Showing posts with label Financial Security in Retirement. Show all posts
Showing posts with label Financial Security in Retirement. Show all posts

Retirement Related News for 12/04/2015

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From The Transamerica Center: The Current State of Retirement: Pre-Retiree Expectations and Retiree Realities

This new study compares and contrasts the retirement outlook of age 50+ workers with the actual experiences of retirees. In TCRS' first-ever retiree survey, it finds that pre-retirees' ideas of retirement are different than the actual experiences of retirees. While many age 50+ workers expect to work beyond age 65 and/or work in retirement, those who are currently retired entered retirement at a median age of 62. Many retirees retired before they had planned to, often due to circumstances beyond their control.

View the study.

From CNN:: How much income will I need in retirement?

A widely accepted tenet of retirement planning is that you need to replace just 70% to 80% of your pre-retirement income to maintain your standard of living after you call it a career. And on the face of it, this rule of thumb seems to make sense. After all, since you'll no longer have to funnel money into 401(k)s and other retirement savings accounts and many of your expenses are likely to drop after you retire, you should be able to live as well, if not better, on considerably less income than you earned during your career.

But while "replacement ratios" may be useful for gauging how much you need to save each year to build an adequate nest egg when retirement is decades away, they're less helpful once you're within 10 or so years of retiring. At that point, you really want to base your planning on something more concrete -- namely, how much dough you'll actually have to come up with to cover your expenses and maintain an acceptable post-career lifestyle.

From The Wallstreet Journal: Why Recent Social Security Changes Make Sense

It took a few years, but Congress has eliminated the remaining loopholes that allowed people to game the Social Security system.

In 2009, we published three briefs under the title “Strange But True,” that described Social Security claiming strategies that allowed individuals to get more benefits. The idea was to show how they worked, who was most likely to benefit, and how much they could cost. Our hope was that publicity would compel Congress to close down these options.

The most egregious claiming strategy was what we called “Free Loan from Social Security.” The strategy allowed individuals to claim Social Security at age 62, invest those funds, and then reclaim higher benefits at age 70 simply by paying back what they had received to date interest free. In essence, the claimant received an interest-free loan from Social Security. The $6-$11 billion potential annual gain, concentrated among higher-income households, equaled a comparable cost to Social Security. In late 2010, the Social Security Administration (SSA) changed its regulations so that individuals had only one year to change their mind. In other words, score one for the good guys.

From Forbes: 7 Tips To Think Differently About Your Money And Become An Everyday Financial Superstar

One of my favorite types of articles to write is what I call “the financial feat story.”

As collected in the new Forbes e-book, “Money Hacks: Forbes Stories Of Superstar Savers,” which I cowrote with reporter Lauren Gensler, these are tales of people who took on and accomplished impressive, if not seemingly impossible, financial challenges.

From PLANSPONSOR: Retirees Share Realities with Younger Generations

In research from the Transamerica Center for Retirement Studies, retirees shared actionable insights about what they would have done differently in preparing themselves for retirement.
Reflecting on their working years, many retirees say they:
  • Wish that they would have saved more on a consistent basis (76%);
  • Wish they had been more knowledgeable about retirement saving and investing (68%);
  • Would have liked to have received more information and advice from their employers about how to achieve their retirement goals (53%);
  • Waited too long to concern themselves with saving and investing for retirement (48%); and
  • Should have relied more on outside experts to monitor and manage their retirement savings (41%).
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Retirement Related News for 11/06/2015

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From PLANSPONSOR: Fidelity Research Busts Five Common Retirement Myths

Retirement is a matter of when, not how much, for most people.

Conventional wisdom has it that workers plan their retirement around the amount of money they have saved. But nearly half of American workers plan to stop working on a specific date, regardless of how much they have for retirement. This is one of several myths debunked in new research from Fidelity Investments, which surveyed retirement savers and recent retirees on the nonfinancial factors that influence retirement decisions.

“It’s critical that employers understand these factors and design benefits to either retain or help transition pre-retirees based on their workforce strategy,” cautions Jim MacDonald, president of Workplace Investing at Fidelity Investments.

From The Gadsden Times: 72-year Employee of Goodyear Retires

Sid Richardson, a 72-year employee of the Goodyear-Gadsden plant and the longest-serving hourly associate in Goodyear Global history, officially retired Thursday at the USW Local 12 headquarters.

