Nevin's Data "Points"

  A new study shows how a proposed government-run retirement program said to increase coverage could actually undermine the nation’s retirement readiness. The  report  — by Morningstar’s Spencer Look and Jack VanDerhei (yes, that Jack VanDerhei) — considers the potential effects of the Retirement Savings for Americans Act (RSAA) on retirement-income adequacy for Generation Z and millennial workers. The  proposed legislation  — which aims to expand retirement coverage for American workers by creating a federal retirement plan for those not covered through their employer — has been introduced in both the House and the Senate. [i]   The legislation has been positioned as a means of helping close the coverage gap — of creating not only an opportunity for those without access to a retirement plan at work to save for retirement, but to receive the incentive of a matching contribution from the federal government. How then, would such a proposal undermine the natio...

  "Unintended consequences" are often a euphemism for something bad. But not always. Take the 401(k), for example. While the nation turns its attention to Election Day, Nov. 6 happens to be the “birthday” of the 401(k). Well, kind of. It’s actually the anniversary of the day on which the Revenue Act of 1978 — which included a provision that became Internal Revenue Code (IRC) Section 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). It 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 already been around for a long time — basically predicated on the ...

  Editor’s Note: To his credit, Shlomo Benartzi took the time to respond to my recent  column  on his Wall Street Journal op-ed on LinkedIn (you can read it  here ) — though to my read, the concerns expressed on where such a proposal could lead remain. Consider this a brief follow-up.      Shlomo, Whew! I can’t tell you how relieved I am/was to have you clarify that you are NOT advocating a government-run retirement plan system. I guess you referring to three specific government-run systems as models to be considered persuaded me that you thought those were good examples for us. You’ve  now  pointed more specifically to the Australian model where “workers remain by default with their first plan provider, even if they change jobs.” But as I am sure you know, there are some significant differences between that system and ours — differences that, to my eye, wind up being significant.  First and foremost , that system is funded primarily by ...

   As Halloween approaches, a leading behavioral science academic has embraced a truly scary idea that involves your 401(k) account. That academic, as you might deduce from the title, is none other than Shlomo Benartzi, professor emeritus at UCLA Anderson School of Management — and more specifically a champion of the application of behavioral finance concepts to retirement plans, notably automatic enrollment and contribution acceleration. As for that scary recommendation, Benartzi has — in a Wall Street Journal op-ed — effectively backed the notion of creating big government-run pools of retirement savings — where ALL retirement savings would be put. “We no longer have jobs for life” he rationalizes, though employment tenure in the private sector has been pretty consistent going all the way back to the 1940s. What HAS changed is the predominance of defined contribution savings plans and — ironically — that system’s increasing reliance on the behavioral science designs that ...

  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...