Friday Top Five: Retirement Related News for 2/27/15

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From BenefitsPro: Elderly spend 20% of incomes on health care

We all know that seniors can face huge hits to their pocketbooks from health care costs. The Employee Benefits Research Institute quantified that on Monday with a report that nearly 20 percent of household income in old age goes to pay for health care.

The EBRI report, titled “Utilization Patterns and Out-of-Pocket Expenses for Different Health Care Services Among American Retirees” uses data from the Health and Retirement Study, the nation’s most comprehensive study of older Americans.


The difference between price and value is a fundamental concept in finance and represents an important lesson for investors to learn. It may be great to find a $5 watch, but the deal is less compelling if the thing doesn’t tick.

As managing principal at Retirement Benefits Group in Irvine, California, Gary Josephs is often called on to discuss how the price/value question applies to employer-sponsored benefits, especially in regard to defined contribution (DC) retirement plans. He says the retirement plan industry’s reinvigorated focus on fees—established in part by the adoption of the fee disclosure regulations under Employee Retirement Income Security Act (ERISA) Sections 408(b)(2) and 404(a)(5)—has been a positive development overall for plan participants, leading to better prices and greater transparency.

From PlanSponsor: Five Behaviors That Sabotage Retirement Savings

For America Saves Week, Prudential wanted to answer a simple question: Why is long-term savings so hard for participants?

According to Jennifer Putney, vice president of Total Retirement Solutions at Prudential Retirement, the firm turned to the behavioral sciences to formulate an approach that would help them understand the behaviors that help or hinder decision-making.

From Time Money:  These Workers Landed Cool and Unusual Retirement Jobs—Here’s How

If you're willing to think outside the box, you'll find fun jobs that provide income and adventure.

Retirement surveys say that many people plan to work part-time in retirement—for the income, the enjoyment or both. But an Unretirement job doesn’t mean you have to be a Walmart greeter (not that there’s anything wrong with that).

From CNBC: Is it ever a good idea to tap into your 401(k) early?

Your retirement savings are intended (obviously) for retirement, but what if you need them now? The IRS offers some provisions for withdrawing savings from an IRA or 401(k) before retirement age without incurring a penalty—and President Barack Obama recently added another hardship option in his budget proposal. But that doesn't mean it's a wise move.

A new white paper from the Center for Retirement Research at Boston College estimates that about 1.5 percent of assets "leak" out of 401(k)s and IRAs each year, on average, through early withdrawals, cash-outs or loans. Many are the result of a job loss or job change (an estimated 3 in 10 who leave their jobs cash out their accounts, according to Vanguard data) or an unexpected health-care expense. But while tapping into retirement savings can provide temporary financial relief, the long-term effects can be costly.

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Rolling Your MOSERS Benefit to a Deferred Compensation Plan

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I have heard you can roll your Moser retirement over to the deferred comp and receive 1 check?
State employees who are eligible for and elect to receive the BackDROP payment option can roll that lump sum into the deferred compensation plan at retirement. As for the lifetime monthly base benefit payment from MOSERS or MPERS, you cannot roll that amount into the deferred compensation plan. If you’ve saved money in a previous-employer’s retirement account (like a 401(k) or 403(b)) or in an IRA, you can also roll those savings into the deferred compensation plan. Note: Roth IRA assets cannot be rolled to the deferred compensation plan. Consolidating all of your savings into one account allows you to take advantage of the low fees, custom investment options and specialized customer service available within the deferred compensation plan. For more information on rolling funds to the deferred compensation plan, view this blog post from August 2014.

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Friday Top Five: Retirement Related News for 2/20/15

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From The New York Times: Retirees Find Meaning Serving the Needs of Their Communities

DESPITE what F. Scott Fitzgerald and Thomas Wolfe said, you can go home again and you can have a second act — or a third. And you can even find meaning, purpose and social justice along the way.

Volunteering to do difficult and meaningful work is part of this new path. According to the Corporation for National and Community Service, a government agency that runs the AmeriCorps and Senior Corps programs, some 24 percent of older adults volunteered in 2013, providing nearly 190 million hours of service. Despite the disruption of a recession six years ago, that rate has held fairly steady over the past decade.

From Plansponsor: DB Plan Investment Consultants Looking Globally for Growth

A new report from Cerulli Associates notes that during the past year, robust equity markets decreased the value of pension liabilities, and resulted in improved funding levels for many corporate defined benefit (DB) plans.

