SOCIAL SECURITY FIX IS EASY

So, John Taylor has a cause. The community activist thinks that extorting money from bank shareholders and customers at the end of a U.S. Government gun barrel is “simply a democratic principle.” And that mutual fund investors should suffer the same heavy-handed fate. (InvestmentNews, July 27.)

These tactics impose costs that are paid by the ultimate consumers of these services — almost every American citizen. Mr. Taylor especially hurts his supposed constituents, since low-income people are the least able to pay for the increased cost of bank services.

Mr. Taylor should spend more time educating his constituents on handling money, using credit wisely and saving. Instead, he tries to take from the “rich” (actually, the middle class) to give to the “poor.”

Rep. Earl Pomeroy wants to allow the government to invest the Social Security trust fund, but insists there will be safeguards. Let me see, the U.S. government buys shares in private companies that make things. Hmmm. Government ownership of the means of production! Haven’t I have read that somewhere? Maybe Karl Marx?

A sensible solution might be this:

1) Actuarially fund the current Social Security obligations of those who are or soon will be retired. This would eliminate the balanced budget myth.

2) Allow those 50 and under to stay in the system or opt out. Those who opt out would have their contributions (but not the employers’) sent to a 403(b)-type account. They’d be responsible for investing it, but unable to withdraw it for any reason until retirement.

The infrastructure is in place. It could be enacted this session of Congress.

Terry Cunningham

Certified financial planner

West Chester, Ohio

Let us commingle

The newfound popularity of commingled funds shouldn’t come as a surprise to readers (InvestmentNews, May 25).

While large mutual fund companies position their funds as a complete, hassle-free investment package, commingled funds present a more flexible and less costly alternative for medium-sized and smaller 401(k) plans. They work like a mutual fund, but have these added advantages:

* Because commingled funds are reserved exclusively for retirement accounts, retail “hot money” is not present, which stabilizes the fund during volatile periods.

* Fees and expenses are flexible for each plan, and can decline on a per-dollar basis as the plan grows in size, unlike mutual funds, which must charge a set expense ratio.

* They usually are less expensive than mutual funds.

* Commingled funds are unitized like mutual funds and can have daily values posted to the Internet or through automated information channels to update participants on fund performance, which means same-day information on NAVs.

* Commingled funds offer easy accounting — dividends and capital gains automatically are reinvested, so participant accounting is timely and accurate.

Today’s plan sponsors are cognizant of their fiduciary responsibilities and are becoming more knowledgeable about the investment options available to them.

Increasingly, commingled funds will find their way into mainstream defined-contribution plans as an attractive option in corporate retirement plan portfolios.

JOHN C. WHEELER

President and chief executive officer

Copper Mountain Trust and Advisor Services

Portland, Ore.

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