Nevin's Data "Points"

One could certainly argue that many Americans act as though at retirement some kind of benevolent elf will drop down their chimney with a bag full of cold cash from the North Pole. They behave as though, somehow, their bad savings behaviors throughout the year(s) notwithstanding, they’ll be able to pull the wool over the eyes of a myopic, portly gentleman in a red snowsuit. 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 conseq...

I can remember as a kid paging through the pages of various Christmas catalogues, earmarking the pages that contained the various things that I hoped Santa Claus (or his emissaries, my parents) would take as hints. These days such things have been replaced by online “wish lists” – and if they’re not quite as much fun to page through, they’re doubtless more effective. So, in the spirit of the holiday season, here are some “presents” that I hope participants find in their retirement plan “stockings” during the coming year: Automatic reenrollment for longer-term workers. New hires, regardless of age, are these days routinely defaulted into some type of qualified default investment alternative, whether it be a managed account, target-date fund, or balanced fund. However, workers who have been in the plan for awhile are generally not accorded that courtesy. Rather, ostensibly on the premise that they have, at some previous point in their careers, made an affirmative election to be ...

To judge by the headlines, if there’s anybody in more trouble when it comes to retirement planning than Boomers, it’s Millennials. But are they really? Consider this: Millennials are saving for retirement – likely earlier, and at higher rates than you did when you were their age. I’ve seen a number of surveys that suggest that Millennials are, in fact, saving earlier – and saving at higher rates than their Boomer parents. A recent Natixis survey says that on average, Millennials first enrolled in a retirement savings plan at age 23, while Boomers didn’t until 31. Another – this one by Ramsey Solutions – finds 58% of Millennials are actively saving for retirement, and they began saving at an average age of 23. Consider also that, of the Millennials who are actively saving, 39% set aside up to 9% of their income for retirement — $5,000 of the average annual Millennial household income of $55,200. This higher and earlier rate of saving exists despite high levels of college debt...

Target-date funds continue to expand in usage and popularity – but there are some things the Labor Department wants you to know about TDFs that you may have overlooked. When the Labor Department published its “ Target Date Retirement Funds – Tips for ERISA Plan Fiduciaries ” in 2013, I was pleased to see it, and to discover that it could be read 1 (and understood) in about 15 minutes. But in preparation for a recent webcast on the topic, I took a fresh look at that document, and found some nuggets that I hadn’t really picked up on the first time around. It’s Not Just About Fees and Performance As part of a reminder about the importance of establishing a process for comparing and selecting TDFs, the Labor Department specifically references considering prospectus information, such as information about performance (investment returns) as well as investment fees and expenses. However, in that same topic point, the agency says that plan fiduciaries should consider how well the TD...

Thanksgiving has been called a “uniquely American” holiday, and though that is perhaps something of an overstatement, it is unquestionably a special holiday, and one on which it seems appropriate to reflect on all for which we should be thankful. Here’s my 2016 list: I’m thankful that participants, by and large, continue to hang in there with their commitment to retirement savings, despite lingering economic uncertainty and competing financial priorities, such as rising health care costs and college debt. I’m thankful that so many employers voluntarily choose to offer a workplace retirement plan — and that so many workers, when given an opportunity to participate, do. I’m thankful that figuring out ways to expand that access remains, even now, a bipartisan concern – even if the ways to address it aren’t always. I’m thankful that so many employers choose to match contributions or to make profit-sharing contributions (or both), for without those matching dollars, many workers w...

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 plan sponsors are scared about? Getting sued. Plan sponsors will often mention their fear of getting sued, and little wonder. The headlines are full of multi-million-dollar lawsuits against multi-billion-dollar plans, and if relatively few actually get to a judge (and those that do are 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 changing as well. As a plan fiduciary, you can still be sued of course; and let’s not forget that that includes responsibility for the acts of your co-fiduciaries, and personal liability at that (see 7 Things an ERISA Fiduciary Should Know ). That said, those cases seem to involve a rather small group of rather large plans. Most plan sponsors won’...

When it comes to retirement, Americans seem to be a pretty insecure bunch. But then maybe it’s because they don’t know all the things they need to know. This, of course, is National Retirement Security Week , a week devoted to making employees more aware of how critical it is to save now for their financial future, promoting the benefits of getting started saving for retirement today, and encouraging employees to take full advantage of their employer-sponsored plans by increasing their contributions. In the spirit of the week, here are six things that people who need to save for retirement (and who doesn’t?) need to know about saving for retirement. You should save to at least the level of the employer match. Many employers choose to encourage your decision to save for retirement by providing the financial incentive of an employer matching contribution. That match is often referred to as “free money” because you get it just for saving for retirement. That match is not actually ...

