retirement savings

Another Day, Another National Retirement Plan Acronym

Congressman Joe Crowley of New York is just the latest politician to formally rollout his legislative version of a national retirement plan. The Act is titled the “Secure, Accessible, Valuable, Efficient Universal Pension Accounts” (SAVE UP Accounts). Its target customers are workers whose employers do not currently offer a retirement savings plan. It has many of the same features as other federal and state retirement plan proposals:

  • Automatic enrollment in an IRA-like plan
  • Pre-tax employee contributions
  • Limited number of low-cost investment funds
  • Opt-out option
But it also has some features many of the other proposals do not:

  • Requires an employer contribution indexed for inflation and based on employee hours worked (waived if employer is contributing to an existing retirement account)
  • Provides a limited employer tax credit to offset the cost of employer contributions
  • Sets target benefit amounts
  • Creates a collective investment pool to protect against losses
What Crowley Gets Right

According to
an article in Plan Sponsor, a recent report by Natixis Global Asset Management ranked the United States tenth among wealthy nations for retirement security. Some of the reasons put forth in the report for the tenth place ranking are income inequality, lack of access to a workplace retirement plan and a low contribution rate. The report suggests that the U.S. “learn from the experiences of other countries around the world.”

But the people in the countries ranked one through nine have numerous advantages over U.S. citizens when it comes to saving. Chief among them is lower health care costs and less income inequality, not to mention the many social programs like paid leave and childcare benefits.
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Should Women Receive Retirement Income Subsidies?

Income inequality is a huge social and political issue this year. But just two years ago it was gender equality grabbing the headlines. It was then that the dual and dueling messages of two Ivy League-educated, wealthy, women received a lot of attention. Sheryl Sandberg wrote the blockbuster book Lean In… and Anne-Marie Slaughter wrote “Why Women Still Can’t Have It All,” for The Atlantic. Both touched on the difficulties of achieving work-life balance, pay equity and the impact of entering and exiting the workforce. Neither specifically discussed the impact of gender income inequality on women’s retirement income. But it is a conversation worth having.

Earnings Have A Real Impact On Retirement Savings

Most people are familiar with the equal pay for equal work efforts—the latest being the Paycheck Fairness Act. They are aware of the often-cited statistic that women who work full-time earn on average 77 cents for each dollar men earn. They may also know some of the reasons why the gender pay gap exists, including but not limited to:

  • More men choose higher paid professions like engineering and finance
  • More men negotiate raises and promotions than women
  • More women leave the workforce to take care of family
The bottom line is despite the reasons for the gender income equality gap; the result is that women have lower retirement savings than men because saving for retirement is linked to earnings. Social security benefits are based on average lifetime earnings. Defined benefit pension plan benefits are based on earnings and years of service from a specific job. And the ability to save for retirement and receive employer-matching contributions is also impacted by earnings.

A Solution to Women’s Retirement Savings Problem Continue Reading...

Low Income Workers Need Real-life Retirement Saving Solutions


Almost all the articles lamenting the sad state of retirement savings in America focus on the averages. The average annual income of savers… The average retirement account balance… The average retirement account balance by gender, age, income level... Not surprisingly, the solutions they propose to solve the “retirement savings crisis” are for the average person.

The advice typically goes something like this:

  • Create a budget or savings plan
  • Save more, spend less
  • Participate in your workplace retirement plan
  • Contribute enough to get the full employer match
  • Increase your savings overtime
This average advice is not very helpful for many workers, especially low-income workers. Fortunately, a few publications do provide specific advice to this subgroup of retirement savers. For example, U.S. News and World Report produces an annual article on how low-income households can save for retirement. The usual suspects are always on the report, like creating an emergency fund and making saving automatic. Which makes me wonder what the author’s definition of low-income is and if she or he spoke with any low-income people before coming up with these suggestions. However, there are items on the list that I really like and support. For example, according to the U.S. News and World Report annual list, low-income workers can increase their retirement savings by:

  • Saving all or part of their tax refund or annual bonus
  • Claim tax breaks when they do save for retirement (e.g., SAVER’s tax credit)
  • Delay retirement
  • Delay claiming Social Security benefits
  • Pay attention to plan fees
But with average annual pay increases (since we’re talking averages) around 3%, how realistic is even this advice rom U.S. News and World Report and others?

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Workplace Retirement Plans – Exposing Fees, Finally


I have a confession to make. After years and years of discussing retirement plan features with new and old employees, I never once spoke of plan fees. Not during new hire benefits orientations, one-on-one information sessions, or group training sessions. I never even had a conversation about retirement plan fees with an employee benefit colleague, my supervisor, or the Chief Financial Officer (CFO). I did once have a conversation over dinner about plan fees with a third party administrator trying to get our company's business.

I'm making this confession because it wasn't until a few years ago that I realized the poor service I was providing in this area to employees. I considered fees in my own portfolio but I never once in my career thought of incorporating fee information into my discussions with employees. But all of that changed when the U.S. Department of Labor (DOL) passed regulation 408(b)(2) mandating annual fee disclosure notices for employees participating in workplace 401(k)-style retirement plans. And now retirement plan fees are all I want to talk about. For me, it is the biggest game-changer in workplace retirement plan administration and education.

What is Fee Disclosure?

DOL Regulation 408(b)(2) amends the Employee Retirement Income Security Act (ERISA) of 1974. It requires covered service providers (e.g., third party administrators and their subcontractors) to retirement plans to reveal information about their compensation. The goal is to help plan sponsors (e.g., employers) determine if the compensation is reasonable and identify potential conflicts of interest. The regulation went into effect on July 2012.
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Workplace Retirement Plans-Benefit Professionals Must Question The Status Quo


The U.S. federal government administers two of the largest retirement plans in the country, Social Security (SS) and the Thrift Savings Plan (TSP). Social Security is available to all eligible workers and the TSP is available to federal workers and those in the uniformed services. Social Security is similar to a non-government defined benefit pension plan. Eligibility is based on years worked and wages earned, and benefits last a lifetime. The TSP plan is similar to 401(k)-style retirement plans where the employee contributes part of their pay to the plan and chooses a fund or funds to contribute to, and benefits are not guaranteed.

Given the federal government’s experience with large, complex retirement plans and the significant benefits they provide, benefit professionals may want to listen when the government suggests changes in this area. And it is not just the federal government proposing changes to workplace retirement plans, at least ten states are looking to expand access to a retirement savings account to workers without one. Unfortunately, these proposals rarely receive support or endorsement by benefit professionals.

This is odd. Benefit professionals are dedicated to helping employees minimize financial risk through insurance and savings accounts. So why are they not in support of efforts to expand access to these products?

Reasons Benefit Professionals Do Not Support Changes to Workplace Retirement Plans
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Stop Retirement Readiness Shaming


We Americans love our celebrations, holidays, and observances. In fact, an entire publication, Chase's Calendar of Events Annual, is devoted to listing and explaining them all. For example, today, April 12 is National Drop Everything and Read Day. This is a good day to observe. But I have another day, week, no month I want to observe--National Stop Shaming Americans' Lack of Retirement Readiness Month.

Seriously, if you set up a Google Alert for Retirement Readiness, and I did, you will receive dozens of links in your inbox daily. Of course folks in the financial services industry write many of these articles. But academics and behavioral economists write some. All coming to the same conclusion: overall, Americans need to save more for retirement. Enough with the surveys and the self-serving commentary.
How about writing about how retirement readiness can be greatly improved if:

  • Employers who sponsor 401(k)-style retirement plans are required to make matching or profit sharing contributions unless they can show it will result in financial hardship
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