Fannie Mae - Accounting Review Update

March 13, 2006
Statement by Daniel H. Mudd, President and Chief Executive Officer, Fannie Mae

Today, Fannie Mae filed a Form 12b-25 with the U.S. Securities and Exchange Commission (SEC) that provides an update on our progress in completing our accounting review as we continue our financial restatement, as well as a report on our business. In our filing, we are reporting that we have made substantial progress in completing our accounting review. In particular, we have completed the process of identifying accounting issues for review.

Although our review of accounting policies and practices is not complete, we have made significant progress in completing our analysis and determination with respect to the accounting issues we have identified.
As I noted on February 23rd upon release of the Paul, Weiss investigation report, we expect in our continuing restatement effort that we could identify additional accounting matters and, as we resolve them, we will disclose them. In today's filing, we detail several errors we identified in the course of our accounting review that were not previously disclosed in our SEC filings or described in the Paul, Weiss report.

These issues include accounting for certain investment securities at the incorrect cost basis; accounting for certain guaranty fees and obligations in connection with a small portion of Fannie Mae mortgage backed securities trusts; and certain loan-related accounting matters, such as accounting for real estate-owned and foreclosed property expense, accounting for troubled debt restructurings, accounting for the accrual of interest on seriously delinquent loans, and accounting for reverse mortgages.

These issues have been previously reviewed with our regulator, Office of Federal Housing Enterprise Oversight (OFHEO), and based on our current view of these errors, we believe we continue to meet our regulatory capital requirements as well as the 30 percent surplus over our minimum requirement set forth in our September 27, 2004 agreement with the OFHEO.

Freddie Mac's "CreditSmart" Initiative

Individuals can learn about the importance of good credit in becoming homeowners through the "CreditSmart" Initiative classes...


STATE TREASURY, PUBLIC, PRIVATE ORGANIZATIONS TEAM UP TO HELP HOUSING AUTHORITY RESIDENTS ATTAIN HOME OWNERSHIP...CreditSmart® Initiative Teaches Participants To Make Good Financial Choices

Hartford, CT – Several public and private organizations are joining forces for a new one-year financial outreach and education initiative to help residents in Connecticut improve their financial decision-making skills.

The Office of the Connecticut State Treasurer Denise L. Nappier, Connecticut Housing Coalition, Freddie Mac (NYSE: FRE), Bank of America, Citizens Bank, Vision Financial Services, and the housing authorities in Hartford, Meriden, Stamford, New Haven and Bridgeport have teamed together to bring CreditSmart® and CreditSmart® Español – Freddie Mac's signature instructor-led financial literacy workshops in English and Spanish – to housing authority residents in those communities. The initiative also will bring one-on-one counseling and follow-up mentoring to housing authority residents.

A recent Commerce Department report found that American consumers are spending 5 percent more than they earn, and are using their savings or credit to make ends meet. Connecticut families are no different. They struggle with the financial challenges of better managing credit and buying a home. Vision Financial Services will conduct CreditSmart and CreditSmart Español workshops for residents and housing authority staff in Hartford, Meriden, Stamford, New Haven and Bridgeport, and will train selected Housing Authority staff to become certified instructors.

The six-hour workshops will be offered free of charge in the community.
During the workshops, instructors provide information about credit and credit management, insight into how lenders assess credit histories, and how credit plays a profound role in achieving financial goals, like renting an apartment, buying a car or home, or getting a job.

Once participants are ready to apply for a mortgage, they are welcome to visit lenders, such as Bank of America and Citizens Bank, who offer mortgages for individuals with credit-challenges as well as low down-payment mortgages. “This financial literacy and education initiative has the potential to help a lot of people across the state,” said Sen. Joseph Lieberman (D-CT). “The workshops will provide an opportunity for Connecticut residents to become better educated on the important and challenging issues of spending, saving and managing credit so that they may make careful and informed financial decisions.”

Congresswoman Rosa DeLauro (D-CT) said, “Education creates opportunity for all individuals, and knowing how to use credit wisely is the key to home-ownership and advancement. Through the CreditSmart and CreditSmart Español workshops, countless public housing residents will learn the benefits of good credit. I am delighted that these programs will soon be available in New Haven.” “Credit can be a two-edged sword. It can open doors of financial opportunity and economic self-sufficiency, but managed poorly can also result in doors closing,” said Denise L. Nappier, Connecticut State Treasurer. “That is why CreditSmart is absolutely critical, providing essential information to help individuals successfully pursue their financial dreams while avoiding unintended and adverse consequences along the way.”

