Retirement, Once On Track, Now Derailed For Many

Retirement, once on track, now derailed for many | BenefitsPRO

Source: BenefitsPRO, by Alan Goforth

Many Americans who thought their retirement planning was on track before the pandemic now find their plans detoured or even derailed. Fidelity’s State of Retirement Planning study examined the extent of planning Americans have undertaken to meet their retirement goals, how they feel about those efforts and the impact the COVID-19 pandemic has had on their preparation. The study also looks at what worries them most and the role planning plays in allaying their stress and concern. Here are some takeaways:

Retirement planning.

Most Americans (69 percent) describe themselves as proactive or planners, and 64 percent either have a plan or have thought in detail about how to afford their desired lifestyle in retirement.

Effects of pandemic.

Among people who have lower confidence levels than before the events of the past year, 82 percent report that their retirement plans have been affected negatively by the pandemic, placing many several years behind where they otherwise would have been. Although men and women report similar recovery timelines, far more women say they are not sure just how far back they are, which likely reflects a lower rate of planning.

Despite this, eight in 10 are confident they will achieve their retirement goals. Men in particular express greater assurance: 55 percent say they are “very confident,” compared to only 39 percent of women. While many are frustrated (30 percent) or angry (11 percent), nearly half (45 percent) are hopeful or determined they will get back on track. In fact, 36 percent are more confident now than they were before the events of the past year.

Stress levels.

When presented with a list of retirement topics that might keep them up at night, younger and older Americans answered differently. While worry over the cost of health care was a theme common to all, those closer to retirement generally had fewer worries, and they tended to be financial. For the younger generations, the concerns were more existential.

Power of planning.

The survey results suggest that the simple existence of a plan has a positive impact on financial mindset, and these benefits accrue even after just taking first steps Gen Z and Millennials more than Gen Xers or Boomers report going it alone and using online tools and calculators.

Finally, the study showed that brushing up on retirement guidelines can make a difference When planning for retirement, it can be useful to have familiarity with some of the broadly accepted fundamentals. The survey results show that a refresher may be useful for many.


Only 25 percent of respondents accurately indicated that experts recommend having 10 to 12 times their last full year of working income by the time they each retirement. Half of all respondents thought the figure would be only five or fewer times.


Twenty-eight percent said financial experts would recommend a withdrawal rate of 10 percent to 15 percent of retirement savings every year, which would use up one’s retirement savings quickly. Withdrawing that amount would be far above the suggested rate of 4 percent to 5 percent annually.

Market returns.

Almost three-quarters of respondents believe the stock market has seen negative returns more frequently than positive ones over the past 35 years. It may come as a pleasant surprise for people to learn that the stock market has had a positive annual return for 26 out of the past 35 years.

Health care expenses.

Most respondents underestimate the cost of out-of-pocket health care for a couple in retirement, with 37 percent estimating between $50,000 and 100,000. In fact, for a couple retiring at 65, the actual average cost throughout their retirement is three times higher, at $295,000.

While Politically Divided, Americans United in Fear of Affording Retirement

While Politically Divided, Americans United in Fear of Affording Retirement  - 401K Specialist

Source: 401k Specialist, by Brian Anderson

Everyone knows how politically divided the country is these days, but Americans can agree on some things: The pandemic has increased concerns about financial security in retirement, and they want Social Security to be around for the long haul to help.

A new report from the National Institute on Retirement Security shows the vast majority of Democrats (70%), Independents (70%) and Republicans (62%) agree that the nation faces a retirement crisis, exacerbated by the COVID-19 pandemic. There also is bipartisan agreement that the average worker cannot save enough on their own to guarantee a secure retirement.

The national survey of working-age Americans found 51% of Americans say the pandemic has increased concerns about achieving financial security in retirement. And the COVID-19 concern is high across party lines: 57% among Democrats; 50% for Independents; and at 44% for Republicans.

The survey, “Retirement Insecurity 2021 | Americans’ Views of Retirement,” was conducted by Greenwald Research to measure sentiment on a broad range of retirement issues. The full report is available here, and it will also be the subject of a webinar scheduled for Thursday, Feb. 25, at 2 p.m. ET to review the findings.

“Today’s COVID-19 job losses, furloughs and pay cuts will further damage Americans’ ability to have a secure retirement. This new research shows the deep economic impacts of the pandemic have only increased Americans’ retirement anxiety,” said Dan Doonan, NIRS executive director and report co-author.

“We also found that retirement anxiety transcends political affiliation. Across party lines, Americans are frustrated with policymakers and that they can’t save enough on their own to be self-sufficient in retirement,” Doonan said. “As such, enacting retirement policy solutions would be a win-win for policymakers and the country, delivering financial relief for working families on an issue that concerns Americans on both sides of the aisle.”

The research indicates Americans see several factors contributing to their struggle to prepare for retirement. The escalating cost of healthcare (59%) and long-term care top the list (56%). Other factors include longer life spans (53%), stagnant salaries (51%), fewer pensions (51%), debt (47%) and “do-it-yourself” retirement plans (45%).

Nearly 70% surveyed said most workers do not have the financial skills to manage money in retirement, which helps explain why 65% said they see pensions as better than 401k plans for providing retirement security. About three-fourths said that “all workers should have access to a pension plan so they can be independent and self-reliant in retirement.”

Expand Social Security?

In terms of retirement policy, the research indicates that Americans are highly supportive of Social Security(79%), and that it should remain a priority of the nation no matter the state of budget deficits. Nearly half (49%) surveyed were in strong agreement.

