Nevin's Data "Points"

There’s an old saying that you can “lead a horse to water, but you can’t make him drink.” It’s a sentiment expressed by many a benefits manager who has devoted significant time and effort to plan design, only to find the adoption rate by individual workers to be “disappointing.” And yet, in the retirement savings context, there’s ample evidence that individuals who have access to a savings plan at work do, in large part, take advantage of that opportunity. Consider that average participation rates in excess of 70 percent are commonly reported in industry surveys, and that’s for plans that don’t take advantage of automatic enrollment. Moreover, previous EBRI research has pointed out that merely having access to a defined contribution plan at work can have a significant positive impact on one’s retirement readiness rating, simply because it greatly enhances the likelihood that those individuals WILL participate (1) . Those who say that you can only “lead a horse to water” might well ...

A recent long-distance family member move required that I rent a vehicle larger than the passenger cars that we generally rely on for transportation.  There were a number of considerations: cost, availability, the opportunity to drop off the vehicle on the other end, and the actual size of the vehicle.  I don’t really have much experience with such determinations; honestly, the carrying dimensions of the vehicle were posted, but I had no real idea how to equate what I needed to transport with those criteria.  I knew the individual pieces (certainly the large ones), but as you might imagine, they were of various shapes, sizes and weights, and worse, what needed to be carried was in multiple locations, which made it even more difficult to make a proper estimation. That said, I made my best guess – chose one that seemed big enough to handle the load but that was still small enough for me to handle comfortably – reserved the vehicle and waited for the pickup day to arri...

Over the weekend, my daughter shared with us an insurance quote she’d received.  It had been a while since I had focused on such things, but I was struck first by how much it was.  It was for insurance in a different state, so we worked through the particulars, trying to be certain that we understood what was covered, matched that against her needs.  Ultimately, while much of the quote made sense, there were a couple of items that seemed too high. As we probed those items, my daughter explained that the agent had made an effort to match those levels against her current coverage.  A logical enough inquiry and starting point, but one that (apparently) failed to take into account that her current coverage – as part of our family policy – would be quite different from what she needed on her own.  The agent got an accurate response to the question he asked – but it wasn’t the right question. Individual Retirement Accounts, or IRAs, hold more than 25 percent of a...

I once spent a very uncomfortable period of time stuck in one of those carnival rides that, for brief periods of time, spins riders in a circle as the cab you are in also twirls. As uncomfortable as the ride was, the “stuck” part came while my cab was high in the air—and turned upside down. In no time at all, it was obvious that this extended “upside down” state wasn’t contemplated by those who designed the seating compartment (nor, apparently, had they considered that my compartment “mate” would find it exciting to rock our stuck cab during our brief “internment”). One of the comments you hear from time to time is that the tax incentives for 401(k)s are “upside down,” that they go primarily to those at higher income levels, those who perhaps don’t need the encouragement to save. And from a pure financial economics perspective, those who pay taxes at higher rates might reasonably be seen as receiving a greater benefit from the deferral of those taxes. Indeed, if those “upside-down i...