“An object at rest or in uniform motion will remain in that state unless an external force acts upon it.”
Newton’s First Law of Motion, 1687, translated from Latin
Isaac Newton was experimenting with inanimate objects when he discovered the laws of motion. But we in the retirement industry know only too well that these laws also apply to human nature. In an age when it is up to employees to take action in order to build retirement security, inertia has been a major impediment.
Fortunately, the leading behavioral economists of our time are showing us how to harness the power of inertia to work for retirement savers instead of against them. Read more
The Health-Wealth Connection – Understanding the power of a physically and fiscally fit workforce
I was at an industry meeting recently speaking to a group of employers, retirement plan record keepers, and financial advisors about the state of retirement readiness in America as we move from old America (working for one employer and defined benefit pension plans) to the new America (multiple jobs and defined contribution plans).
The central theme of the talk was that while Americans are not saving enough, viable solutions to get more Americans on track are becoming increasingly clear. We just need to move faster. Read more
Nobody likes to have something taken away from them, especially kids. At least at my house, when one of my kids takes a toy from another one I always have to intervene. Of course, two minutes later the toy is laying on the floor and no one is playing with it. They have quickly moved on to something else, but there was still an emotional outburst.
You also hear a version of this from employees who are not contributing to their retirement plan. They often cite “I can’t afford to” or “I have too many other priorities” as reasons. This emotional response is a big reason why some plan sponsors are apprehensive of implementing automatic enrollment. They are afraid of the reaction/feedback they will have to deal with by employees who all of a sudden see a reduction in their paycheck. Read more
While I love college football, I’m not a pro football fanatic by any means. I do enjoy a few good pro games each season – and am so glad those painful pre-season games are behind us! Yet I’m always intrigued by how the coach will play their star players for maybe the first quarter and then usher in a gaggle of no-name back-ups to finish it out. It makes for must-snore TV.
I know it’s for good reason – they want to keep their starters healthy, evaluate their second and third stringers, etc. But I wonder if they don’t go with their best line-up, how will they really know what level of talent they’ll have on the field once the real season starts?
I liken this to what I learned from the recent results from surveys by the Plan Sponsor Council of America. I realized that the 401(k) plans were largely outscoring 403(b) plans in some key plan features. Read more
Wouldn’t it be nice to have an idea of how much income your retirement savings could deliver when you retire? Well, legislators are looking to make this information available right at your fingertips through The Lifetime Income Disclosure Act.
Details of proposed legislation:
The intent of the bill is to help participants of defined contribution plans understand how their current account balance translates to monthly lifetime income at retirement. In other words, participants would receive a snapshot into their financial future in just one glance.
Plan sponsors of defined contributions plans (subject to the Employee Retirement Income Security Act (ERISA)) would be required to illustrate how a participant’s account balance would translate into guaranteed monthly payments at retirement. The monthly income estimates take into account the participant’s current accrued value of benefits, with no future earnings or contributions assumed in the income calculation.
Tax the rich! Raise their rates! Limit their deductions! That seems to be the populist mantra. It’s perpetuated in the press, and there’s some indication that the general public seems to support the idea. Now middle class workers with higher than average incomes seem to be caught up in discussions defining those that are “rich.”
As this applies to tax-exempt organizations, we’re talking about hospital administrators, educators, executive directors of local community and other charitable organizations – people who generally earn a better than average income, yet by no stretch of the imagination do their incomes compare to Warren Buffett’s. And when it comes to the impact on their employers’ retirement plans, shouldn’t the tax structure support retirement readiness for those who have dedicated their careers to giving back to their communities? Read more
As a numbers guy – in the insurance industry to boot – one might be surprised to know that I enjoy playing the guitar as much as I love analyzing tax-exempt retirement plans!
I’ve learned it’s one thing to own a really cool guitar (and having it sit in the corner collecting dust), but it’s another to pick it up and practice regularly so you can truly enjoy it.
Maybe the same is true for some employers with their participant education plan. The plan might look good on paper, but could use a little work in order to hit the right notes with employees. So I’d like to provide some best practices to help you create a participant education plan that can rock. Read more