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

Target Date Funds: The Good, the Bad, and the Unknown

Target Date Funds, which automatically diversify, adjust and rebalance retirement saving allocations over very long periods of time, are among the most successful individual investing products of the past decade. Initially introduced in 1994, target date funds (TDFs) really took off after the U.S. Pension Protection Act of 2006 allowed defined contribution (DC) pension plans to use them as a default option for plan participants. Assets in TDFs rose from a total of $100 billion in assets in 2005 to over $700 billion in 2015, and more than 60% of new DC pension contributions are now flowing into these funds. At least 36 mutual fund companies offer TDFs to pension plans, and a growing part of the pension consulting business consists of helping pension plan sponsors to “customize” their TDFs.Read More

A New Approach To Timing Pension Payouts

US federal law requires retirees to annually withdraw a minimum amount from their retirement accounts after the age of 70 ½. [1] This is driven by a tax rationale: since pension contributions are generally tax-deferred, Required Minimum Distribution (RMD) rules require that taxes should be paid on pension benefits during old age. Yet a criticism has been levied at RMD rules, namely that they may prejudice good retirement policy. To the extent that some households are required to draw down their pension wealth too soon, this increases the risk that they will outlive their resources.Read More

What’s Wrong With Our Retirement System & What We Can Do About It

As the Baby Boom moves into retirement, confidence in our retirement system is waning, for good reason. Plan sponsors, including public and private employers, are rapidly freezing their defined benefit plans—those that promise a guaranteed level of income in retirement—by closing the plans to new hires or stopping current employees from earning additional benefits.Read More

Argentina’s Pension Policy In The Last 20 Years: Chronicle Of A Death Foretold

Argentina is one of several countries that implemented a major structural reform of the pension system during the 1990s and then, more recently, decided to reverse itself. This note presents a summarized discussion of the motivations and main characteristics of the early reform, the performance of the system since then, and the rationale for and impacts of the recent changes.Read More

Financial Savvy Key To A Secure Retirement

Over the last 40 years, we as individuals have been given increasing responsibility for ensuring our own financial well-being in retirement. But it’s gotten quite complex, with an alphabet soup of retirement saving vehicles – from 401(k) to 403(b) plans to IRA and Roth IRAs – and our responsibilities loom large. Not only must we figure out how much to save and how to invest our retirement assets, but we also must take advantage of a variety of tax-favored assets, employer matches, payout options, and much more.Read More

Key Retirement Concerns And 7 Planning Tips For Women

Retirement planning is extremely important for women, and ideally it should consider the big picture including financial resources, the family’s situation, risks, and employment. Nevertheless, many women are more focused on meeting their families’ current needs than on their longer-term futures. This article looks at how family issues can shape women’s retirement plans and examines issues and planning steps that might otherwise be overlooked.Read More

How To Get More Guaranteed Retirement Income In The 401(k) Age

In the old days, many Americans had a defined benefit (DB) pension that paid them a steady guaranteed income in retirement. But the pension landscape has shifted dramatically: now more than half of all US retirement assets are in self-directed defined contribution (DC) plans, such as 401(k)s and individual retirement accounts (IRAs) – and the figures are rising. These DC plans and IRAs do offer millions the chance to build up and control their own nest eggs, but what they don’t offer is a guaranteed income in retirement. Instead, retirees must manage their nest eggs themselves and hope that their decisions – how much to save, where to invest, and how much to take out each year – and the ups and downs of the market, will permit their money to last as long as they do.Read More