Nevin's Data "Points"

It is all too common in human affairs to make choices that have “unforeseeable consequences.” And then there are those situations where people should have known better. Like the current rumors about capping employee pre-tax contributions at $2,400. Having the opportunity to put off paying taxes is something that most Americans relish — even those whose tax bracket means they really don’t wind up owing taxes. While there’s plenty of evidence to suggest that it is the employer match, rather than the (temporary) tax deduction that influences worker savings, most are happy to get both. Indeed, the ability to defer paying taxes on pay that you set aside for retirement is part and parcel of the 401(k) (though cash or deferred arrangements predated that change to the Internal Revenue Code). Enter the talk about “Rothification” — the limit, or perhaps even complete elimination, of pre-tax contributions to 401(k)s. While a definitive notion of how participants would respond remains elusive...

All too often the innovations honored with a Nobel Prize fly under the radar of “regular” Americans. But that wasn’t the case last week when the work of University of Chicago’s Richard Thaler was acknowledged. Thaler was, of course, recognized by the Royal Swedish Academy of Sciences, who said that his focus on limited rationality, social preferences and lack of self-control has “built a bridge between the economic and psychological analyses of individual decision-making.” More plainly, to my reading, Thaler (finally) managed to prove to economists that human beings don’t (always) act rationally and/or in their own self-interest. Now, anybody who has ever actually interacted with human beings knows this. Indeed, in some ways the most amazing thing about Thaler’s insights of this reality is that it is seen as being innovative by economists. 1 I still remember reading the report that Thaler and Schlomo Benartzi authored way back in 2004, “ Save for Tomorrow: Using Behavioral Economi...

There’s an old saying that when you assume… well, here are five assumptions that can create real headaches for retirement plan fiduciaries. Assuming that not being required to have an investment policy statement means you don’t need to have an investment policy. While plan advisers and consultants routinely counsel on the need for, and importance of, an investment policy statement (IPS), the reality is that the law does not require one, and thus, many plan sponsors — sometimes at the direction of legal counsel — choose not to put one in place. Of course, if the law does not specifically require a written IPS — think of it as investment guidelines for the plan — ERISA nonetheless basically anticipates that plan fiduciaries will conduct themselves as though they had one in place. And, generally speaking, plan sponsors (and the advisors they work with) will find it easier to conduct the plan’s investment business in accordance with a set of established, prudent standards if those ...

If you’re still struggling to figure out how to reach Millennials (even if you are a Millennial), take heart – there’s (already) another generational cohort entering the workforce. This new cohort is called Generation Z (at one point, Millennials were referred to as Gen Y, so…) – they are, generally speaking, children of Gen X – born in the mid-1990s, and separated from Millennials by their lack of a memory of 9/11. Gen Z is, in fact, already entering the workforce – and, according to the U.S. Census Bureau, they currently comprise a quarter of the population. They are seen as being more “realistic” when it comes to life and working than Millennials, who have been characterized as more “optimistic.” Gen Z is said to be more independent and competitive in their work than the collaborative Millennials, more concerned with privacy (Snapchat versus Facebook), and are said to have a preference for communicating face-to-face. It’s said they’ll eschew racking up big college debt, and are...