He was joined by friends, Goodyear-Gadsden leadership, USWA Local 12 members, former co-workers and family at a small celebration.

“I want to thank everyone for everything you have done for me. I’ll miss coming to work every day and seeing my family, because I spent a lot of time with my work family over the years,” Richardson said. “It’s really all I’ve ever known, so I will miss it. But the time is right.”

From Forbes: Men's Retirement Savings More Than 50% Bigger Than Women's, New Study Shows

Add this to the ongoing debate over pay inequality between the sexes: according to new research, men’s retirement accounts are more than 50% higher than women’s on average in the U.S. – despite women being far, far better savers than their male counterparts.

The results of a review of Vanguard’s retirement plan investors, released today, show men’s accounts averaged $123,262 while women’s accounts were $79,572; the median account balance for male participants was also substantially higher at $36,875 for men and $24,446 for women.

From BenefitsPRO: 10 Questions on Retirement Preparedness

How well prepared are American workers for retirement?

Not very, according to the vast majority of studies, which have found that not only do many people have nothing saved for retirement, but those who’ve managed to put money away are way short of the mark.

According to a Financial Finesse study, as people are increasingly made responsible for funding their own retirement, just 19 percent are confident that they’re on track to retire with enough money to do so.

From PLANSPONSOR: Retirement Investors Need to Understand Role of Risk

“Understanding how risk factors into your plan can help build financial confidence,” says Marcy Keckler, with Ameriprise Financial.

Seventy-three percent of American investors tend to avoid risk entirely or weigh risk very carefully when engaging in financial decisions, according to the Financial Risks & Investor Attitudes study by Ameriprise Financial.

The study found 31% of investors surveyed are what Ameriprise calls Risk Avoiders, who are the most guarded when it comes to financial risk-taking. Eighty-nine percent of this group view their outlook on risk as “cautious.” But, while nearly half (42%) of respondents in this profile claim they are not willing to take risks with their finances, many are unknowingly increasing their exposure to risk, Ameriprise says.
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Friday Top Five: Retirement Related News for 10/23/2015

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From Governor Nixon: Gov. Nixon takes action to keep FY2016 budget in balance following loss of one-time tobacco settlement funds

Gov. Jay Nixon today announced that, due to the recent court ruling relieving tobacco companies of their obligation to pay the State of Missouri $50 million under the Master Settlement Agreement, spending will need to be restricted in order to maintain a balanced budget.

“Based on the St. Louis Circuit Court’s decision, both my administration and members of the General Assembly counted on these funds being available when the Fiscal Year 2016 budget was passed,” Gov. Nixon said. “Now that this ruling has been overturned, this unexpected loss of funds must be accounted for through spending restrictions to keep the budget in balance and our AAA credit rating intact. In taking these necessary actions, we have made every effort to minimize the impact on vital services by reducing spending from new programs yet to get underway and funding increases that would grow the size of government.”

From Forbes: An Early Start Can Lead To An Early Win In Retirement Saving

I recently ran into a blog post on dealing with money for Millennials that’s gone viral: “If You Have Savings In Your 20s, You’re Doing Something Wrong.” The message: enjoy life now, spend your money and quit trying to save so much since life is a gamble and living by the numbers sucks! That idea kind of makes me go, “Hmmm, how can that be right?” so let’s talk about it.

I’m totally in agreement with the idea that saving shouldn’t be a gloomy, hated thing. Diets with food we hate eating end up in calorie binges we love! The same thing goes for your money. If you can’t enjoy the journey, you probably aren’t going to the destination.

But there’s a balance in here somewhere, and an undeniable fact. Starting saving during your 20’s beats saving later hands down, all over town! And you can gamble on yourself with all your dough, but having enough to quit working someday doesn’t have to be a gamble at all!

From BenefitsPro: IRS 2016 Cost-Of-Living Adjustments For Retirement Plan Contributions

The Internal Revenue Service released cost-of-living adjustments for retirement plan contributions today.

As expected, contribution caps will remain largely unchanged from last year.

In a press release, the IRS explained that Social Security’s cost-of-living index did not meet the statutory thresholds required to trigger adjustments to plan contribution caps.

From Treasurer Clint Zweifel: For National Save for Retirement Week, Treasurer Zweifel Offers Advice to Make Your Retirement More Secure

Treasurer Zweifel is raising awareness of the steps Missourians can take to prepare for retirement.