As more pension plans’ funded status is enhanced, those that are on liability-driven investing (LDI) glidepaths will start to reduce their return-seeking risky assets and replace them with fixed income. More than half (56%) of investment consultants surveyed by Cerulli indicated they are likely to increase their corporate DB clients’ U.S. fixed-income exposure during the next one- to two-year period.
Much has been said about the racial wealth gap and how the financial crisis widened that disparity, especially as minorities have had a harder time keeping their homes and rebuilding their portfolios.
But there’s another side to those challenges that doesn’t get as much attention — the retirement savings gap.

If minorities are less likely to get an inheritance from a family member than a white person is, or to have wealth to fall back on when they want to buy a house or start a business, they are likely to have less money to save for retirement, too. And if they are saving, the weaker safety net makes it more likely that they’ll have to raid that reserve or take on debt when things go wrong.
Related: For more information see the 2013 National Institute on Retirement Security (NIRS) study Race and Retirement Insecurity in the United States.

From MarketWatch: How a 1% savings boost could sweeten your retirement

When it comes to saving for retirement, what difference can another 1% of your pay make?


Thanks to the magic of compounding, “a little bit (of extra savings) today can go a long way tomorrow” in terms of the retirement income it’ll generate, says Fidelity Investments, which crunched the numbers for a report released this week.

From Employee Benefit Advisor: DB plan sponsors actively look at risk management options

While there are several reasons pension plan sponsors are looking to address risk in their plans, reducing Pension Benefit Guaranty Corporation premiums remains a concern many plan to address in the coming year.

Close to one-quarter (22%) of plan sponsors say they are very likely to offer terminated vested participants a lump sum window in the coming year, according to recently released data from Aon Hewitt. In addition, 19% of employers plan to increase cash contributions to reduce PBGC premiums in 2015, and 21% say they will consider purchasing annuities for a portion of their plan participants.

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Friday Top Five: Retirement Related News for 2/13/15

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A series of new case studies finds that states that shifted retirement plans from defined benefit (DB) pension plans to defined contribution (DC) 401(k)-type individual accounts experienced higher costs. The case studies also indicate that the DB to DC switch exacerbated rather than solved any pension underfunding issues, and employees faced increased levels of retirement insecurity.

Case Studies of State Pension Plans that Switched to Defined Contribution Plans, by the National Institute on Retirement Security, presents summaries of changes in three states – Alaska, Michigan, and West Virginia – that made the switch from a DB pension to DC accounts. The case studies examine key issues that impact pension plans, including demographic changes, the cost of providing benefits, actuarially required contributions (ARC), plan funding levels and retirement security for employees.

U.S. public pensions reported median returns of 6.8 percent last year, the sixth year in a row of gains after the financial crisis, according to Wilshire Associates.

The gains, though, are less than the annual investment returns of 7.5 percent to 8 percent that many state and local governments count on to pay benefits for teachers, police and other employees. In the 10 years through Dec. 31, public pensions had a median return of 6.6 percent.

Related -  Related: MOSERS’ return, net of fees, for calendar year 2014 was 7.3%. See the MOSERS’ CIO letter for information about FY14 highlights.
A new report from CEM Benchmarking claims to have settled, at least in part, the active versus passive investing debate for defined benefit pension plan sponsors.

Financial research and benchmarking provider CEM Benchmarking says its most recent report contains enough data to prove active investing is worthwhile for pension funds, if executed efficiently and effectively.
Social Security may be your largest or one of your largest assets. How you manage it, by deciding which benefits to collect and when, can make an absolutely huge difference to your lifetime benefits. And those with the highest past covered earnings have the most to gain from maximizing their Social Security.

Small steps that can make a big difference.

Retirement planning is serious business that requires diligence and patience. But a quick tip, or even an irreverent one, can sometimes be helpful, too. Here are 25 observations from my 30 years of writing about retirement and investing that may spur you to plan more effectively (or to start planning if you’ve been putting it off).

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The Education Never Ends, by Barbara Beermann

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Barbara was a Senior Educator at MOSERS who retired in February of 2015.

I learned a lot from my dad. One thing he taught me was to “support the product.” He was a farmer and raised cattle, hogs, chickens, and row crops. My mother had a garden. While I was growing up, we ate beef, pork, poultry, bread (from wheat), and vegetables from the garden. We did not eat seafood (or imitation-anything) since it did not support the product.

I learned a lot from MOSERS, too—that people want financial security. Members need to understand their benefits better, especially retirement, so they can make good decisions about the next phase of their lives. I also learned a lot from members. My job here for more than 14 years has been to meet members where they live and work, and encourage them to find out more about retirement. During my MOSERS career, I have travelled approximately 86,000 miles around Missouri educating about 770 groups, including around 36,000 people getting ready to retire. I learned that people are excited and anxious about retiring.

