Nevin's Data "Points"

When Fidelity announced this last week that it was dropping its pension plan, it drew my attention. Not so much because it was taking that step. By now, there have been enough pension fund freezes—or enough reports about how many pension fund freezes there will be—that the occasional announcement barely fazes me anymore. That Fidelity chose to do so while “riching up” their 401(k) plan (see “ Fidelity Investments to End DB Plan ”) was also pretty much standard fare for such moves. But there was a significant difference in this particular announcement—a focus on concerns about paying for health care in retirement. In a Boston Globe report, a Fidelity spokesperson cited data that 71% of Fidelity workers didn’t know how they would pay for health-care expenses in retirement (kind of makes one wonder about the other 29%); and as part of this shift in strategy, Fidelity will be putting $3,000 into health-care reimbursement accounts for each worker—monies that won’t be taxable when withdra...

We live in an uncertain world, and when it comes to retirement planning, we are forced to make assumptions about an uncertain world some uncertain number of years in the future. However, a recent white paper by JPMorgan Asset Management (JPMAM) calls to mind that old adage about what happens when one assumes (see Participant Behavior Matters in Target Fund Strategy ). First, retirement projection tools tend to overlook the reality that many, perhaps most, participants dip into their retirement savings from time to time: some for only awhile—JPMAM’s research found that 20% of participants borrow, on average, 15% of their account balance—and some forever. JPMAM’s data noted that a full 15% of those over the age of 59 ½ (the age when one avoids the 10% premature distribution penalty) withdraw, on average, a quarter of their account balance. The research, which looked at the behaviors of 1.3 million participants in some 350 plans recordkept by JPMorgan Retirement Plan Services, also fou...

For now we see through a glass, darkly. 1 Corinthians 13:12 When St. Paul wrote those words, he was trying to explain to the early Christians that we may not understand why things are the way they are today, because our perspective is clouded. That phrase, to see through a glass—a mirror—darkly, conveys a similar sense in today’s usage: a sense of an obscured or otherwise imperfect vision of reality. For the very most part, those of us in the business of retirement plans look at the landscape and fret about things like the dismal rate of participation, tepid deferral rates, and inert asset allocations (see “IMHO: ‘Never, Ever’ Land” ). Heck, these days, you don’t have to be in the retirement plan business to wring your hands over the sorry state of retirement savings. Equally discomfiting to me are the incessant recitations regarding how apparently oblivious retirement savers are about the looming financial disaster. And while “the industry” often comforts itself by noting that th...

The good news is, Congress is beginning to take a hard look at 401(k) fees. Unfortunately, that also happens to be the bad news. They have a lot of company, of course. The Department of Labor has several initiatives currently under way, the Government Accountability Office (GAO) has called for more transparency, and a number of lawsuits have been filed alleging all sorts of fiduciary malfeasance on the subject (a complaint filed against Cigna last week seemed to suggest that having investment management fees netted against the returns in a mutual fund was some kind of conspiracy - see CIGNA Latest Target of 401(k) Fee Suit ). In view of all that activity, last week’s hearing before the House Education and Labor Committee was relatively sanguine (see Congressional Committee Hears 401(k) Fee Disclosure Testimony ). Not that there weren’t points of contention (but not as many as one might have thought)—and even a couple of moments of tension between those offering testimony. All in all...

Not too long after my first daughter was born, my wife decided that we needed to have a vehicle with four doors. All other decisions about the car were mine—color, options, make, model, etc.—so long as it had four doors (anyone who has ever wrestled with a car seat, or with getting a child into and out of a car seat, will appreciate why). In this particular case, even though I hate car shopping, I had done my homework—the service record of the make made it a cinch, the dealership was close, my wife and I saw eye-to-eye on color, and, for my money, there was only one model (in that make) whose four-door version looked sporty enough to satisfy my sense of a car I wouldn’t mind being seen driving. There was just one problem. This particular manufacturer had its model options arranged in three very specific packages. The model that had the features I wanted—for the price I wanted to pay—was the middle option. The one option I really wanted (and I REALLY wanted it) that wasn’t included...