Nevin's Data "Points"

   Life is full of annoyances – all the better to appreciate the blessings that surround us. That said, there are things about the retirement industry that really bug me.  I recently had the privilege of being part of the Leafhouse National Retirement Symposium. The theme was unfiltered – the unvarnished truth.  And it seemed an appropriate forum to share some of the things about the retirement industry that really bug me.  Here’s the list: Using the average or median retirement balance as a proxy for retirement readiness. Generally speaking, retirement plans are comprised of a myriad of individual circumstances – participants of ages that run from late teens to beyond traditional retirement, savings behaviors based on income – and age – and company match… Not to mention that this might be only a half dozen years of a worker’s accumulation, with the rest on some other recordkeeping platform… Why any rational person would think that combining those disparate elem...

New research puts a new twist on “A Wonderful Life” – answering the question, what if there hadn’t been an ERISA? ERISA is, of course, the Employee Retirement Income Security Act of 1974 which  just turned 50 . The  analysis [i]  – put together by Morningstar Retirement’s Director of Retirement Studies Jack VanDerhei and Associate Director of Retirement Studies Spencer Look – first looks at the current “status quo” retirement readiness impact (more specifically, retirement readiness shortfalls). It then looks at the potential result if there had been no ERISA – or, perhaps more precisely if there had been no individual account retirement plans (defined contribution and IRAs), though allowance was made for the probability of saving to an IRA.  Now, anyone with a realistic assessment/awareness of the  limited availability of traditional pension plans  in the private sector (before AND after ERISA’s passage) can hardly be surprised to find that the absence of ...

I’ve long relished telling “newbies” to the retirement space that ERISA was the   second   big executive act of then-newly enshrined President Gerald R. Ford—less than one month after he took office.  In fairness—and I’m not exactly a kid—I was barely out of high school when that event occurred.  I’ve never had a benefits program (retirement OR healthcare, and us retirement geeks tend to forget that ERISA also has sway over workplace health plans) that wasn’t operating under its auspices—and so, talking about what ERISA has done/changed requires going back before my personal experience. And yet, despite the disparaging acronym “Every Ridiculous Idea Since Adam,” what ERISA has accomplished—and what has emerged in its aftermath—seems truly remarkable to me.  ERISA is, of course, the Employee Retirement Income Security Act of 1974—and on Labor Day 2024, that legislation will be 50 years young. Not that ERISA created either the concept or the reality of pensions an...

  I’m not sure how old I was when I first saw “Night of the Living Dead”—but I have long been intrigued by stories of a zombie apocalypse—where mindless beings inexplicably rise from the dead, with no memory of their past, just a relentless (and apparently insatiable) hunger for…well, “us.” That is perhaps an unfortunate comparison to  last week’s hearing  by the Senate Health, Education, Labor and Pensions (HELP) Committee, one ostensibly held to focus on how we were going to stave off the retirement “crisis” by…bringing “back” [i]  defined benefit plans. [ii] There were two fundamental premises underlying the hearing; first that there is, in fact, a retirement crisis, and second, that the restoration of defined benefit plan designs would remedy that situation.  There remains in many circles (including last week’s hearing) a pervasive sense that the defined contribution system is inferior to the defined benefit approach—a sense that seems driven not by what the...

Thanksgiving has been called a “uniquely American” holiday, and while that may be something of an overstatement, it is unquestionably a special holiday, and one on which it seems appropriate to reflect on all for which we should be thankful. So, as I look back at this past year: 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 a growing number of employers have chosen to automatically enroll valued workers into these programs, and that they are increasingly opting to establish a default contribution rate in excess of the “traditional” 3%. 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 o...

"Unintended consequences” are generally a bad thing. But not always. The 401(k), for example. This week we celebrated the birthday of the 401(k) – because it’s the anniversary of the day on which the Revenue Act of 1978 – which included a provision that became Internal Revenue Code (IRC) Sec. 401(k) – was signed into law by then-President Jimmy Carter. That wasn’t the “point” of the legislation of course – it was about tax cuts (some things never change) – reduced individual and corporate tax rates (pulling the top rate down to 46% from 48%), increased personal exemptions and standard deductions, made some adjustments to capital gains, and – created flexible spending accounts. But it did, of course, also add Section 401(k) to the Internal Revenue Code. That said, so-called “cash or deferred arrangements” had been around for a long time – basically predicated on the notion that if you don’t actually receive compensation (frequently an annual bonus or profit-shar...

Pundits have long worried that retirees wouldn’t have accumulated enough to live on in retirement, but the data suggests that most retirees aren’t exactly burning through their retirement savings. I remember my one and only conversation with my father about retirement income. He had already decided to quit working, and had gathered his assorted papers regarding his savings, insurance, etc. for me to review. Determined to “dazzle” Dad with my years of accumulated financial acumen, I proceeded to outline an impressive array of options that offered different degrees of security and opportunities for growth, the pros and cons of annuities, and how best to integrate it all with his Social Security. And when I was all done, he looked over all the materials I had spread out before him, then turned to me and said – “so how much will I have to live on each month?” See, my dad, like many in his generation, were accustomed to living within their means. And, according to new ...