State Treasurer Clint Zweifel is celebrating National Save for Retirement Week, (now know as National Retirement Security Week) October 18-24, with a few tips to help you save and plan for retirement. Individuals and families have more options now than ever before to save for their retirement. From employer-sponsored plans to private options, now is the time to understand what you will need in retirement and stick to a long-term plan to get there.

From News Leader: How To Pay A Pension Debt When Fair Isn't An Option?

There's big trouble brewing in a little corner of Springfield's police-fire pension plan. And despite repeated promises (and city ordinances) saying that public safety employees would foot the bill, taxpayers might be tapped again for help.

The problem goes back to 1999, when police and firefighters agreed to pay for a boost in retirement benefits through a payroll deduction. The cost of the benefit has been rising steadily for veteran employees, raising concerns those long-serving employees will resign or retire early, increasing the financial burden on the few that remain.

Bonus Article:

From The Wall Street Journal: Retired Women Are More Generous Than Men

Maddy Dychtwald: Are retired women really more generous than retired men?

That is one of the questions my firm, Age Wave, in partnership with Merrill Lynch, set out to explore in our just released study, “Giving in Retirement: America’s Longevity Bonus.” We surveyed 3,694 adults age 25-plus from all walks of life and socioeconomic strata to deepen our understanding of the role of giving in retirement and how giving back has the potential to both maximize social impact and provide personal fulfillment.
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Friday Top Five: Retirement Related News for 10/16/2015

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From the News Tribune: Lawmakers finally move on study of state pay, benefits

After several years of inaction, Missouri state government issued last week its request for proposals from potential consultants interested in determining the “total compensation” state employees receive.

Federal reports and a special Missouri legislative committee already agree — state government’s employees are, on average, the lowest-paid in the nation.

But members of the Legislature’s Joint Interim Committee on State Employee Wages also want to know if ranking changes when the employees’ total compensation — salary, health care and retirement and other benefits — are considered.

From the News Tribune: Lower gas prices means no Social Security increase next year

For just the third time in 40 years, millions of Social Security recipients, disabled veterans and federal retirees can expect no increase in benefits next year, unwelcome news for more than one-fifth of the nation’s population.

They can blame low gas prices.

By law, the annual cost-of-living adjustment, or COLA, is based on a government measure of inflation, which is being dragged down by lower prices at the pump.

The government is scheduled to announce the COLA — or lack of one — on Thursday, when it releases the Consumer Price Index for September. Inflation has been so low this year that economists say there is little chance the September numbers will produce a benefit increase for next year.

From Forbes: How To Give Financial Gifts To Loved Ones

Giving to a loved one or charity can be one of life’s greatest joys. But when it comes to gifting, there are some key issues, including potential tax implications, that you’ll want to keep in mind in order to make the most of your gift.

The most important thing to remember is that financial gifts are irrevocable: Once you make the gift and record it on your federal tax documents, you can’t take it back.

From American City & Country: The Retirement Tsunami

As the point person for Houston’s initiative to maintain a quality workforce in the face of a rising tide of retirements, Kelly Schreck practices what she preaches. So, as head of employee development, she asked two employees in her department with very different specialties to swap jobs for a year.

For 12 months, each woman trained the other on how to perform her duties, so that each mastered the technical details of handling labor relations and public information.

From BenefitsPro: 4 Simple Things To Do Now While You're Not Retired

Older workers are in trouble when it comes to retirement. They have little or no savings to meet what’s going to be a huge income gap for most of them, and no time to correct the situation.

According to a new study from the Insured Retirement Institute, the typical retiree faces annual expenses of some $50,000 but can only expect an average of $16,000 a year from Social Security.
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Friday Top Five: Retirement Related News for 10/02/2015

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From PLANSPONSOR: Retirement Readiness in the Age of High Tuition

Adults who think it’s their duty to put the kids through college may want to think a little further—that is, if they are also saving for retirement. A recent LIMRA Secure Retirement Institute study explored the incidence of parents and grandparents helping, or being willing to help, finance a four-year college education and their attitudes behind that. More than collecting numbers, the researchers wanted to give a warning, if needed, to self-sacrificing family who might later find they’ve given up more than they bargained for.

From Forbes: Four Must-Know Social Security Facts

When it comes to Social Security, far too many retirees — and future retirees — are in the wilderness. Not only are most Americans not fully informed about the program, they don’t know how to maximize their benefits.

Of course, knowing what Social Security offers and how to get the highest-possible benefits are two different things. There’s a lot you have to know.