I’ve always had a certain ambivalence about what are cynically referred to as “Hallmark holidays.” You know the ones I’m talking about – the ones that seem (and in many cases, are) crafted for the sole purpose of generating sales for greeting card sellers. Next week some – and I hope many – will commemorate National Retirement Security Week (which used to be called National Save for Retirement Week). Sponsored by the National Association of Government Defined Contribution Administrators (NAGDCA), it runs from October 16-22. It’s a national effort to raise public awareness about the importance of saving for retirement – and it’s even managed to obtain a Senate resolution in support of its observance. That said – and despite the hard work, talented designs, and sponsorship of a number of large and reputable financial services organizations, I suspect many of you haven’t even heard of it. More’s the pity. The week is focused on three key objectives: Making employees more aware ...

It’s been a busy year, a crazy summer – and we’ve still got a presidential election to go. It has been years since things actually slowed down in the summer (at least in the way we all seem to remember it), but this summer has been busier than any I can remember. Not only has everybody been making preparations for the implementation of the Labor Department’s fiduciary regulation (and it’s affecting different business models very differently), we’ve had the looming prospects of litigation regarding the legality of the regulation itself, and the authority of the Labor Department to undertake it. The challenges to that regulation share certain critical aspects, and yet each has its own unique flavor – and let’s not forget that they are filed in three different federal venues (four, counting the one filed just last week ). Could one prevail in convincing a federal judge to grant a preliminary injunction to stop the rule’s implementation? Could such a ruling actually serve to maintain t...

Delegates to last week’s NAPA DC Fly-In Forum were treated to a discussion about a proposal touted as “rescuing retirement.” But the math (still) doesn’t seem to work. And it’s likely to kill the 401(k) (or at least its tax benefits). Here’s how. The proposal itself isn’t new – its the Guaranteed Retirement Account (GRA) concept initially introduced by the New School’s Professor Teresa Ghilarducci, now somewhat modified, and embraced by Hamilton E. (Tony) James, President and COO of money management Blackstone. This newest version was rolled out earlier this year. Writ large there seem to be two significant differences in this newest version (packaged in a nice 119-page softbound book, Rescuing Retirement ): James’ involvement, which lends some investment cred to the assumptions of the proposal; and a reduction in the mandatory contributions from employer and employee (the original proposal called for 5%, the new one only 3%). The Ghilarducci/James team firmly believes that th...

In most professional sports, the clock – the time remaining in the contest – is a factor (baseball being a notable exception – those nine innings are going to be played, regardless of how long it takes). The clock can be your enemy if you’re trying to hang on to a slender lead – or it can be your friend – if your team needs some extra time to catch up. Retirement also has a clock – the problem is, we generally can’t see it. Little wonder that time – our retirement clock – is perhaps the biggest uncertainty when it comes to retirement planning. Not just the when it starts, but mostly the “how long” aspect. Surveys suggest that fear of outliving one’s assets is a primary concern about retirement – little wonder since so few have stopped to figure out how much they have, not to mention the uncertainty as to how long it has to last. I recently read an interesting article by Dr. Joe Coughlin, founder and director of the Massachusetts Institute of Technology AgeLab (and closing keyno...

One of the great concerns of our industry — when we aren’t worrying if people have saved enough for retirement — is worrying about how those savings are going to last through retirement. Enter to that debate a recent report from the Government Accountability Office (GAO) that basically takes the Labor Department to task for not doing enough to encourage the use of lifetime income options in workplace retirement plans. Sure enough, it’s been hard for lifetime income options to get traction with retirement plans. The GAO rightly outlines a number of the concerns typically articulated with these options — which are well known to those who have looked to remedy the situation (see “ 5 Reasons Why More Plans Don’t Offer Retirement Income Options” ). GAO Alternatives So, what suggestions does the GAO have for the DOL? Well, the GAO has several specific suggestions, including that the DOL: do more to clarify the safe harbor for selecting an annuity provider; consider providing lega...

