Nevin's Data "Points"

Last week, Senate Democrats unveiled a bill that would, among other things, enhance the Saver’s Credit – a provision which retains bipartisan support, even as the take-up rate disappoints. Here are six things that people who don’t get the Saver’s Credit often don’t “get.” The Saver’s Credit is, of course, a tax credit from the federal government for low- to moderate-income workers who are saving for retirement. For those who qualify, 1 in addition to the customary benefits of workplace retirement savings, the amount of the credit is 50%, 20% or 10% of retirement plan (or IRA or ABLE account) contributions depending on adjusted gross income. Credit ‘Limits’? And yet, some of the things that seem to be holding back the take-up rates could surely be addressed with a legislative “fix” – and here we’re talking about the relatively low income thresholds to which it applies, the fact that while it’s a credit, it’s not a refundable credit (and thus you have to have a fe...

It has been heartening in recent weeks  to see a number of employers announce plans to expand and increase benefit programs, offer bonuses, and increase the employer match. Better still, a recent survey  indicates that more positive changes could lie ahead. A decade ago , the headlines were filled with stories about a number of large firms announcing that they were cutting, and in some cases eliminating altogether, the employer match. While the vast majority of employers didn’t reduce those matches, it was nonetheless a stark reminder that those defined contributions are “defined” annually, not in perpetuity. The Match Matters There are a number of things that we know about the importance of the employer match; there’s the obvious (though sometimes glossed over) impact that an employer contribution means in terms of retirement security in simple dollars, for one thing. Indeed, the nonpartisan Employee Benefit Research Institute (EBRI) has estimated th...

People often talk about the significance of the “free” money associated with the company match in retirement savings – but there’s another source of “free” money that is often overlooked. I’m talking about the so-called Saver’s Credit, more precisely the Retirement Savings Contributions Credit. It’s a credit, not a deduction – a dollar-for-dollar reduction of tax liability. Income Limits For those who qualify, in addition to the customary benefits of workplace retirement savings, it could mean a $1,000 break on their taxes — twice that if married and file a joint return. In fact, for a moderate income saver, it can offset 50%, 20% or 10% of retirement plan or IRA contributions up to $2,000 ($4,000 if married filing jointly), depending on adjusted gross income. Speaking of which, the Saver’s Credit can be claimed by: married couples filing jointly with incomes up to $61,500 in 2016; heads of households with incomes up to $46,125 in 2016; married individuals filing separatel...

Thanksgiving is a special time of year — and one on which it seems fitting to reflect on all for which we should be thankful. Here’s my 2015 list: I’m thankful that so many employers voluntarily choose to offer a workplace retirement plan — and that so many workers, given an opportunity to participate, do. I’m thankful that so many employers choose to match contributions or to make profit-sharing contributions (or both). Without those matching dollars, many workers would likely not participate or contribute at their current levels — and they would surely have far less set aside for retirement. I’m thankful that the vast majority of workers defaulted into retirement savings programs tend to remain there — and that there are mechanisms (automatic enrollment, contribution acceleration and qualified default investment alternatives) in place to help them save and invest better than they might otherwise. I’m thankful that trends that suggest that more plan sponsors are extending tho...

Over the years, I’ve seen some convoluted ways to rationalize undermining the tax preferences of workplace retirement plans and substituting government tax credits — but a new one just may take the cake. “ A Behavioral Contract Theory Perspective on Retirement Savings ,” authored by Ryan Bubb and Patrick Corrigan from the New York University School of Law and Patrick L. Warren from Clemson University’s John E. Walker Department of Economics, starts off by assuming that workers are rational, though perhaps not rational in the way you or I might consider to be rational. However, I’ll accept as logical their assertion that rational workers will prefer saving through an employer-provided plan, rather than accepting a job that does not provide such a plan. They also claim to provide an analysis that “provides novel explanations for the use of low default contribution rates in automatic enrollment plans, the shift away from defined benefit annuities toward lump sum distributions in defin...