Nevin's Data "Points"

Trying to figure out how much money an individual or couple needs to live on in retirement is, to put it mildly, a complicated business. Among other factors, it depends on the age at which he or she retires, where they live, and how they live. It can be affected by marital status, their health, and the markets, both before and after retirement. And, as a recent EBRI Notes article (see “Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News” ) explains, it can also be affected by the availability and source of health insurance coverage after retirement to supplement Medicare, and the rate at which health care costs increase. Additionally, public policy that changes any of the above factors will also affect spending on health care in retirement. Consequently, trying to hit that target can feel like aiming at a bulls-eye that is not only moving, but moving fast, and zig-zagging away from the bouncing, moving vehicle in which you find yourself. W...

  I’ve written previously – albeit just a couple of times – about my decision to “retire.” Not that I don’t have stories to share, and perhaps even insights to impart. [i]   I’ve mostly held off because (a) people keep telling me I “suck” at retirement, and (b) I have come to believe that every retirement experience is unique.  That said, of late, I have become aware of just how many folks write and counsel about retirement – who are actually well short of that milestone. I’m not saying that guidance is irrelevant – I’m just saying that I have found that the reality is… different. My good friend and podcasting partner Fred Reish (who hasn’t yet crossed over into retirement, it bears noting) came up with the idea of doing a podcast where we talk to retirement industry people about their retirement(s). We’ve now done  three of those interviews  – and I hope that you’ll come check them out.  In the most  recent episode , [ii]  Fred thought it would b...

Inertia is a powerful force in nature, and in human behavior. Even the most proactive and engaged plan designs (and plan designers) can, over time, slide from being in a groove to being in a rut. Here are three ways to reinvigorate automatic plan designs. 1. Auto-enroll all Eligible Participants Over the past decade a growing number of plans have embraced automatic enrollment, in the process not only simplifying and streamlining the process, but also expanding the number of individuals who are saving for retirement. These days, new hires, regardless of their age, are routinely defaulted not only into the plan itself, but also into some type of qualified default investment alternative, whether it be a managed account, target-date fund, or balanced fund. However, those who have been employed for some time are often not accorded that convenience. Instead, perhaps because they are presumed to have previously made a decision not to participate, it is assumed that if they were to hav...

Without question, asset-allocation solutions—particularly target-date fund solutions—are well on their way to becoming a dominating force on retirement plan menus. More than three-quarters of the roughly 5,000 respondents to last year’s Defined Contribution Services Survey already had one of these options on their menu. Moreover, the popularity of these offerings has resulted in a burgeoning number of choices, with what seems like a new introduction every other week, and by some of the most well-known and highly regarded names in the asset management business. Having said that, the notions of what constitutes an “appropriate” asset allocation, much less an appropriate asset-allocation fund—or fund family—are varied, to say the least. Almost as varied as the number of choices, in fact—and it appears that those notions are shifting as well. These “moving” targets (see “ Moving Targets ”) will keep us all on our toes for the foreseeable future—and I suspect that we will all bring to th...

There is an old adage that cautions about the consequences “when you assume…” And yet, the business of retirement planning is replete with any number of so-called “common wisdom” rules of thumb. Doubtless many have well-intentioned origins – to make complicated concepts easier to grasp, and thus to address. One of the more pervasive notions is that a realistic target for retirement savings can be determined by accumulating a sum that will provide an income stream equal to a percentage of one’s pre-retirement earnings – a sum that is generally expressed as 70-80% of what you earn prior to retirement. This starting point - generally called a "replacement ratio" - includes any number of imbedded assumptions, perhaps most significantly that the individual will need to spend less post-retirement, generally understood to be on things such as taxes, housing, and various work-related expenses (including saving for retirement). Moreover, the replacement rate approach represent...

Those who were wondering when—or perhaps if—the issues raised in those revenue-sharing lawsuits would ever actually be tried got a strong, affirmative response last week. This time, the 8th U.S. Circuit Court of Appeals found triable issues of fact in a case involving Wal-Mart’s 401(k) plan (“ 8th Circuit Says Wal-Mart 401(k) Suit Requires Further Discussion ”), sending the case back for another hearing by the trial court that had dismissed issues raised in the lawsuit, while also taking the time (at least in a footnote) to distinguish some of its findings from a similar case (Hecker v. Deere) that had failed to clear the bar in another circuit (see " The 'Burden' of Proof "). But, IMHO, what distinguishes the ruling in Braden v. Wal-Mart Stores Inc. from all the revenue-sharing cases that have been adjudicated thus far is that the 8th Circuit judges were willing to concede that the plaintiff had alleged facts that, at least on the surface, were sufficient to support ...

