolve the specified listing deficiency by November 17, 2008 would result in the staff assessing the company's continued listing eligibility, including the application of the continued listing evaluation and follow-up procedures specified in Section 1009 of the Amex Company Guide and/or initiation of delisting proceedings.

Roberts Realty expects that its board of directors will appoint a new independent director to its board of directors, audit committee, and compensation committee by November 17, 2008, thereby regaining compliance with the Amex requirements.

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