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Showing posts from May, 2014

Source "Spots"

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Individual retirement accounts (IRAs) have been around a long time – since the Employee Retirement Income Security Act of 1974 (ERISA), in fact[i]. Today IRAs represent nearly $6 trillion in assets, approximately a quarter of the $23.7 trillion in retirement plan assets in the nation. As an account type, they currently hold the largest single share of U.S. retirement plan assets with, as a recent EBRI publication notes, a substantial (and growing) portion of these IRA assets having originated in other tax-qualified retirement plans, such as defined benefit (pension) and 401(k) plans. Recognizing not only the significant growth but the increasing importance of these accounts to individual retirement security, the Department of Labor has proposed expanding ERISA’s fiduciary protections to these accounts. To help better understand the trends driving this critical retirement savings component, the EBRI IRA Database, an ongoing project that collects data from IRA plan administrators acr...

"Surface" Conditions

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Our first home was in the Northwest suburbs of Chicago, a split-level (my wife’s preference), walking distance to the commuter train (my preference), and within our stipulated price range (“our” preference).  Much as we liked the house, we were not the first owners, and there were certain things we wanted to “fix.”  The first of these was the family room, where we figured to spend a lot of our time and which the previous residents had seen fit to line with pine paneling.  Our plan was to take down that paneling and replace it with wallpaper, to modernize and “open up” the room. My previous experience with wallpapering was limited; in this case my job (as I understood it from my wife) was to take the lead in pulling down the paneling, and then to pretty much stand back and learn.  As I pulled back that first strip of paneling, I was nearly blinded by a flash of orange…which was from what turned out to be a misbegotten shade of 1970s floral print wallpaper which lay ...

Myth Understandings

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A frequent criticism of the 401(k) design is that it was “never designed” to provide a full retirement benefit, unlike, as it’s often stated or implied, the defined benefit plan. Moreover, while there is a very real tendency to focus on the CURRENT balance[i] in a defined contribution/401(k) plan and treat that as the ultimate outcome, for reasons I’ve never really been able to understand, people tend to think and talk about defined benefit (DB) plans in terms of the benefit they are capable of providing, rather than the actual benefits paid. However, the data show that some of the common assumptions about defined benefit pensions are out of line with the realities, including: Once upon a time, everybody had a pension. “Coverage” is a hot topic among policymakers these days, or more accurately, the lack of it. One of the most frequently invoked criticisms of the current system is that so many American workers don’t have access to a retirement plan at work. But in 1979, only...

Work "Forces"

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A couple of years ago, my wife and I sat down with an advisor to revisit our financial plan.  Having gathered all the requisite information regarding assets, debt, insurance, and retirement savings, he turned to me and asked how long I planned to work. Being in a profession that I not only enjoy, but one relatively unbounded by physical constraints; having some appreciation for the various financial trade-offs associated with the decision to retire, yet desirous of the ability to have more leisure time with my family—conscious of the fact that I have made a career studying and writing about such decisions—I paused to reflect…. And then my wife, with a smile on her face, laughed and said, “Oh, he’s going to work forever!” Well, that wasn’t the answer I had in mind, but apparently I’m not the only one rethinking retirement.  In 1991, just 11 percent of workers expected to retire after age 65, according to the Retirement Confidence Survey (RCS)[i]. Twenty-three years later...