From CBS News: Is more money the key to a happy retirement?

With so many people approaching their retirement years with meager retirement savings, rather than aiming to fully retire and not work at all, it might be more realistic to aim for being happy. To help you get there, it's important to think about how much money you really need to be happy. A long time ago, someone said "money can't buy you happiness," and indeed considerable thought and research has gone into the question of whether having more money makes you happier. The so-called "Easterlin paradox" maintains that once your basic needs are met, having additional income won't add to your happiness.

From CNN Money: Low gas prices may doom Social Security raise

Cheap gas is good news for most people -- except senior citizens. Falling prices at the pump mean that retirees probably won't get a boost to their Social Security benefits next year.

The amount of money that Social Security pays out is adjusted each year to taken into account the rate of inflation in the 12 months leading up to September. This is known as the cost of living adjustment, or COLA. This year benefits rose 1.7%, and they've climbed by less than 2% for three years in a row.

From Daily Finance: How to Start Investing, & Why Now Is a Good Time

There is a big percentage of Americans who don't like complex financial problems. It's why things get crazy around tax season. It's why personal debt and credit are out of control for many. And it's why so many Americans don't invest for their retirement. Sure, there are plenty of people who rightly say they don't have the extra money to invest. But I suspect that these people are actually in the minority. With careful planning, it's possible for most people to invest in such a way that -- at least -- they will be somewhat financially secure upon retirement.

Related:  As a Missouri state employee, you can easily start investing through the State of Missouri Deferred Compensation Plan by using Target Date Funds or a Self-Directed Brokerage account.
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Avoiding the worst

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The investment community has pushed the stock market to historic highs. I read the blog that our retirement is secure. When (not if) the bubble bursts and markets drop to half their value, and the dollar to historic lows, what provision is there for public employees to receive an income? or if the dollar is devalued? The USA cannot keep borrowing to fund the present lifestyle. Cuts would be drastic and interest would rise to afford paying the debt. What happens to fixed income? I may not live to see the worst, but the coming generations will. Is there anything we need to avoid the worst?
Note: Due to the nature of this question, we took it to our chief investment officer and below is his response.

You portend two, potentially separate scenarios. A stock market crash and/or a US Dollar crash.  If we were to see a stock market crash only, it is likely that assets would flow from stocks to perceived safe haven assets like US Treasuries and gold.  If we were to see a stock market crash fueled by a US Dollar crash it likely means investors have lost faith in the US government to make good on its IOUs.  In this scenario, assets would flow from both stocks and US Treasuries into non-dollar denominated assets and gold.

You are probably starting to pick up on a common theme as to where one should concentrate their money if they were convinced that one of your two scenarios would play out.  There is just one problem, investing $8.4 billion in gold generates no income to pay current retirees like yourself.  While a gold investment has the potential to protect principal should one or both of your scenarios play out, we are simply not in a position to manage the portfolio as if we know what the future holds.  Our number one investment belief is that diversification is critical because the future is unknown.  This philosophy has guided our thinking for nearly twenty years and has allowed us to generate annualized returns of over 8.5%. Over the last few years we have been taking steps to diversify the portfolio well beyond what most institutional investors consider to be mainstream.  That has resulted in less exposure to stocks and larger exposure to commodities (including gold) and other assets expected to perform well should inflation expectations and actual inflation start to rise, like inflation indexed bonds. 

With that said, the unwinding of high debt levels is generally deflationary, not inflationary.  There are two ways debt levels come down.  Either the debtor pays it off or the creditor writes it off.  If the debtor pays it off, he will spend less of his income on other things.  Because he is spending less, there will be deflationary pressure on the goods and services he would have otherwise purchased.  Because one person’s debt is another person’s asset, if he is unable pay it off, it will mean the value of the asset declines, thus the asset deflates in value.  Because debt levels have peaked and have started to come down, this deflationary pressure is a very powerful force on the economy.  It is quite possible that all the monetary and fiscal stimulus provided by our Federal Reserve and our government (which many are now arguing must ultimately result in inflation) will not be enough to offset this deflationary force.  The bottom line is we simply don’t know, so having assets which have historically performed well in a deflationary environment, like long maturity US Treasuries, is also an important part of our diversification strategy.

I hope this has given you a feel for how we go about managing the assets of the retirement system and allows you some comfort when we tell you, “Your retirement income is secure.”

Rick Dahl,
Chief Investment Officer
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