Nevin's Data "Points"

Perhaps because of the recent full moon, the nation’s 401(k) “haters” were out in force. Yes, last week we were “treated” to a  Bloomberg op-ed  with ideas on how to “fix” America’s broken retirement savings system, a back-handed compliment (of sorts) on SECURE 2.0 in  Forbes  from Teresa Ghilarducci, and the trifecta was completed with an academics op-ed in the  Washington Post  alleging that the current retirement system is “built for the rich.”  Most of the criticism was focused on the same old myopic view on taxes and tax preferences—all flavored through the prism of a highly biased preference for the involvement of the federal government in such matters, rather than the private sector. Key Points So, let me take a couple of minutes to make a few points that always seem to be glossed over: Tax deferral is not tax avoidance. Those contributions and earnings will be taxed (though generally outside the 10-year budget scoring window Congr...

 One of  my  favorite holiday movies is “Planes, Trains, & Automobiles”—but who thought so many would have to live it?  The movie I’m referring to is that 1987 John Hughes classic starring Steve Martin and John Candy as a pair of travelers (Martin an advertising exec, Candy a travelling shower curtain ring salesman—and you think  you  have a hard job) trying to get home for Thanksgiving. There are any number of misadventures along the way—involving the aforementioned means of transportation on the trip from New York to Chicago… via Wichita and St. Louis.  Well, a couple of weeks back several hundred advisors found themselves reliving that experience as a series of unrelated events emerged to thwart their scheduled travel to the NAPA 401(k) Summit in Tampa. It started early the day before the event with a strike by Alaska Airlines pilots, by mid-morning  Southwest Airlines  was experiencing ““intermittent performance issues f...

Thanks to their mother, my kids have grown up with a variety of pets in our house—but none more bizarre than our experience with… a chicken. My son’s elementary school class had been exposed to the miracle of life over the course of several weeks by watching a set of chicks spring forth from eggs that had been carefully tended by the class. Once hatched and ready to be turned loose, the teacher offered to let selected children take one home—provided they obtained their parent’s permission, of course. My son was smart enough to ask his mother—who, seeing how much it meant to him—and much to my amazement, acquiesced to the request.  And so “Grr” [i]  entered our lives. Mind you, we were living in a residential neighborhood in Connecticut at the time, miles and miles from anything remotely resembling a farm. That said, the little peeping chick was adorable, and my wife persuaded me that, as the chick grew we’d be able to erect a small pen in the back yard. We even...

 Years back I remember being part of a Q&A with a group of plan sponsors—the focus was the challenge of not only getting, but keeping their plans in compliance, while also looking for creative ways to engage and encourage participants. Then at one point, a tired looking gentleman, expressing frustration with the pressures of audits and litigation, said: “I wish the DOL would just tell us what to do.”  I cautioned him at the time that he ought to be careful what he wished for—that he might just get it. Sure enough, in mid-March the Labor Department issued a “compliance assistance release” which was unique both in format and, arguably, focus. It reminded plan fiduciaries of the significance of their review and assessment of prudence of plan investments—and then said in no uncertain terms that it had concerns about the ability of cryptocurrency to meet those high standards. Indeed, the release plainly stated that those who did include such options could “expect ...

 It’s been fun watching “Coach K” take another team to the Sweet 16 this year—hard to believe he’s been coaching for nearly half a century.  I had the opportunity to see Mike Krzyzewski coach in person just once—and in the not-so-friendly confines of the claustrophobic Cameron Indoor Stadium (no, I was not rooting for Duke). And while he’s had better teams—and Duke’s not on my favorites list—I, for one, won’t be disappointed if he wound up an amazing career by winning it all… again (a sentiment made easier because the teams I was pulling for are no longer in contention). And then there was Tom Brady—who may have had the shortest retirement in NFL history. Rumors notwithstanding, apparently Aaron Rodgers is still willing to keep playing. Presumably both are at least partially motivated by the possibility of hanging up their cleats with another championship ring on their hand—to get “out” at the top of your game.  A  Pew Research Center analysis  o...

It’s hard to believe that just two years ago many of us went into our places of work, packed up, and went home for what most thought would be a week, maybe two—and wound up being a lot more than that. In March 2020, my wife and I had just returned from a funeral in the Boston area. While the worst of what we would come to learn about COVID was—well, yet to be learned—we knew that cautions were in order. So we drove, rather than flew to the event—which wound up being full of strangers (many of whom were in what would come to be acknowledged as “vulnerable” health categories). Throughout we were aware, conscious of a certain risk, but we were not overly cautious—about on the order of what you would do when you come into contact with someone who had a cold.  In hindsight, what might have been a “super spreader” event didn’t turn out to be one—even though less than 48 hours later the governor of the Commonwealth was putting in place lockdowns and restrictions that wo...

 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 ...