“Teaming up with these respected organizations to make CreditSmart and CreditSmart Español classes available will help more people understand the important role credit has in achieving homeownership,” said Craig Nickerson, vice president of Expanding Markets for Freddie Mac. “The payoff to financial literacy is an improved standard of living and a sense of confidence about the future. “Financially savvy individuals are more likely to plan for retirement, fund the education of their children and accumulate more assets.” Jeffrey Freiser, executive director of the Connecticut Housing Coalition, added, “Most public housing residents – despite the stereotypes – are working hard, incredibly hard, in low-wage jobs, struggling to support their families and make ends meet. Financial literacy training helps them reap the benefits of that hard work.”

Freddie Mac believes that by educating consumers about smart credit habits and helping them understand the importance of obtaining and maintaining good credit, then they are helping them take the first steps toward homeownership. More than 57,000 people have attended CreditSmart classes since it was launched in 2000.

NFHA Files Complaint

National Fair Housing Alliance files sales discrimination complaint against metro New York real estate company

NFHA Denounces Use of Schools as Proxy for Race

WHITE PLAINS, NY – March 23, 2006 – The National Fair Housing Alliance (NFHA) announced today the filing of a housing discrimination complaint against Peter J. Riolo Real Estate, located in Westchester County, NY. This complaint, filed with the U.S. Department of Housing and Urban Development (HUD) and the Westchester County Human Rights Commission, results from NFHA’s sales testing in the County. The investigation revealed a dramatic pattern of discriminatory comments by real estate agents. Agents used the ethnicity of the public schools to steer White families away from Tarrytown.
Racial steering is not only unethical — it’s illegal.

Agents of Peter J. Riolo Real Estate violated the federal and local Fair Housing Acts when they repeatedly recommended homes and school districts to potential homebuyers based on their race or national origin. Agents made negative comments to White homebuyers about neighborhoods and school districts with high percentages of Latino and African-American residents/students. Tarrytown schools were referred to as “bad” when the agents were discussing schools with Whites; however, Latinos and African-American buyers were shown homes in the very school districts that Whites were told to avoid. In fact, Latino homeseekers were encouraged to consider homes in Tarrytown and no comments were made about the quality of the schools.

“Illegal sales steering keeps neighborhoods segregated,” says Shanna L. Smith, President and CEO of the National Fair Housing Alliance. “Agents limit buyer choice through negative comments or by simply never showing homes to people in communities in which their race or national origin does not predominate. Homebuyers trust that their agents are showing them all available homes in their price range, but our investigation shows that this is not always the case.”
Are Tarrytown schools bad? No. According to the Tarrytown Unified School District Report in November 2005, 98% of the Tarrytown students graduate from high school and 84% go on to attend colleges including Ivy League schools, SUNY schools, and many others. “The City of Tarrytown, its school Board and residents are being injured by these illegal discriminatory practices,” continues Smith. “They have standing under the Fair Housing Act to file complaints and even lawsuits against companies and agents who discourage people from considering their community.

Today, schools have become the proxy for race. ‘Good schools’ and ‘bad schools’ are the new code words used by some real estate agents to discourage Whites from considering integrated neighborhoods.” Local governments and residents harmed by housing discrimination can sue under the federal Fair Housing Act. The City of Evanston, IL and the Village of Bellwood, IL both successfully sued real estate companies for steering White homeseekers away from their communities while marketing homes primarily to people of color.

The U.S. Supreme Court ruled in Bellwood that the agents had denied the residents “the social and professional benefits of living in an integrated society.” The Evanston case reportedly settled for more than $400,000 in 1992. The National Association of Realtors provides a high level of fair housing training to its professionals, and most states require real estate agents to have continuing fair housing education in order to keep their licenses; but in spite of these training opportunities, too many agents continue to discriminate. Evidence of their willful violation is clear from NFHA’s testing—licensed real estate professionals throughout the country have stated to testers that they know it is illegal to steer based on race or school districts.

"We urge real estate brokers to look carefully at the practices of their agents and to send a clear signal that racial steering is not to be tolerated," says Toni Downes, Executive Director of Westchester Residential Opportunities, a local fair housing agency that is co-sponsoring the press conference.