I can relate to those feelings, thinking about my own retirement date, and I have learned some valuable lessons from retirees and other experts:
  • Get a plan for your time and money. Some research suggests that people may live to 130 years of age on average, in the fairly near future. So what will “the next half” of your life look like? Maybe work (even somewhere else or doing something else), or travel, or find hobbies, or enjoy family time, or fill-in-the-blank, or a combination of these. It is known as cyclical retirement, where you do something for a while, then do something else. For example, first you may want to travel and see all the wonderful places of your dreams. Then possibly concentrate on a hobby. Then perhaps work part-time. If you choose employment for additional income, decide if you would rather work during your 60s or your 80s. Make a budget and keep a calendar (know how much you can spend and what day it is). Invite a friend to coffee. Take a class. Volunteer.
  • Keep or make your health a priority. Get regular check-ups and screenings. Exercise. Eat better. You cannot do much if you are in poor health—such as enjoy the grandchildren, work very much, or travel very easily. If for no other reason, think about how much less expensive your costs are for prevention than if you become ill or injured.
  • Never think you are too old for something. George H.W. Bush skydived on his 90th birthday. Rumor has it that Rose Kennedy swam in the ocean every day, even into the second century of her life. What do you really want to do in your lifetime?

So I have learned these great lessons: never-too-old, health is important, make a plan, expect anxiety with excitement, and seek financial security; and I am taking my dad’s advice. After years of working at MOSERS, which is in the business of retirement, I will support the product. I am retiring and excited about it! MOSERS provides a good benefit as a means of financial security. I have a plan (which is clearer on some days than others) for my life and my health. I am still considering my “never too old” ideas!

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Friday Top Five: Retirement Related News for 2/6/15

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From The Kansas City Star: Missouri state treasurer to lead national pension group

Missouri state treasurer Clint Zweifel has been appointed chairman of the pension and trust investment committee for the National Association of State Treasurers. In his role, Zweifel will help shape pension policy and promote retirement security.

From Time Money: If You Want to Retire in 10 Years, Do These 5 Things Now

The decade before retirement is a critical time. Here's how to make sure you're on the right path.

After 30-plus years of working and socking away savings, you can finally see retirement on the horizon. But it’s not time to coast just yet.

From Fox Business: U.S Retirement Worries Go Global

Here’s the good news: In the past two decades, average life expectancy around the world has increased by six years, from 65.3 in 1990 to 71.5 in 2013, according research funded by the Bill and Melinda Gates Foundation and conducted by the University of Washington’s Institute of Health Metrics and Evaluation. The primary reason: improvements in health care.  In higher-income countries fewer are dying from heart disease; lower-income nations have seen a sharp decline in deaths from childhood diseases.

Now the flip side: Living longer costs more. Governments around the world have said they can’t afford it. Neither can employers. Thus, the responsibility for funding a longer lifespan is increasingly up to each individual.

From StL Today:  Gallagher: You'll live longer, and that means retirement will cost more

The nation’s actuaries have added years to our lives, statistically speaking. That’s good news, but it will cost you.

The Society of Actuaries, America’s sober assembly of death forecasters, has updated estimates on how long people will live. They now expect that a 65-year-old man will live another 21.6 years. That’s about two years longer than their previous guess made 15 years ago.

A 65-year-old woman is now expected to hang around another 23.8 years, about 2½ years longer than before.
Saving more money ranks up there just behind losing weight as a leading New Year’s resolution for Americans each January. As a nation, we seem to struggle to achieve either goal. As an incentive to setting and reaching the savings objective, I recommend a just-published book, Falling Short: The Coming Retirement Crisis and What to Do About It.* This well-researched, lucidly written, slender volume describes in detail the growing dilemma of financing retirement and provides advice on how to rise to the challenge.

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Annual Leave & Retirement

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Are there a maximum number of annual leave(AL) days you can use from your last day of work to your date of retirement?
You will need to speak to the human resources office at your agency about the limits that may apply. MOSERS doesn’t determine the procedures for using or paying out annual leave at retirement.

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When Are COLAs Applied?

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Do we get a cost of living raise this year, or was it on December's cheque?
Yes, and as we posted on our website in January, this year’s COLA for retirement benefit payments will be 1.298%. COLAS are payable on the anniversary of your retirement date, unless you elected BackDROP--then it will be payable on your BackDROP anniversary date.

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