Nevin's Data "Points"

   Last week, I shared a   list of things that make me “mad as hell”   — things that those in our industry generate, promote and often share as fact without any application of common sense, and no apparent appreciation for the damage done by their complicity in sharing such nonsense.  Here’s the rest of the list:  Reporting on average  —  well, anything (see  Why an Average 401(k) Balance Doesn't 'Mean' Much ) . You name it, if it involves numbers from widely varied sources, individuals, or different time periods, somebody in this industry will report it as an arithmetic average. This industry continues to insist on reporting average 401(k) balances, average fees, average estimates on retirement needs, and more recently “forgotten” average account balances. I get it. Averages are widely considered to be a middle of the pack assessment of reality. But that’s only true when you are averaging things that are similar, and more importantly real. I...

   “ Larry Fink Knows Less About Retirement Than You’d Think an Investment Billionaire Would .” That’s the provocative title of a recent Substack column by Andrew Biggs, a senior fellow at the American Enterprise Institute. [i]  Not that Biggs offered a truly harsh criticism. Rather, he equated the comments of Larry Finks with that of “someone who reads the newspaper, the same as you or me.”  Of course, and as yours truly has commented on any number of occasions — and what Biggs calls out — is that “much of what you read about retirement in the newspaper or online or even in  so-called studies  just isn’t correct.” To put it mildly. In this recent column, Biggs offers a detailed account of what the actual data shows versus what Mr. Finks (and SO many others [ii] ) have held out as reality. Those with no retirement accounts don’t have retirement savings. Fink is quoted as saying that 57 million Americans “don’t have any savings or retirement plan.” Howe...

Nobody likes to be thought of as “average” – so why do people spend so much time worrying about the “average” 401(k) balance? These averages are reported with some regularity by any number of providers (based on the records for which they have access), and sometimes by academics drawn from government databases. 1 The short (and less cynical) answer to “why” is most likely that the math is “easy.” You simply take the total assets (from whatever recordkeeper/plan balances you have), divide it by the number of participants in that group, and “voila” – you have an average. 2 Now, when you stop and think about it (and many don’t), you realize that doing so adds together the balances of individuals in widely different circumstances of age and tenure – everything from those just entering the workforce (and who have relatively negligible 401(k) balances) with those who may have been saving for decades. It can also, in the case of government databases, add together those that...

The title of a new report by the Society of Actuaries poses an intriguing question: “Retirement Adequacy in the United States: Should We Be Concerned?” When all is said and done, the answer from the report’s authors seems to be “it depends.” And, as it turns out, it depends on a lot of things: who is asking the question, who you are asking the question about, and what you think the answer should be. And that doesn’t even take into account the questions about the assumptions one makes to come up with the answers. The SOA report draws some conclusions: The current system of voluntary employment-based retirement plans has been largely successful from the perspective of companies sponsoring plans for individuals with long-term employment covered by such plans. The mandatory Social Security system has done much to reduce poverty in old age, though adequacy studies using replacement ratios may overstate the success of this safety net for those in the lowest-income grou...

There’s a new proposal being floated that proponents say would “increase retirement income security and reform Social Security.” And yes, a mandate is involved. The proposal involves something tagged “Supplemental Transition Accounts for Retirement” (a.k.a. “START”), and it’s being touted by AARP. The proposal is the work of Jason Fichtner of George Mason University, Bill Gale of the Brookings Institute and Gary Koening of AARP’s Public Policy Institute. The basic concept is to help people postpone claiming Social Security benefits (the most common age to start claiming remains 62) since – as an executive summary  of the proposal indicates – between the ages of 62 and 70, monthly Social Security benefits increase by about 7% to 8% for each one-year delay in claiming. This is accomplished by creating the aforementioned START accounts, which are funded by a new layer of mandated withholding: 1% each from workers and employers (2% combined) up to the annual max...