“Home ownership is a precious and significant undertaking because it opens the door to financial security,” says Delores Brathwaite, Executive Director of the Westchester County Human Rights Commission. “Where you live often affects and determines the quality of education your children will receive as well as your access to employment and health care opportunities. Engaging in racial steering is nothing less than a euphemism for intentional and forced segregation.” Over the past two years, NFHA has conducted extensive testing in 12 metropolitan areas nationwide, which has revealed a surprisingly high level of steering and other illegal behavior. Since mid 2005, NFHA has filed complaints against real estate companies located in metropolitan Atlanta, GA (Coldwell Banker “The Condo Store,” Coldwell Banker Marietta, and Re/Max Buckhead); Detroit, MI (Detroit Century 21 Town & Country) and Chicago, IL (Re/Max East-West).

Licensed real estate professionals are fully aware that racial steering is against the law. HUD’s regulations implementing the federal Fair Housing Act state that:
It shall be unlawful, because of race, color, religion, sex, handicap, familial status, or national origin, to restrict or attempt to restrict the choices of a person by word or conduct in connection with seeking, negotiating for, buying or renting a dwelling so as to perpetuate, or tend to perpetuate, segregated housing patterns, or to discourage or obstruct choices in a community, neighborhood or development. (24 CFR Part 14, Section 100.70(a))

Countrywide & ACORN to Help Locate Displaced Homeowners

The following press release explains the efforts of Countrywide Mortgage and ACORN, who have come together to help locate homeowners who were displaced by Hurricane Katrina.

Countrywide Joins ACORN Initiative to Locate Hurricane-Displaced Homeowners 03/15/2006

HOUSTON, March 15 /PRNewswire-FirstCall/ -- More than six months after Hurricane Katrina, thousands of displaced Gulf Coast homeowners still have not contacted their mortgage lender to discuss their options for postponement of payments and other steps toward personal recovery.

Now, with financial support from the nation's #1 home loan lender, Countrywide Financial Corporation (NYSE: CFC), the Association of Community Organizations for Reform Now (ACORN) has launched a telephone and door-to-door campaign to find evacuees and put them in touch with their lender, whether it is Countrywide or another company. The program was announced on Wednesday in Houston, one of several cities with a high presence of hurricane evacuees. Others included in the program include Dallas, San Antonio, Baton Rouge and New Orleans. The canvassing follows a series of newspaper ads that Countrywide placed last month in newspapers in affected communities across the Gulf Coast states.

The ads encouraged Countrywide customers to call the lender, and also listed the ACORN Housing Helpline as an intermediary for customers of other mortgage companies to contact their lenders. "Countrywide and other mortgage lenders have provided significant assistance to our customers affected by the storms, including suspending mortgage payments and credit reporting," said Michael Gross, Managing Director of Mortgage Servicing for Countrywide. "However, despite our best efforts to reach them, there are still a number of customers who we have been unable to reach, limiting our ability to provide assistance to them. "ACORN has the proven ability to organize and mobilize its membership for community outreach, and we are pleased to support them in this all-out effort to reach hurricane victims and put them in contact with their lender," Gross said.

"ACORN Housing has been able to assist almost all the Katrina Survivors we have worked with in making arrangements with their lender to protect their home and their finances," said Dorothy Stukes, president of the ACORN Katrina Survivors Association. "But everyone needs to get in contact with their lender or ACORN Housing as soon as possible -- and we are going to go out in the community to make sure as many people as possible know they need to act now." In accordance with the guidelines established by Fannie Mae, Freddie Mac, HUD and other entities who own or insure mortgages, Countrywide will continue to offer postponed payments and other assistance to customers in the most devastated areas whose homes remain uninhabitable or who are unable to work. The majority of Countrywide's customers affected by the hurricanes have already contacted the lender to be considered for various forms of assistance including postponement of monthly payments, repayment plans, loan modifications or loan reinstatement. Other lenders are taking similar measures.

But no help is available to homeowners who don't contact their lender, and more than six months after Katrina, time is of the essence for those homeowners. Impacted customers who have not contacted Countrywide since the hurricanes are urged to call a special toll-free hotline set up for this purpose at 877-744-7691.

The ACORN Housing Hotline can help homeowners who are not customers of Countrywide contact and work with their individual lenders at 866-471-2272.
In addition to payment forbearance and other assistance programs designed to help individual hurricane victims, Countrywide and its employees have participated in voluntary hurricane relief efforts and collectively committed about $2 million in financial aid to recovery programs in the Gulf Coast region.

