Nevin's Data "Points"

  Last week, I shared   five of my Top 10 Pet Peeves   about the Retirement Industry. Here’s the rest of the list. Making “apples to oranges” comparisons of world pension systems. Let’s face it — nobody wants to be “average.” And yet, there are now a handful of retirement industry consultants that, each year, publish a ranking of how the world’s retirement systems rate — and year after year the United States generally comes in about the middle of the pack. Considering just how diverse these systems and the populations they serve are — one might well wonder at the need to rank them. But rank them they do, employing a relatively complex rating system to do so. The  most recent was by Mercer  — who, once again — held the U.S. in relatively poor esteem compared with the Netherlands, Iceland, Denmark and Israel. The Nordic countries are a perennial favorite here — though they all happen to be (much) smaller in population, and more culturally and racially monolithic t...

 It’s not  all  about “the Benjamins,” but a recent analysis of the nation’s private retirement system certainly puts a lot of emphasis on the accumulation of aggregate assets in retirement plans. The Morningstar report—“ Retirement Plan Landscape Report, An In-Depth Look at the Trends and Forces Reshaping U.S. Retirement Plans ”—is extraordinarily diverse and comprehensive [i]  in its assessment—though while the report’s authors seemed to be striving for a balanced assessment, the overall sense was one of a leaky boat. No Surprises  There were some findings that seemed to surprise the authors that didn’t strike me as all that remarkable. Apparently (I hope you’re sitting down for this one) larger plans pay lower fees (expressed as basis points) than smaller plans. They are also more likely to invest in collective investment trusts (which tend to have lower fees, though that isn’t necessarily the case). What I  did  find surprising was ...

The title of a new report by the Society of Actuaries poses an intriguing question: “Retirement Adequacy in the United States: Should We Be Concerned?” When all is said and done, the answer from the report’s authors seems to be “it depends.” And, as it turns out, it depends on a lot of things: who is asking the question, who you are asking the question about, and what you think the answer should be. And that doesn’t even take into account the questions about the assumptions one makes to come up with the answers. The SOA report draws some conclusions: The current system of voluntary employment-based retirement plans has been largely successful from the perspective of companies sponsoring plans for individuals with long-term employment covered by such plans. The mandatory Social Security system has done much to reduce poverty in old age, though adequacy studies using replacement ratios may overstate the success of this safety net for those in the lowest-income grou...

Ours is a complex and complicated business — constantly changing and evolving. And yet, there are key fallacies about today’s retirement system — and how it compares with what used to be — that will not go away. Back in the good old days being “covered” by a pension plan meant you would actually get a full pension benefit. We’re routinely told that “once upon a time” individuals used to work for a single employer their entire career, and that most of those workers were “covered by a workplace retirement plan, frequently a defined benefit pension.” While defined benefit plans were certainly more common a generation ago, they were not as ubiquitous as is often assumed (see here ).   Moreover, while some workers did spend their working career at a single employer (and some still do, particularly in the public sector), the data show that for the very most part we have long been a nation of relatively short-tenured workers. How short? Well, the median job tenure in the United St...