retirement

A Proposal For Allowing State Pension Buyouts

Many U.S. state and local employee pensions are facing dire problems as massive plan liabilities come due, threatening to drain government coffers. As Robert Novy-Marx and Joshua Rauh wrote in the Journal of Finance, 21 state pensions held less than 40 percent of the assets needed to pay benefits. Their estimate of the aggregate “funding gap” faced by states was roughly $2.5 trillion in 2009. Since then, the story has not improved, and it has likely worsened. Puerto Rico recently joined Detroit as a case study of fiscal and public pension mismanagement and failure, and the Puerto Rican pension is essentially without any assets.…Read More

Retirement Income Calculators: Not Much Better Than Counting On Your Fingers?

When average Americans confront the complicated problem of how much to save for retirement, they often use so-called “rules of thumb,” or greatly-simplified approaches, to figure out how much to save and how to invest. It turns out that many of the computer programs created to help with retirement income planning do exactly the same thing: use rules of thumb.…Read More

Here’s How to Get More People to Delay Claiming Social Security

By: Olivia S. Mitchell Olivia S. Mitchell (@OS_Mitchell) is a professor of business economics/policy and insurance/risk management at the Wharton School of the University of Pennsylvania, where she focuses on pensions, household finance, retirement, and risk management.  Global aging paired with pension shortfalls have led many governments to raise retirement…Read More

Is Social Security Really Running Short?

Social Security is a pay-as-you-go system, since payroll taxes collected from today’s workers mostly go to pay today’s retirees. But as the U.S. population ages, fewer young workers are paying into the system relative to rising numbers of ever-longer-lived retirees drawing benefits, according to this opinion piece by Olivia S. Mitchell, a Wharton professor of business economics and public policy, and also insurance and risk management.…Read More

Alpha Opportunities In A Sluggish Return Environment

The global economic environment presents new challenges for investors across the board. Public and private pension plans, consultants, Wall Street strategists, and money managers have all ratcheted down their forward-looking views on asset returns, meaning that defined contribution plan participants will be hurting if the financial community’s morose predictions bear fruit.…Read More

Improving Women’s Retirement Security

Older women confront many retirement security challenges. For one thing, women live longer than do men, so their money must stretch farther. For another, many average fewer years in the paid workforce and, when they do work, their average pay is often lower. Additionally, they are more likely to work part-time, for a lower salary. These factors all translate into lower retirement accumulations, smaller retirement payouts, and higher poverty rates in old age, as reported in a recent Society of Actuaries 2014 study “Impact of Retirement Risk on Women.”…Read More

Fixing The Weakest Link: Strengthening Retirement Security By Default

One drawback of defined contribution (DC) retirement plans is that they place the burden of making financial decisions on participants who are often ill equipped for the task. This has contributed to widespread concerns about retirement security. Will people have enough savings when they leave the workforce to afford a comfortable retirement? Will they then draw on their nest eggs efficiently while in retirement, enabling them to avoid financial ruin over an uncertain lifetime?…Read More

Chile’s Fabled Retirement System: Why Fix It?

Since its launch 35 years ago, Chile’s retirement system has been hailed as “best in class” by pension experts near and far. The country’s fabled individual and privately-managed accounts include around 10 million affiliates, hold $160 billion in investments, and pay retirement benefits to over a million retirees. So why did President Michelle Bachelet establish a Pension Reform Commission that just delivered to her 58 specific reforms and three comprehensive proposals to overhaul remodel Chile’s retirement system?…Read More

Unfunded Pension Debts of U.S. States Still Exceed $3 Trillion

It’s well-known that there’s a huge financial hole in state-sponsored retirement plans for public employees, a hole that states will eventually have to fill with tax increases and spending cuts.

There is, however, still considerable debate as to the size of this government debt owed to public employees. In July 2015, the Pew Charitable Trusts released their latest issue brief, reporting that as of 2013, the nation’s state-run retirement systems had a $968 billion funding gap GPS +1.75%, not far from the “Trillion Dollar Gap” they reported in 2010.…Read More