Nevin's Data "Points"

What does it mean to have a 75% probability of success? I’ve never been particularly fond of the probability-of-success measures commonly used in retirement planning. It’s not that the calculations aren’t useful — or that I have a better crystal ball. I’m just not convinced that most people understand what the resulting percentage means, much less how to apply it to their retirement decisions. After all, a 75% probability of success sounds like a grade — and not a particularly good one. It also sounds as though there is a 25% chance that your retirement will be a complete and unmitigated failure. Neither interpretation is necessarily accurate. ad space A new paper from David Blanchett at PGIM, aptly titled “Successfully Failing,” takes on that conventional measure and suggests that it may not simply be confusing. It may actually lead retirees — and those advising them — to make less-than-optimal decisions. Success ‘Measures’ Probability-of-success calculations generally run a retireme...

   For years, the retirement industry has been obsessed with one key problem: people aren’t saving enough. Now, “suddenly,” we have another. Retirees aren’t spending “enough.” There’s a certain irony in that. After decades of urging discipline, restraint, and delayed gratification, we’re now concerned that retirees are  too  disciplined — that they’re depriving themselves of the very retirement they spent a lifetime preparing for. Some of that is clearly a byproduct of the defined contribution system itself. We’ve spent years focusing workers on how much they can accumulate, not how much they can spend. Defined benefit plans answered a very different question: What will I get? Defined contribution plans leave retirees staring at a balance and wondering how long it will last.  And once the paycheck stops, that question gets very real, very fast. Because while you can model returns, you can’t model life. Inflation, healthcare costs, longevity—those aren’t just var...

 Despite surveys to the contrary, a new study finds that overall interest in ESG strategies by participants is “relatively weak” and “driven by naïve diversification.” The difference may, of course, be attributed to the difference between what individuals say—and what they actually do. Unlike surveys that purport to capture participant (and plan sponsor) sentiments, the research by David Blanchett of PGIM and Zhikun Liu of the Employee Benefit Research Institute (EBRI) looks at the actual allocation decisions of 9,324 [i]  newly enrolled DC participants who are self-directing their accounts in a DC plan that offers at least one ESG fund.  ‘Weak Preferences’ They do so in a paper titled “ ESG Fund Allocations Among New, Do-It-Yourself Defined Contribution Plan Participants ,” they claim to find that overall interest in ESG strategies among these participants is “relatively weak,” with only 8.9% of participants having  any  allocation to an ESG fund...

Which is more powerful—a generous match, or a high savings rate default?  As it turns out, Christmas Eve brought us a new white paper with the fairly innocuous title, “ The Impact of Employer Defaults and Match Rates on Retirement Saving .” Indeed, there have been plenty of surveys (and tons of data) that speak to this issue (many of which are cited as references in the paper)—but underneath that bland title the authors take on an intriguing question, specifically how, and how differently, the deployment of specific plan design features—the employer match, or default enrollment—impact retirement savings.  With regard to the former, there’s been plenty of real data to buttress the notion that the employer match acts as a virtual target for retirement savings—with employee contributions clustering around those like moths to a flame, regardless of the savings needs or income wherewithal of the participant. Similarly, we’ve long—but even more so since the advent of t...