Nevin's Data "Points"

Last week an article in an industry publication led with the title “401(k) experiment has failed, fueled U.S. retirement crisis, labor economist says.” In what I am sure generated a fair number of “clicks” that turned out to be the pronouncement of none other than Professor Teresa Ghilarducci, teeing up a new book [i] —one that she says aims to review the last 10 years of research by multiple entities on something she’s labeled the “liminal” period of life—that apparently intended to refer to an “intermediate” stage of life. According to the article, she is taking aim at certain assumptions that are made with regard to retirement investing/saving between the ages of 55 and 70. Bad assumptions, apparently. Now, considering that Professor Ghilarducci has written an entire book on this particular subject, extrapolation from a short interview about it (particularly when someone else did the interview) is a hazardous undertaking. But in that article —based on the upcoming ...

As if there wasn’t enough to worry about regarding retirement—a new research paper suggests we’re not worrying about the “right” things. More precisely, that paper, published by the Center for Retirement Research at Boston College, was titled, “ How Well Do Retirees Assess the Risks They Face in Retirement? ” And, as you might suppose, the answer provided at the conclusion of the paper is—“not very well.”  The premise of the paper relies on the author’s identification of five major risks in retirement, which turn out to be: Longevity risk (the risk of outliving one’s resources) Market risk (the financial risk not only from the markets, but from things like the housing market) Health risk (the risk of unexpected medical and long-term care expenses) Family risk (the risks arising from divorce, death, or the unexpected illness of an adult child) Policy risk (notably the sustainability at current benefit levels of Social Security) Arguably, all of these are legitimate risks tha...

 As kids, we often struggle with our parents’ attempts to help us make good choices—and, at least in my family, Mom caught the brunt of all that (at least from me).  We were probably like most families at the time in that we never really talked about money or finance. Doubtless that was in no small part because neither of those were in abundance in our household. But mostly, I suspect, it was because that was just one of “those” topics that were deemed to be private. In our house Mom was definitely our family’s CFO. See, like many in his generation, my dad wanted to hold the checkbook, but it was Mom who always made sure that there was money in the account. She’s the one who started setting aside money from her paycheck in her 403(b) plan at work—and continued to do so, even when my father was convinced they couldn’t afford it—and made no secret of that opinion. Or did until he got a glimpse of the statement that showed Mom’s retirement account growth—and then...

Most of the surveys and research in our industry focus on the shortcomings – a lack of savings, of diversity in investment, of failure to maximize the employer match, or to have access to the programs that support those opportunities. There is, however, a shortfall that doesn’t garner much attention. I’m talking about time. And while time is often treated as an “enemy” of retirement planning (sometimes under the “longevity” label), certainly when there is a concern about outliving one’s resources, or perhaps when too little time remains to make preparations, there is another aspect: a retirement cut short.    This is heavy on my mind of late – not just because this week marks the anniversary of the Sept. 11 attacks, though that’s certainly a factor. My recollections  of that awful day notwithstanding, I’ve been particularly mindful of the untimely passing of three individuals of my acquaintance in recent weeks: a relative, a colleag...

Mothers give us a lot, not the least of which is life itself. But as I was reading through all the accolades on social media over the weekend, I couldn’t help but be reminded of all my mother gave me. As is the case in many families, “Mom” was our family’s CFO. See, like many in his generation, my dad wanted to hold the checkbook, but it was Mom who always made sure that there was money in the account. She’s the one who started setting aside money from her paycheck in her 403(b) plan at work – and continued to do so, even when my father was convinced they couldn’t afford it – and made no secret of that opinion. Or did until he got a glimpse of the statement that showed Mom’s retirement account growth – and then, inspired by that example – he began setting money aside for retirement as well. Not surprisingly, Mom was the one who encouraged me to start saving in my workplace retirement plan as soon as I was eligible – and while I wasn’t always smart enough to ta...

The future is an uncertain thing, and planning for uncertainty inevitably involves making some assumptions. Here are six that, done improperly, can wreck your retirement. How Long You’ll Live The good news we are living longer – but that means that retirements can last longer, and medical costs can run higher. But while we’re living longer, studies indicate that we tend to underestimate how much longer we will live. The Social Security Administration notes that a man reaching age 65 today can expect to live, on average, until age 84.3, a woman turning age 65 today can expect to live, on average, until age 86.6. But those are just averages. About one out of every four 65-year-olds today will live past age 90, and 1 out of 10 will live past age 95. How Long You’ll Work Perhaps the most important assumption is when you plan to quit working; today most Americans are doing so at 62, though 65 seems to be the most common assumption – and while using 70 (or later) will surely bo...

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...

As April is National Financial Literacy month, and this is National Retirement Planning Week, those who work with retirement plan participants know it’s important to do the right thing(s) when it comes to retirement planning and savings. But for those you are trying to help encourage, here are five reasons to plan and save for retirement now, and as an integral part of that financial plan. Because you don’t want to work forever. Seriously, no matter how much you love your job, if you want to stop working one day – and trust me, you will – you are going to have to think about how much income you will need to live after you are no longer working for a paycheck. Because living in retirement isn’t “free.” Many people assume that expenses will go down in retirement – and, for many, perhaps most, they do. On the other hand, there are changes in how we spend in retirement as well – and they aren’t always less. A recent report by the nonpartisan Employee Benefit Research Institut...

Last week the Senate Finance Committee held a hearing on “promoting retirement security.” While options were presented to improve things (see “ Industry Groups Urge No Changes to Retirement Savings Tax Advantages ”), the discussion quickly veered toward a debate on whether and how well—or poorly—the current system is working. That said, listening to the witnesses, 1 one might well have thought they were discussing completely different systems—from one that is striking a good balance between incentivizing employers and encouraging participants to one that is all about providing tax benefits for saving to those who don’t require such enticements; from one that is putting too much responsibility on individual savers to one that has managed to, on a voluntary basis, draw the support of roughly eight in 10 workers. One that has failed, and seems unlikely to ever deliver a real retirement income solution—or one that has the potential to make that a reality. Metrics Systems As always, the...