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Money funds for retirement planning

Although public acceptance of money market mutual funds has been phenomenal (over 5 million shareholders, about $100 billion in assets), the fact that these funds offer a specific investment vehicle for qualified retirement plans is likely to become more widely recognized, Howard Pianko, a New York attorney, writes in a recent issue of Mutual Funds Forum, published by the Investment Company Institute.

In considering a money fund, Mr. Pianko says, the plan sponsor should consider the purpose of the investment vehicle. If the purpose is to insure long-term yields, the money market funds may not be the answer. If the purpose is to provide a vehicle with rates competitive with those payable by banks for their savings accounts and by short-term Treasury Bill rates, the money fund may be appropriate.

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