Our industry often seems to treat participants like children who can’t make big decisions—but a recent research paper suggests they might make better choices  if  we expanded their perspective. The paper, intriguingly titled “ Financial Wellness Meets Behavioral Economics ,” highlights a behavioral tendency known as “narrow framing”—basically a tendency to focus on one complex choice, or one element of a complex choice, at a time.  Now, at first blush this seems rational, and perhaps even prudent—but the paper suggests that this kind of linear thinking means that people are inclined to overlook real-life disruptions like financial emergencies—which are not only uncertain with regard to amount or timing, but even in terms of whether they will occur at all. Little wonder, therefore,  that  studies   routinely find that workers say they are ill prepared to come up with the funds to cover some kind of short-term emergency o...

My decision as to whether or not to save in my workplace savings plan wasn’t long or complicated.  Yes, I had to actually fill out a form, and yes, I actually had to figure out how to invest those savings (though in fairness, there were only four funds from which to choose, one of which was company stock). Yes, there was also a generous match, but when you’re young there are more enticing ways to spend your income than—well, not spending it. That said—and at age 22 I’d not always fully embraced my parents’ counsel—my mother didn’t hesitate to insist that I did so.   My mother, now a retired school teacher, then (and still) reminds me with some regularity (and deserved pride) that she began having $50 taken out of her paycheck at work—though my father protested at the time they couldn’t afford to do so. Or at least he did until he saw that first quarterly statement—at which point he began looking into how he could s...

As I was pulling together tax information this weekend, I was reminded that, in addition to the benefits of pre-tax savings and deferred taxes on retirement savings, there’s another tax benefit—but one of which many aren’t aware.  It’s called the Saver’s Credit—but only 43% of workers are aware of the credit, according to the  20th Annual Transamerica Retirement Survey  of workers. It’s available to low- to moderate-income workers who are saving for retirement. For those who qualify, in addition to the customary benefits of workplace retirement savings, it could mean a $1,000 break on your taxes—twice that if you are married and file a joint return! Now, there are some  limitations [i] —both regard as to who is eligible, and the income levels to which it applies. But in a year when household income levels might be impacted by COVID—well, it’s worth revisiting the option even if it hasn’t been available in the past.   Here are some things y...

Will your 401(k) be bitten by the Bengals—or rally with the Rams? That’s what adherents of the so-called Super Bowl Indicator [i]  would likely conclude, after all. It’s a “theory” that when a team from the old National Football League wins the Super Bowl, the S&P 500 will rise, and when a team from the old American Football League prevails, stock prices will fall. It’s a “theory” that has been found to be correct nearly 80% of the time—for 41 of the 55 Super Bowls, in fact. And sure enough, last year’s win by the NFC’s Tampa Bay Buccaneers provided support for that notion, as the S&P 500 gained ground.   Not that it hasn’t had its shortcomings. One need look back no further than the previous year’s win by the AFC’s (and original AFL) Kansas City Chiefs over the then-NFC Champion San Francisco 49ers to refute the applicability (or did your 401(k) miss that 18.4% rise in the S&P 500?). Or how about the year before that when the AFC’s New England Pat...

 A new paper rehashes (and embraces) some old beliefs, blatantly ignores the full impact of workplace savings, disregards the reality that deferrals are temporary—and kills a lot of trees in the process.   The diatribe’s author, perhaps because he’s affiliated with a law school, perhaps because the paper (provocatively titled “ The Great American Retirement Fraud ”) is so long (82 pages), managed to get what amounts to a long-winded pontification published by the Social Science Research Network [i] —a network that normally publishes research.  There’s little new here, and painfully little substance—though he does affix a label—“the Retirement Reform Project”—to the “conspiracy” he crafts between employers, investment management firms, advisors and those that support their interests. At the crux of this imagined conspiracy is none other than Rob Portman and Ben Cardin. Yes, that Portman and Cardin!   Reform ‘School’? Indeed, he claims this “...

Which is more powerful—a generous match, or a high savings rate default?  As it turns out, Christmas Eve brought us a new white paper with the fairly innocuous title, “ The Impact of Employer Defaults and Match Rates on Retirement Saving .” Indeed, there have been plenty of surveys (and tons of data) that speak to this issue (many of which are cited as references in the paper)—but underneath that bland title the authors take on an intriguing question, specifically how, and how differently, the deployment of specific plan design features—the employer match, or default enrollment—impact retirement savings.  With regard to the former, there’s been plenty of real data to buttress the notion that the employer match acts as a virtual target for retirement savings—with employee contributions clustering around those like moths to a flame, regardless of the savings needs or income wherewithal of the participant. Similarly, we’ve long—but even more so since the advent of t...

 I’ve been writing a weekly column (and then some) for more than two decades now. Some are easier to write (and read)—and some hold up better (and longer) than others. These are some of  my  (and perhaps your) favorites from 2021. Let me know what you think in the comments below… particularly if I have missed one of your favorites…  What’s So Special About College Debt? Student loan debt—or more precisely, the forgiveness of some part of it—has dominated the headlines of late—but it’s been on the minds of retirement plan sponsors for a while now. The question is—why?  https://www.napa-net.org/news-info/daily-news/whats-so-special-about-college-debt Bundled Versus Unbundled: 5 Myths While there are some amazing bundled solutions, ERISA’s admonition to act solely in the interests of plan participants (and beneficiaries), alongside the requirement that those be reasonable in terms of cost and value, call for a careful and considered evaluation. In t...