* Source: As ranked for 2005 by Inside Mortgage Finance (Jan. 26, 2006),
Copyright 2006

About Countrywide Financial Corporation
Founded in 1969, Countrywide Financial Corporation is a member of the S&P 500 and Fortune 500. Through its family of companies, Countrywide provides mortgage banking and diversified financial services in domestic and international markets. Mortgage banking businesses include loan production and servicing principally through Countrywide Home Loans, Inc., which originates, purchases, securitizes, sells, and services primarily prime-quality loans.

Also included in Countrywide's mortgage banking segment is the LandSafe group of companies that provide loan closing services. Diversified financial services encompass capital markets, banking, insurance, and global, largely through the activities of Countrywide Capital Markets, a mortgage-related investment banker; Countrywide Bank, a banking entity offering customers CDs, money market accounts, and home loan products; Balboa Life & Casualty Group, whose companies are national providers of property, liability, and life insurance; and Balboa Reinsurance, a captive mortgage reinsurance company. For more information about the Company, visit Countrywide's Web site at www.Countrywide.com.

About ACORN
ACORN is the nation's largest community organization of low- and moderate-income families, with over 175,000 member families organized into 800 neighborhood chapters in 80 cities across the country. Since 1970 ACORN has taken action and won victories on issues of concern to our members. Our priorities include: better housing for first time homebuyers and tenants, living wages for low-wage workers, more investment in our communities from banks and governments, and better public schools. We achieve these goals by building community organizations that have the power to win changes -- through direct action, negotiation, legislation, and voter participation. ACORN is an acronym, and each letter should be capitalized. ACORN stands for the Association of Community Organizations for Reform Now.

Fixed Rate Increases to Highest Level Since July 2002

WASHINGTON, D.C. - The Mortgage Bankers Association released its Weekly Mortgage Applications Survey for the week ending March 10. The Market Composite Index - a measure of mortgage loan application volume was 574.4 - a decrease of 0.2 percent on a seasonally adjusted basis from 575.6 one week earlier. On an unadjusted basis, the Index increased 0.2 percent compared with the previous week but was down 20.4 percent compared with the same week one year earlier.



The seasonally-adjusted Purchase Index increased by 1.0 percent to 403.0 from 399.0 the previous week whereas the Refinance Index decreased by 1.9 percent to 1583.6 from 1614.4 one week earlier. Other seasonally adjusted index activity includes the Conventional Index, which decreased 0.1 percent to 845.2 from 846.1 the previous week, and the Government Index, which decreased 1.4 percent to 122.8 from 124.6 the previous week.



The four week moving average for the seasonally-adjusted Market Index is up 0.1 percent to 575.3 from 574.9. The four week moving average is up 0.5 percent to 401.9 from 400.1 for the Purchase Index while this average is down 0.3 percent to 1593.4 from 1599.0 for the Refinance Index.



The refinance share of mortgage activity decreased to 37.7 percent of total applications from 38.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 28.8 percent of total applications from 27.9 percent the previous week.



The average contract interest rate for 30-year fixed-rate mortgages increased to 6.42 percent from 6.31 percent, with points decreasing to 1.14 from 1.22 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The 30-year fixed rate is at its highest level since July, 5, 2002 when it was 6.46 percent.



The average contract interest rate for 15-year fixed-rate mortgages increased to 6.06 percent from 5.97 percent, with points decreasing to 1.19 from 1.22 (including the origination fee) for 80 percent LTV loans.



The average contract interest rate for one-year ARMs decreased to 5.64 percent from 5.69 percent, with points remaining at 0.96 (including the origination fee) for 80 percent LTV loans.

KeyBank- Mortgage Financing for Cleveland Development Project

KEYBANK TO PROVIDE CONSTRUCTION AND MORTGAGE FINANCING ON PEROTTI DEVELOPMENT'S NEW LARCHMERE COURT PROJECT

CLEVELAND, February 21, 2006 – With $2 million in construction financing from KeyBank, Perotti Development LLC is set once again to provide sophisticated urban living environments in the Larchmere Boulevard area.
The two-building, 13-unit project is set to open in late summer and already more than half of the townhouses have been sold. KeyBank is also providing mortgage financing for the project, and the City of Cleveland Department of Community Development has made available 15-year, 100 percent tax-abatement for buyers of the townhouses.

“You won’t see a configuration like this anywhere else in the city,” says Tim Perotti, principal of Perotti Development LLC. “We chose Larchmere because it is an excellent neighborhood – a true gem of Cleveland. The units are very close to University Circle as well as Case Western Reserve, University Hospitals and the Cleveland Clinic – organizations that are an engine of growth in Cleveland. People want to live in a cool neighborhood that’s close to work and that’s exactly what we’re giving them.”

