Nevin's Data "Points"

Earlier this year, I commented that it would be interesting to see how expanded access to hardship withdrawals might impact that activity. Now we have some answers. There’s more than a little irony in a legislative body that has long bemoaned both the paucity of retirement savings and the nefarious impact of “leakage” (pre-retirement withdrawal of retirement savings) opening those floodgates a little wider – but mostly the new law, and clarifying regulations [i]  seemed to provide plan sponsors a bit more flexibility in administering these programs, some welcome latitude in helping their workforce navigate choppy financial waters. What remained unknown was – would participants take advantage – or, more precisely, would they abuse the privilege. The first sign – and it was a bit of an eye-opener – came from Fidelity who, in a white paper , claimed to have seen a shift in participant behavior. Not in the percentage of participants taking loans and hardships over...

A few months back, I was intrigued to catch several episodes of “Cosmos,” an updated version of the classic 1980 Carl Sagan series.  Along with the significantly expanded and enhanced visuals and (to me, anyway, generally annoying) animations, the series recounted the work, travails and accomplishments of Edmond Halley, who, even today, is probably best remembered for the comet whose 75-year cycle he identified and which still, as Halley’s Comet, bears his name. Halley wasn’t the first to see the comet, of course – in fact, it had been recorded by Chinese astronomers as far back as 240 BC, noted subsequently in Babylonian records, and perhaps most famously shortly before the 1066 invasion of England by William the Conqueror (who claimed the comet’s appearance foretold his success).  Halley noted appearances by the comet in 1531, 1607 and 1682, and based on those prior observations – and the application of the work and mathematical formulas of his friend Isaac Newton – pred...

“401(k) breaches undermining retirement security for millions,” was the headline of a recent article in the Washington Post .(1) No, we’re not talking about some kind of data hacking scandal, nor some new identity theft breach. Rather, those “breaches” are loans and withdrawals from 401(k)s. Providing the impetus for the article is a new report by HelloWallet(2) that indicates that “more than one in four workers dip into retirement funds to pay their mortgages, credit card debt or other bills.” While the article primarily deals with the potentially negative aspects of loans and withdrawals, it also touches on some broader concerns—and does so with some factual inaccuracies. For example, the article incorrectly states that “in 1980, four out of five private-sector workers were covered by traditional pensions;” in fact, only about half that many actually were at that point (a correct statement would be that 4 out of 5 covered by a plan at that time were in a traditional pension, whi...

I was recently asked about the so-called 4 percent “rule.” That’s the rule of thumb(1) that many financial consultants rely on as a formula for how much money can be withdrawn from retirement savings every year (generally adjusted for inflation) without running out of money. Of course, like so many of the “assumptions” about retirement, certainly in the aftermath of the 2008 financial crisis, that withdrawal rule of thumb has drawn additional scrutiny.(2) At the time, my comment was that the 4 percent guideline is just that—a guideline. What’s not as clear is whether adhering to that guideline produces an income stream in retirement that will be enough to live on. How much are people actually withdrawing from their retirement accounts? At a recent EBRI policy forum,(3) Craig Copeland, senior research associate at the Employee Benefit Research Institute, explained that the median IRA individual withdrawal rates amounted to 5.5 percent of the account balance in 2010, thoug...