Nevin's Data "Points"

By some accounts, inertia has long been the bane of the voluntary retirement system—and a great deal of money and time has been spent overcoming the reluctance of workers to become savers, and of savers to do so at levels sufficient to achieve their retirement goals.   That same inertia likely accounts for the fact that, once set on a savings course, or better still, set on one that improves on that initial setting, 1   participants in overwhelming numbers appear to “stay the course”—and do so through good times and times that aren’t as good.   So, what happens to those participants who stay the course, those “steady,” consistent participants?    The Employee Benefit Research Institute (EBRI), through the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project, has long tracked the changes in consistent participant accounts in a database that is the largest, most representative repository of information about individual 401(k) plan parti...

As my wife and I drove to pick up our eldest for the Thanksgiving break, I saw something I never thought I would see again: $1.95/gallon gasoline (even more incredible, that was while I was still in the borders of Connecticut, which imposes some of the highest gasoline taxes in the nation). Indeed, what with the election, the introductions of the new Administration’s team, the bailout/rescue of the week, and the continued jitters of the world markets, the reality that gasoline costs about half what it did in July has gone almost unreported. Still, I heard a report last week that suggests the net impact of that drop in price has put about $500 billion back in American pockets—now THAT’S a “stimulus package” we can believe in! Still, what I find interesting about that dramatic turnaround in oil prices is that it happened so rapidly that the explanations of why it ran up so quickly are still ringing in my ears. I remember all too well the pundits laying the price hikes off on the growth...

I wouldn’t for a second suggest that the current financial/economic crisis that we are enmeshed in isn’t “real,” or that the efforts to remedy it thus far aren’t well-intentioned, but it’s hard to shake the feeling that the words put forth to explain the situation—and thus the solutions put forward to redress that situation—are being done by folks desperate to be seen to be doing something, but not quite (at all?) sure what that something should be. And, IMHO, that inclination won’t diminish with a new Administration eager to prove itself. Let’s face it—even when doing nothing might be the best medicine (and I, for one, am at that point), we tend to believe that “something should be done.” Meanwhile, we have retirement plan participants, most of whom—again—appear to be riding this one out. Oh, there are signs of change on the fringes—some modest reductions in average deferral rates, slight upticks in hardship distributions, and, on particularly volatile days in the market, a bump in...

The recent market tumult has hit Main Street in its retirement pocketbook—and some are once again fretting about their “201(k)s.” You can say all you want that this is a good buying opportunity, but the reality is that our retirement savings accounts have taken a hit, and most people are going to be in mourning, at least for a time. Regardless of the markets (which we can’t control), we all know that the most important determinant of retirement security is how much we save—something we can, within bounds, control. However, when it comes to saving, there are two big questions looming over us, IMHO: Are we saving enough?—and, more importantly, Can we save enough? Those of the opinion that Americans are saving enough are few and far between. With a median retirement savings plan balance of less than $125,000 (and that was before the impact of the last several weeks), it’s hard to see how we could be saving “enough” based on historical spending patterns, much less taking into account t...

One of my favorite quotations is George Santayana’s, “Those who cannot remember the past are doomed to repeat it.” It is also, unfortunately, one of the most overused quotations, generally during times when we are in the middle of repeating an unremembered mistake. The current financial mess on Wall Street is the most recent example, of course. The problem—like the tech bubble that preceded it, the derivatives mess in the mid-1980s, the junk bond blow-up before that—is not that we don’t see it coming. It’s that we don’t do a very good job of knowing when it will hit. That, and nobody wants to leave the “party” before it’s over. And then we all wind up with hangovers. On the plan sponsor side, it was interesting to see the encouraging words of a number of public pension plans this week (see " Public Pension Groups: We’re Still OK ". Most spoke to the long-term nature of their investments, and the short-term security that comfortable funding levels provided. Some offered...