A pre-construction open-house last week gave buyers and prospects a chance to talk with the architect and contractor as well as real estate agents and KeyBank mortgage specialists. “We have a passion for the kind of urban renewal made possible through Perotti Development,” says Lisa Oliver, president of KeyBank’s Cleveland District. “Tim and Ned have taken some well-calculated risks
that are making a difference, and we’re happy to be a part of their formula for success right here in our hometown.”

Key and Perotti Development successfully collaborated on the Larchmere Lofts condominiums in 2003 and 2004, with Key again providing construction and mortgage financing. At that time, the project was the first new construction, mid-rise condominium ever built on Cleveland’s east side. Key lends more than $500 million nationwide each year through its community development bank
and recently received its sixth consecutive “Outstanding” awarded by the Office of the Comptroller of the Currency (OCC) for continuing efforts to exceed the terms of the Community Reinvestment Act. By comparison, less than 14 percent of all financial institutions in the United States receive one “Outstanding.”

About Perotti Development LLC-
Perotti Development LLC was founded by brothers Tim and Ned Perotti, who have been involved in residential real estate for over 20 years. They are longtime residents of the Cleveland area, who use their industry experience and knowledge of the City of Cleveland and its neighborhoods to create the type of
innovative, well located, quality housing developments that customers demand.

About KeyCorp
Cleveland-based KeyCorp (NYSE: KEY) is one of the nation’s largest bank-based financial services companies, with assets of approximately $93 billion. Key companies provide investment management, retail and commercial banking, consumer finance, and investment banking products and services to individuals and companies throughout the United States and, for certain businesses, internationally.

US Bank- Master Servicing Ratings 3/2/2006

U.S. Bank Corporate Trust Services Receives Master Servicing Ratings
NEW YORK--(BUSINESS WIRE)--March 2, 2006--U.S. Bank Corporate Trust Services has received the ratings needed from Standard & Poor's and Moody's to offer master servicing for mortgage-backed transactions. By expanding its product capability in this way, U.S. Bank reaffirms its commitment to the mortgage-backed services (MBS) market and enables clients to receive comprehensive business solutions under one umbrella.
As a master servicer, U.S. Bank will be responsible for trustee reports and for overseeing third party primary servicers. The ratings approvals reflect the readiness of U.S. Bank's master servicing procedures and systems, as well as its overall financial strength, the experience and structure of its management team, and its demonstrated ability to service mortgage loans.
"U.S. Bank is a strong player in the MBS and asset-backed securities business and is known for providing great service. We are excited to add master servicing capabilities to our complete line of products and services available to our mortgage-backed securities clients," said Diane Thormodsgard, president of U.S. Bank Corporate Trust Services.
U.S. Bank Corporate Trust Services is one of the nation's largest providers of trustee services with more than $1.7 trillion in principal outstanding in municipal, corporate, asset-backed and international bonds. In addition, it provides paying agent, escrow agent and document collateral services through its network of 47 offices nationwide. U.S. Bank Home Mortgage is the 15th largest mortgage servicer in the country, servicing approximately 750,000 loans with $86 billion outstanding.
U.S. Bancorp (NYSE:USB), with assets of $209 billion, is the 6th largest financial holding company in the United States. The company operates 2,419 banking offices and 5,003 ATMs, and provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses and institutions. U.S. Bancorp is the parent company of U.S. Bank. Visit U.S. Bancorp on the web at www.usbank.com.
CONTACT: U.S. BankAmy Frantti, 612-303-0733SOURCE: U.S. Bank