There are few things more disruptive to the peace or clarity of a 401(k) plan than a switch in recordkeepers. Let’s face it—change—even change for the better—is frequently disruptive to the human psyche. Most of us tend to drift into comfortable “ruts” of pattern, or perhaps habit—places where we know what to expect and, roughly anyway, when to expect it. And, at least in my experience, the more frazzled your existence, the more one pines for these oases of quiet and relative clarity. That’s true, of course, even when the change is instigated by a regular, thoughtful, focused evaluation of the alternatives; and certainly when that change is the product of a desperate quest driven by a truly awful service relationship. But it is perhaps particularly disruptive when the change is thrust on the plan by forces outside of its control or instigation—and for the thousands of plans that have recently or are in the process of a change in recordkeepers due to industry consolidat...

You have to wonder what the Wall Street Journal has against automatic enrollment. The latest instance of finding the cloud in this silver lining arose in a recent Journal article by Anne Tergesen, “ Downside of Automatic 401(k) Savings: More Debt ” (subscription required). The article, based on the findings of a recent academic study , says that automatic enrollment has “pushed” millions of people who weren’t previously saving for retirement into those plans – but quickly cautions that “many of these workers appear to be offsetting those savings over the long term by taking on more auto and mortgage debt than they otherwise would have.” This “crowding out” concern – that automatic enrollment would stretch already strained financial resources, particularly among lower-income workers – has long been a sticking point for those advocating caution regarding automatic enrollment. The Study So did the study – drawn based on what the researchers termed a “natural experim...

I was recently asked by a reporter if the new fiduciary regulation was “needed.” The question caught me a bit off guard, because having been in “figure out how to deal with this” mode for most of the past year, I had long since moved past “why” and “if” to “when” and “how.” I was reminded of our last home purchase – which we bought in a bit of a rush. Oh, it wasn’t like we didn’t know we were moving – but our ability to actually hone in on a new home was hindered by the fact that our current home had to sell first. And, as is often the case in such things (or has been for us), we had gone a long time with nary an offer, much less a viable one. Once that offer came, of course, we had to move quickly (literally). And so, the planning that we had done mentally in anticipation of that day was thrust into overdrive. Ultimately we settled on a house that wasn’t the best we had seen, but it was the best available at the time (within the price and commuting distance restraints we placed up...

Halloween is the time of year when one’s thoughts turn to trick-or-treat, ghosts and goblins, and things that go bump in the night. But what are the things that keep – or should  keep – plan fiduciaries up at night? Well, there are the things like… Getting Sued Plan sponsors will often mention their fear of getting sued (actually, their advisors frequently broach the topic), and little wonder. The headlines are (still) full of multi-million dollar lawsuits against multi-billion dollar plans, and if relatively few seem to actually get to a judge (and those that do have – to date – largely been decided in the plan fiduciaries’ favor), they nonetheless seem to result in multi-million dollar settlements. Oh, and not only has this been going on for more than a decade, the issues raised are evolving as well. As a plan fiduciary, you can be sued, of course; and let’s not forget that that includes responsibility for the acts of your co-fiduciaries, and personal liab...

Over the years, so-called personal finance experts have provided valuable information—but also a smattering of misinformation—but I can think of none quite as egregious as some remarks recently made by Dave Ramsey. By now I’m sure you’ve heard—or heard about—his “counsel” with regard to acceptable retirement withdrawal rates—and his disparagement of the “supernerds” who would dare to disagree with him. As for that counsel, at a high level, Ramsey maintains that an 8% withdrawal rate is not only doable, but sustainable. All you have to do is be invested 100% in equities—oh, and assume a 12% return. [i] Of course, such machinations have always been predicated on assumptions—about inflation, about market returns and, most notably, about the length of life itself. That said, this didn’t become a specific focus—a so-called “rule of thumb”—until 1994, whe...

A couple of Saturdays back I discovered that one of my online accounts had been “hacked.”  The good news is that I “discovered” this via transaction emails confirming what appeared to be purchases—a half dozen of them… for various, small-ish (though not small) amounts… all about 4:00 a.m. on a Saturday morning. And trust me, while the pandemic has certainly fueled my online purchases, both the number and the timing were  not  normal behaviors (nor was the Chinese text in those emails). The even better news was that I was able to flag those transactions via the provider—and via my credit card company— almost  immediately (apparently the foreign hackers and I were the only ones awake at that hour). Even though there was no damage done by this incursion (aside from some temporary heartburn), it brought home to me again the importance of protecting  all  of my online accounts. Like many, perhaps most, of you, I have long found managing the sheer v...