Personal finances and family budgeting

Big money crops up in small elections in the united states


´╗┐Political groups that took advantage of loosened campaign-finance rules spent hundreds of millions of dollars in the 2012 U.S. presidential election. This year, they're cropping up in state and local races as well. Wealthy individuals and interest groups of all stripes are increasingly setting up political committees that can steer unlimited sums to small-dollar contests for state legislature, sheriff and school board. Four years after the Supreme Court ruled that Congress cannot restrict spending by political groups not directly affiliated with candidates, the "Super PACs" and other spending committees that sprung up in the wake of that decision are becoming a fixture in races farther down on ballot sheets, where their money can have a greater impact. In some cases, they are looking to bypass a gridlocked Washington that likely will not be more productive after the Nov. 4 congressional elections. In other cases, local operators are adopting tactics first developed at the national level. In Cumberland County, Maine, a property developer spent $100,000 on attack ads this spring in an unsuccessful attempt to defeat the county sheriff in a Democratic primary. In Arkansas, a conservative entrepreneur routed money through a network of committees to help a political neophyte topple a Republican legislator who had worked with Democrats to expand health coverage for the poor. Americans for Prosperity, a conservative network backed by the billionaire industrialists Charles and David Koch, has sought to influence judicial contests in North Carolina and school board races in Tennessee and Wisconsin. "Our activists are motivated to affect change in their own communities, and often enjoy seeing results that are more tangible than with working on national issues," said Americans for Prosperity spokesman Levi Russell.

The increased activity reflects a new focus at the state level by interest groups that have made little progress in Washington. GUN CONTROL AT LOCAL LEVEL Everytown for Gun Safety, a gun-control group backed by former New York Mayor Michael Bloomberg, plans to spend $12 million on a ballot initiative in Washington state and legislative races in Colorado, Connecticut, Delaware, Maryland, Minnesota and Nevada to counteract the pro-gun influence of the National Rifle Association. Though firearms restrictions foundered in Congress in 2013, several states have since passed measures of their own. "Washington's broken, not just on guns but on many issues," said John Feinblatt, the group's president.

It's not easy to track outside spending at the state level, as reporting requirements vary and many states don't require any sort of disclosure at all. In the 21 states tracked by the National Institute on Money in State Politics, a watchdog group, independent spending jumped from $175 million in 2006 to $245 million in 2010. The amount is likely to jump by a similar amount this year, said Paul S. Ryan, senior counsel at the Campaign Legal Center, a nonpartisan watchdog group. "It's often the way things work in money and politics: practices are developed at the national and federal level, and those that work are replicated at the state and municipal level," Ryan said. LESS MONEY TO INFLUENCE LOCAL POLITICS

Independent groups have a mixed record at the top of the ticket, where candidates for governor and the U.S. Senate typically have substantial war chests. It is a different story further down the ballot, where candidates often have limited name recognition and their budgets amount to thousands, rather than millions of dollars. Colorado state Senate candidate Rachel Zenzinger, a Democrat, has struggled to rebut TV ads and mailers that accuse her of voting to use taxpayer money for a trip to China while serving on the city council in the Denver suburb of Arvada. Zenzinger has never been to China, and official records show she sponsored a measure to prohibit public money for a proposed trip to visit a sister city there. Colorado Citizens for Accountable Government, the Republican-funded group responsible for the ad, maintains it is accurate. Zenzinger has raised at least $240,000, nearly twice as much as her Republican challenger, and outside Democratic groups have also spent more than $120,000 to boost her candidacy. Still, it's been difficult to fight back against the ad, she said. "It's my reputation that's at stake here. If they're saying stuff that's blatantly false, it could affect the outcome of this election," Zenzinger said.

Column despite risks, retirement savers plow into target date funds


´╗┐target-date funds suggests many retirement investors may be ignoring the risks of this key category. These funds now represent the second-most-popular allocation after U.S. large-stock funds within defined-contribution plans like 401(k) accounts, according to pension consultant Callan Associates. Target-date assets have climbed above $500 billion, attracting $16 billion in the first two months of 2013 alone, according to Strategic Insight. Target-date funds combine several mutual funds within one package and are managed so that they move to less risky postures as their shareholders move closer to retirement. That movement - usually from stocks to bonds - is called the fund's "glide path." The funds take aim at specific future dates, and investors are expected to buy the fund that matches their own retirement date. Investors may find themselves automatically invested in these funds: Target-date funds are approved by the U.S. Department of Labor as a default choice in 401(k)s, so some plan managers use them whenever they automatically enroll employees. All that might suggest the funds are fairly risk-free. But while diversification strategies can reduce risk, they don't eliminate it. Some target-date funds are much more volatile than others, depending upon their allocation. Their internal risks are poorly understood, fund expenses are high and they yield varying results. Here's what investors may be this site RISKS The premise behind most of the glide paths is that bonds are safer than stocks. But when interest rates rise, bond prices fall, so bond funds within target-date funds are likely to lose money. And sooner or later, either a recovering economy or improving job situation will compel the Federal Reserve to raise interest rates. A legion of market observers are warning of a decline in the bond market, which is said to be nearing the end of a 30-year bull run.

Then there's inflation. If consumer prices begin to rise more rapidly, that could hit your target-date bond holdings too. Does yours have a stake in Treasury inflation-protected securities (TIPS), which pay a premium if the cost-of-living increases? Many funds lack sufficient protection against this enemy of bond holders. STOCK RISKS While many investors may think target-date funds reduce risk over time, they still have large exposures to the stock market. That helps retirement investors keep their portfolios growing over the long term but also leaves them vulnerable to a market sell-off. For example, the T. Rowe Price 2020 fund performed poorly in 2008, with a 33 percent loss. That fund keeps 69 percent of its portfolio in stocks and more than 26 percent stake in bonds, with the remainder in cash, and it is almost as volatile as a broad-market S&P 500 Index fund. During bull markets, though, that aggressive stance has paid off for fund holders: It's up 8 percent year to date through May 6.

Other target market funds are less aggressive. The Schwab 2020 fund, with the lowest volatility in this group at just over 13, has a lower stake in stocks, at 58 percent with the remainder in bonds and cash. It lost 26 percent in 2008. It's up 7.5 percent year to date through May 6. HIGH COSTS Target-date fund holders pay dearly for convenience, shelling out as much for a group of mostly passive funds as they would for an actively managed fund. Expenses for funds with target dates ranging from 2016-2020 averaged 0.71 percent, just slightly lower than the 0.78 percent average for more than 300 U.S. active stock funds tracked by Morningstar. Furthermore, higher-priced target-date funds do not deliver better performance than the lower-priced ones, according to a study by Marc Fandetti, principal of the Meketa Investment Group in Westwood, Massachusetts.

As is often the case, the Vanguard Retirement 2020 (VTWNX) fund is a low-cost option. It charges 0.16 percent annually. Through last year the fund held 63 percent in stocks, 33 percent in bonds and the remainder in cash. It lost 27 percent in 2008 and is up 7.76 percent year to date through May 6. OTHER APPROACHES Instead of the prepackaged solution, consider owning separate stock and bond index funds, so you can adjust your own allocation between them to reflect your risk tolerance. Are you close to retirement and concerned about inflation? Look at funds that invest in real estate investment trusts (REITs), dividend-paying stocks, commodities or precious metals."Hedge your urgent needs," says Zvi Bodie, a finance professor at Boston University and staunch critic of premixed funds of funds. "Only risk wealth that you can afford to lose. The providers of target are not offering guarantees."