Third Federal - Five Star Rating

THIRD FEDERAL MAINTAINS TOP FINANCIAL RATING FOR 16 YEARS
Your Money's Safer at Third Federal Savings and Loan, According to National Bank Soundness Rating Service.
January 25, 2006 Third Federal joins an elite group of the nations' banks, according to Bauer Financial, a nationally recognized bank soundness rating organization. That's because Third Federal has maintained a Bauer five star rating (the highest rating) for every quarter for 16 years, which is as long as the rating service has been in business. According to Bauer officials, fewer than 10 percent of the nation's financial institutions are able to maintain a five-star superior rating for such a sustained period of time. Bauer Financial, a nationally recognized bank soundness rating organization headquartered in Florida, bases its ratings on a financial institution's capital adequacy, asset quality and stability, among other criteria. Anyone can check Third Federal and other financial institutions' ratings on the internet by going to the Bauer web site at www.bauerfinancial.com. Third Federal Savings and Loan Association, named for five years to the Fortune list of 100 Best Companies to Work for, is a leading provider of savings and mortgage products. Founded in Cleveland in 1938 as a mutual association by Ben and Gerome Stefanski, Third Federal is dedicated to serving consumers with competitive rates and outstanding customer service. Third Federal, an equal housing lender, serves customers in Northeast Ohio from 26 branches and eight lending offices in Central and Southern Ohio, and from 14 branches throughout Florida. As of December 31, 2005, Third Federal had total assets of $8.6 billion. Third Federal can be reached toll-free by calling 1-888-844-7333.

ING Retirement Investment Decisions (2-27-2006)

Emotions and Human Impulses Drive Retirement Investment Decisions
Can Compromise Long Term Retirement Security; Yet, Employers Can Provide Help
Hartford, CT & Orlando, FL - February 27, 2006 - ING, a global financial services leader, today released a report entitled Psychology, Emotion, Investing and Retirement: Exploring Participant Behavior in Defined Contribution Plans that examines a growing body of data that sheds light on how human psychology and emotion can cause barriers to adequately preparing for retirement financial security. However, employers can play an important role in providing employees resources to help make better retirement savings decisions.
The report examines how these emotional behaviors can impact an investors investment decisions and discusses some of the solutions that employers can make to encourage “good” behavior by employees that participate in their employer-sponsored retirement plans.
The tenets of behavioral finance, a discipline that combines the cold analytics of finance and investing with the human element of emotion, indicate there are emotional reasons that cause people to make mistakes in retirement plan investing.
Common emotional and behavioral drivers include:
Procrastination and inertia – While most people know they should contribute to their workplace retirement plan, many put off doing so. Others who do participate in an employer-sponsored retirement plan, are simply not saving enough.
Information Overload and Analysis Paralysis – When there are too many choices -- both in the “real world” and within a retirement savings plan – people may be overwhelmed, and make no choice at all, which could have detrimental effects for retirement planning.
Irrational Investment Decision Making – Rather than using analytical tools, many people invest based on “irrational biases,” such as arbitrary rules of thumb, familiarity, overconfidence, and fear of loss.
“The power of emotional behaviors and their impact on how individuals invest cannot be underestimated,” said Brian Haendiges, senior vice president, ING Defined Contribution. “But there are ways for companies to help their employees make better decisions when it comes to investing in their workplace retirement plan.”
“For employers, there’s a new dynamic to building, implementing, communicating and managing defined contribution plans, such as 401(k)s, 403(b)s and 457 plans, given the vastly expanded role they are being called upon to play in helping employees plan for their future retirement income.”
The various emotions and human impulses can negatively effect how participants invest including:
Poor diversification -- participants have poor diversification with respect to equity exposure. Younger workers tend to invest too conservatively (do not invest enough in equities), and older workers tend to invest too much (too aggressively).
Rebalancing – revisiting allocation across asset classes four to eight times per year tracks with a greater instance of beating the S&P 500. Yet 68 percent of those studied did not rebalance at all. Only 12 percent rebalanced the optimal number of times (four to eight).
Fund Choice – over the longer-term period studied (five years), the participants who most significantly outperformed the S&P 500 Index invested in between six and 15 funds. Yet the average number of funds used by 401(k) participants was just 4.1.
Asset Allocation – Over both the three and five year period, investors who included an asset allocation fund in their portfolio were significantly more likely to beat the S&P 500 than those who did not. Yet just 34 percent of the investor population uses these funds.
The report discusses various elements employers can use in their Defined Contribution plan to help their employees make better retirement plan investment decisions. Plan design elements such as an employer match, automatic enrollment, contribution increases, the inclusion of a target date or lifecycle funds and a limited fund selection can help participant make beneficial decisions. Additionally, regular, ongoing and simple communication (versus simply relying on traditional “education / enrollment meetings”) about retirement plan investing – not just at one point in time – may help employees feel good about participation decisions and help them understand their options and help them make the appropriate investment decisions.
“The solutions proposed in this report each have the potential to improve the retirement preparedness for participants of employer sponsored retirement plans, “ said Haendiges. “ING recognizes the need to work closely with employers to continue to look for new ways to help them, help their employees make the right decisions when it comes to investing for retirement.”