Socially responsible retirement savings
Question: My retirement begins 01/10. I will receive $148,000 in Feb. 10 and my monthly state retirement check will begin. I must roll-over the lump sum into an IRA, which I do not have. I've never heard of a socially conscious IRA! How can I be sure my hard earned money is only invested in socially responsible ways? (I will be 60 this summer and want to wait til 66 to get my whole SS.) Diane, Perry, FL
Answer: You want to be part of a growth business. The Social Investment Forum estimates that total industry assets were closing in on $3 trillion in 2007 (the latest data available). That's up from $639 billion in 1995. Most of the socially responsible money is managed for institutional investors and high net worth individuals. But assets managed by socially responsible mutual funds, exchange traded funds (ETFs), and the like are also up, to over $200 billion in 260 funds last year. Investing in socially responsible funds remains popular despite the bear market in stocks.
To take a slight detour, the biggest rap against the movement is the belief that marrying personal values to an investment portfolio cuts into returns. In other words, doing good and making money don't mix. I don't agree. A number of studies suggest there's little difference between pooling money to make money and pooling money to make money and express values. This came home to me in a series of papers by Meir Statman, a finance economist at Santa Clara University. Among his conclusions, the risk-adjusted return on socially conscious index funds is roughly comparable to the Standard & Poor's 500 index. His research also showed that the performance of actively managed socially responsible mutual funds is about equal to their conventional mutual fund peers.
Put somewhat differently, socially responsible index funds do better than their actively managed socially responsible peers. One troublesome aspect of the industry is that socially responsible funds tend to have high fees that cut into returns. It always pays to shop around, but it's especially true with these funds.
To your specific question, any socially responsible mutual fund company will open a rollover IRA for you. Two websites for researching socially responsible investing from your computer are socialinvest.org and socialfunds.com. The mutual fund and investment research company morningstar.com also has good information on socially responsible funds and ETFs.