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Showing posts from December, 2014

"Retirement Ready" Resolutions

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As the New Year begins, we are often of a mind to think about making a fresh start. If you are an individual, you may (finally) be ready to be serious about saving for retirement - or you may have mailed in that last tuition check - or crossed that age 50 threshold where you can start " catching up " on retirement savings. If you're an employer, you may well have established new goals for your retirement plans this year—a new threshold for participation, perhaps—or maybe you’ve just rolled out a new fund menu for your participants. But whether your plans - or your programs - have undergone change or not, this is a good time of year to help participants reexamine their savings goals—and perhaps even some of their “bad” retirement savings habits. Here’s a short list of “resolutions” that can help you get started. ___ Resolve to participate in your workplace retirement savings plan. If you are not already saving for your retirement in your workplace program, you ar

"Naughty" or Nice?

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A few years back — well, now it’s quite a few years back — when my kids still believed in the reality of Santa Claus, we discovered an ingenious website that purported to offer a real-time assessment of their "naughty or nice" status. Now, as Christmas approached, it was not uncommon for us to caution our occasionally misbehaving brood that they had best be attentive to how those actions might be viewed by the big guy at the North Pole. But nothing we said ever had the impact of that website — if not on their behaviors (they were kids, after all), then certainly on the level of their concern about the consequences. In fact, in one of his final years as a "believer," my son (who, it must be acknowledged, had been particularly  naughty that year) was on the verge of tears, worried that he'd find nothing under the Christmas tree but the coal and bundle of switches he so surely deserved. One could argue that many participants act as though at retirement some

"Choice" Architecture - for Plan Sponsors

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In recent years, the notion that the ways in which choices are presented to individuals — known as “choice architecture” — can influence their decisions, has been widely embraced. Well before the advent of the Pension Protection Act of 2006, the retirement plan industry had acknowledged the positive influences of those behavioral finance techniques on overcoming, or at least countering, certain human behaviors. Based on the evidence of several decades of adoption, we know that automatic enrollment — even with the ability to opt out — transforms voluntary participation rates of roughly 70% to near-unanimous participation. And yet, even with the structure and sanction of the PPA, today fewer than half of the roughly 7,000 plan sponsor respondents to the 2013 PLANSPONSOR DC Survey have implemented that design (large plans being significantly more likely to do so than smaller programs). Even plan sponsors that have adopted automatic enrollment tend to do so with a default deferral ra

A Second Opinion on Self-Medicating Your 401(k)

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At a recent event, one of the speakers was taking our industry to task for expecting too much from participants. “We don’t expect individuals to diagnose and treat their own illness,” he said, going on to note that with 401(k)s we expect people who don’t have any knowledge or training in investments to decide how to invest those balances. Admittedly, those 401(k) investment decisions can be complicated for some — and, since it (mostly) is their money, after all, most do give individual participants the ability to decide how it will be invested. As nice as it would be if individuals were exposed to the basics of finance — saving, budgeting, investments — sometime in their lives ahead of that workplace plan enrollment meeting, or the pages of that 401(k) enrollment kit, that’s not the current system’s fault. In reality, individuals are routinely asked to make decisions on things in which they have no real knowledge or training. On numerous occasions, I’ve had plumbers and mechanics

First Things First

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This may be the time of year when thoughts turn to stockings hung by the chimney with care, but it’s also the time of year when parents have to deal with assembling some of the things in those packages. And while Santa may have elves on staff to undertake the construction of a tricycle, dollhouse or Little Tykes airplane seesaw, in our house, that "elf" was named “Dad.” A painful lesson learned over those years was the importance of following the instructions. No matter how self-evident the process appeared at the outset, or how much I thought I remembered assembling something similar in the not-too-distant past, lurching ahead and tackling things in the order I thought made most sense was inevitably a formula for disaster. And then there was the year some miscreant had apparently “liberated” the assembly instructions from the package. Since it was Christmas Eve by the time I discovered this, all I had to go by was common sense and the picture of the finished product on the