Early on a bright Tuesday morning in 2001, I was in the middle of a cross-country flight, literally running from one terminal to another in Dallas, when my cell phone rang. It was my wife. I had been on an American Airlines flight heading for L.A., after all — and at that time, not much else was known about the first plane that struck the World Trade Center. I thought she had to be misunderstanding what she had seen on TV. Would that she had… That day, when family and friends were so dear and precious to us all, I spent in a hotel room in Dallas. It was perhaps the longest day — and loneliest night — of my life. In fact, I was to spend the next several days in Dallas — there were no planes flying, no rental cars to be had — separated from home and family by hundreds of insurmountable miles for three interminably long days. As that week drew to a close, I finally was able to get a rental car and begin a long two-day journey home. While it was a long, lonely drive, it gave me a lot ...

It’s not hard to find scary headlines about 401(k)s – seems as though every week you read how people aren’t saving enough, are worried that they aren’t saving enough, aren’t saving enough and aren’t worried that they aren’t saving enough… Then in the past couple of weeks, a new twist. First a headline that proclaims that “ The 401(k) is Wreaking Havoc on Retirement .” Then one that purports to share “ Why 401(k)s are bad for people without a college degree .” As it turns out, the articles are both about the same study, “ Disadvantages of the Less Educated: Education and Contributory Pensions at Work .” The authors of that study (ChangHwan Kim of the University of Kansas and Christopher Tamborini of the Social Security Administration) offer a basic premise – that less educated workers aren’t as well served as college graduates by the current defined contribution-centric plan structures (notably 401(k)s) that predominate the retirement landscape today – which is to say that they are...

Preparing for retirement inevitably brings up questions of time: When will you retire? How long will your retirement last? How long do you have to prepare? Often we don’t take advantage of the time we have, and sometimes we don’t have the time we thought we would. It was just five years ago this week that my wife and I, having just deposited my youngest off for his first semester of college, spent our drive home up the East Coast with Hurricane Irene (and the reports of her potential destruction and probable landfalls) close behind. We arrived home, unloaded in record time, and went straight to the local hardware store to stock up for the coming storm. As you might imagine, we weren’t the only ones to do so. And what we had most hoped to acquire (a generator) was not to be found — there, or at that moment, apparently anywhere in the Nutmeg State. What made that situation all the more infuriating was that, while the prospect of a hurricane landfall in Connecticut was relatively un...

Each year the good folks at Beloit College produce a “Mindset List” providing a look at the cultural touchstones that shape the lives of students about to enter college. So, in what ways will their retirement plans differ from those of their parents? In the most recent list (they’ve been doing it since 1998), the Beloit Mindset List notes that for the class of 2020 (among other things): There has always been a digital swap meet called eBay. They never heard Harry Caray try to sing during the seventh inning at Wrigley Field. Vladimir Putin has always been calling the shots at the Kremlin. Elian Gonzalez, who would like to visit the U.S. again someday, has always been back in Cuba. The Ali/Frazier boxing match for their generation was between the daughters of Muhammad and Joe. NFL coaches have always had the opportunity to throw a red flag and question the ref. Snowboarding has always been an Olympic sport. John Elway and Wayne Gretzky have always been retired. So, what abo...

One could hardly read the headlines this past week without experiencing a certain sense of déjà vu. After all, it’s been not quite 10 years since the then relatively obscure St. Louis-based law firm of Schlichter, Bogard & Denton launched about a dozen of what have come to be referred to as “excessive fee” lawsuits. Not that the recent batch of suits targeting multi-billion dollar university plans are a mere recounting of the charges leveled against their private sector counterparts. No, in the years since then the Schlichter law firm has sharpened their pencils, and their criticism. Those early suits focused on what, in comparison to the most recent waves, seem almost quaintly simplistic: allegedly undisclosed revenue-sharing practices, the use of non-institutional class shares by large 401(k) plans, the apparent lack of participant disclosure of hard-dollar fees (which even then were disclosed to regulators), and even the presentation of ostensibly passive funds as actively ...

As human beings, we’re drawn to perspectives, including surveys and studies that validate our sense of the world. This “ confirmation bias ,” as it’s called, is the tendency to search for, interpret, favor, and recall information in a way that confirms our preexisting beliefs or hypotheses. It also tends to make us discount findings that run afoul of our existing beliefs. In its simplest terms then, when you see a headline that confirms your sense of the world, you’ll be naturally inclined to embrace and remember it as a validation of what you already perceive reality to be. Even if the grounds supporting that premise are shaky, sketchy, or (shudder) downright scurrilous. Here are some things to look for – likely in the fine print – as you evaluate those findings. There can be a difference between what people say they will (or might) do and what they actually will. No matter how well targeted they are, surveys (and studies that incorporate the outcome of surveys) must rely on w...