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Showing posts from October, 2018

5 Steps to Retirement Security

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While it might not be on your calendar, this happens to be National Retirement Security Week – and in the spirit of the week, here are five things that can provide just that. Retirement security – or more precisely, preparing so that you do have retirement security – is a year-long activity, of course. But this week is 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. So, for those looking to shore up your own retirement security – or those you may work with – here are some things to keep in mind. Don’t default to the plan default. While most education materials provided with your 401(k) emphasize the benefit of the employer match (generally referencing that you don’t want to leave “free money” on the table), a growing number...

Multiplication ‘Fables’

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Did you hear the one about loan defaults adding up to $2.5 trillion in potential retirement savings shortfalls over the next 10 years? How about the “$210 Billion Risk in Your 401(k)”? Those reports were based on an “analysis” by Deloitte that claims to find that “…more than $2 trillion in potential future account balances will be lost due to loan defaults from 401(k) accounts over the next 10 years…” That’s right, $2 trillion lost “due to loan defaults” (the Wall Street Journal  apparently picked the figure that matched the impact on a “typical 401(k) borrower” – more on that in a minute). Now, when you see headlines putting a really big number on what you already suspect is a problem – in this case “leakage” – roughly defined as a pre-retirement withdrawal of retirement savings – well, you could hardly be blamed for simply accepting at face value the most recent attempt to quantify the impact of the problem. A closer look at the assumptions behind that analy...

The ‘Storm’ of Your Lifetime

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The tail end of hurricane season — and more specifically the disastrous flooding of Hurricane Florence — brings to mind my last serious brush with nature’s fury. It was 2011, and we had just dropped our youngest off for his first semester of college in North Carolina, stopped off long enough in Washington, DC to check in with our daughters (both in college there at the time), and then sped home up the east coast to Connecticut with reports of Hurricane Irene’s potential destruction and probable landfall(s) close behind. We arrived home, unloaded in record time, and rushed straight to the local hardware store to stock up for the coming storm. We weren’t the only ones to do so, of course. And what we had most hoped to acquire (a generator) was not to be found — there, or at that moment, apparently anywhere in the state. What made that situation all the more infuriating was that, while the prospect of a hurricane landfall near our Connecticut home was relatively rare...

'Puzzle' Pieces

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Academics have long agonized over something they call the annuitization puzzle. Simply stated, the thing academics can’t quite understand is the reluctance of American workers to embrace annuities as a distribution option for their retirement savings. Some of that is because they assume workers are “rational” when it comes to complex financial decisions, specifically because “rational choice theory” suggests that at the onset of retirement, individuals will be drawn to annuities because they provide a steady stream of income and address the risk of outliving their income. Compounding, if not contributing to that belief, are surveys – albeit surveys generally published , if not conducted by, annuity providers (or supporters) that consistently find support from participants for the notion of reporting benefits as a monthly payout sum, if not the notion of providing a retirement income option. And yet, despite those assertions, in the “real” world where participant...