Defined contribution plans – often known as 401k plans – have become the mainstay of US company pensions, yet their main function has been to get employees to save and invest during their work years. These plans haven’t been successful at delivering lifetime income benefits, as a rule: fewer than one-fifth of all such plans today help workers convert their plan assets into retirement paychecks.…Read More
retiresecure
Making Your Retirement Savings Last
Ask yourself these questions:
Do you want a guaranteed retirement income stream as long as you live, to protect you against outliving your assets?
Are you nearing retirement?
Are you in a defined contribution pension – either an employer-sponsored 401(k) or 403(b) plan, or an individual Roth or regular IRA?
If the answer to any of these questions is “yes,” reading this post could save you money!…Read More
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
Where Should You Live In Retirement?
I am often asked what are the most retirement-friendly places to live, so I assembled some thoughts in talking with John Kiernan from WalletHub.com.…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
Understanding The Implications Of An Interest Rate Hike
Pundits keep a close watch on the U.S. Federal Reserve as it meets to raise interest rates after seven years of effectively zero rates. Yet the reality is that many Americans know little about interest rates, and much less about the implications of a rate hike for their finances! This was one key finding from the recently released S&P Global FinLit Survey, gathered with the support of McGraw Hill Financial.…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
What The U.S. Can Learn From Chile’s Retirement System
Chile provides a safety net for those who fall into poverty in old age, but it’s still an imperfect pension system that needs work.
Pay-as-you-go (PAYG) retirement programs in the U.S. and many European countries are struggling to remain solvent in the face of an aging population, fewer workers, and a shortfall in private savings. A different approach would strengthen individual savings accounts by requiring workers to contribute out of pre-tax income, combined with a redistributive means-tested safety net for those who fall into poverty in old age.…Read More