Most surveyed (60%) support the idea of increasing the amount that workers and employers contribute to Social Security to ensure it will be around for future generations. And half support expanding Social Security, with 25% saying it should be expanded for all Americans and 25% saying it should be expanded except for wealthier households.

The Washington, D.C.-based National Institute on Retirement Security is a non-profit, non-partisan organization established to contribute to informed policymaking by fostering a deep understanding of the value of retirement security to employees, employers and the economy as a whole. NIRS membership includes financial services firms, employee benefit plans, trade associations, and other retirement service providers.

As Biden Sticks To The Changes Of The Trump Era, New Rules For 401 (K) Rollovers Will Take Effect

Source: New York News Times, by Daniel Redmayne

The Ministry of Labor said late last week that it would not replace it, but build it under the Trump administration’s regulations to manage advice affecting trillions of dollars in retirement accounts.


With many rollovers coming into effect on Tuesday, hundreds of billions of dollars a year will be transferred from 401 (k) to personal retirement accounts and will be more tightly regulated. It also gives investors the right to file a proceeding or arbitration claim if they feel they have been given bad rollover advice.

Investment fees tend to be lower for 401 (k) plans than for IRAs, so “financiers can move funds from 401 (k) plans to IRAs and manage them in a more profitable way. We have a strong incentive to do so, said Barbara Roper, director of investment protection for the non-profit American Consumers Federation.

“This is a signal from the Ministry of Labor and we will continue to strengthen consumer protection so that rollover recommendations are truly in the best interests of consumers,” she said.

The regulation will also keep advisors to IRA owners at a higher level in managing conflicts of interest, including conflicts of interest that arise in the sale of products such as variable annuities that pay commissions and other sales incentives. Said Fred Leish. We specialize in employee benefits.

As Biden sticks to the changes of the Trump era, new rules for 401 (k) rollovers will take effect.

Are You Ready For The New 401(k) MEP/PEP?

Are You Ready For The New 401(k) MEP/PEP?

Source: Forbes, by Chris Carosa

On January 1, 2021, the 401(k) world as you know it will be reborn. It may start out slowly at first, but ultimately the popular retirement savings vehicle will change.

And you should be happy.

It’s very possible, if not likely, the new and improved “401(k) 2.0” will allow you to benefit from broader opportunities, more flexibility and lower costs. Best of all, it will make this millionaire-maker savings plan accessible to more people.

When Congress passed the SECURE Act last year and President Trump signed it into law, it allowed a rarely used form of the 401(k) plan to become more universally available. Called “Multiple Employer Plans” or “MEPs,” prior to the SECURE Act their use was restricted generally to business associations. Beginning January 1, 2021, any company can pool their 401(k) plan with any other company.

These “Pooled Employer Plans” (“PEPs”) operate much like MEPs. The main difference is, unlike MEPs, PEPs do not require member businesses to share some form of commonality. And while this portion of the law doesn’t become effective until next year, that doesn’t mean the process of moving from stand-alone plans to PEPs hasn’t started.

“The transition has already begun,” says David N. Levine, Principal at Groom Law Group. “I’m involved in a number of PEPs where some small plan sponsors have already begun to plan the transition with their advisors. The impact on participants is likely in 2021 though.”

Even if your 401(k) plan is destined to joined a PEP come January, you won’t be able to tell just yet. In fact, depending on how the new plan operates and how often you look at your 401(k) account, you may not see anything at all.

“One of the main reasons why a company chooses to use a MEP/PEP is to transfer responsibilities and authority to someone else,” says Ilene H. Ferenczy, Managing Partner of Ferenczy Benefits Law Center. “So, probably the best way to ensure a good transition from the single employer plan to a MEP is for the company to let the MEP representatives do their job by following their directions carefully. The company’s staff should get as much information as it can about what the MEP representatives need, both initially and on an ongoing basis, and then set up internal systems to make that happen as easily as possible.”

There is a good chance, however, that moving from a stand-alone company plan to a PEP will bring wholesale changes in the financial professionals serving the plan. This also means changes in the investment options.

“Some 401(k) plan participants may be attached to their current plan advisor or investment funds, and many people are a little suspicious of change,” says W. Michael Montgomery, Managing Principal of Montgomery Retirement Plan Advisors. “However, this concern generally passes quickly if the benefits of expert, independent investment oversight is communicated clearly.”

On the bright side, if you (like many others) invest solely in a target date fund, while the name of the fund may change, the underlying investment strategy likely won’t change.

Even if the service providers remain the same and the fund line-up is retained, you may experience a slight hiccup in your 401(k)—but only if you’re paying close attention.

Normally, when a company plan undergoes a change, you’re notified that there will be a short “blackout” period while the old plan converts into the new plan. If you’re one of those “set it and forget it” types who prefers to let their 401(k) run on auto-pilot, you might not even notice this.

“The merging of a single employer plan into a MEP/PEP solution may or may not require a change of recordkeepers,” says Terrance Power, President of Platinum 401K, Inc. “Retention of the existing recordkeeper could likely eliminate the need for a ‘blackout’ of the plan, by the way. Most of the PEP solutions being proposed won’t require significant (if any) changes in plan design (eligibility, vesting, etc.). It is likely that there would be a shakeup in the investment fund lineup as a new 3(38) Investment Manager steps in to select and monitor the investment options. And depending on the structure of the new program, there could be a significant cost savings that could be passed on to the participants.”

You may think of your 401(k) as an investment tool, and, to some extent, it is. But it is the plan recordkeeper that makes sure all the trains run on time. This service provider is the hub which connects all other service providers. They keep track of all the accounts and the money flowing into and out of those accounts, including investment purchases and sales. When there’s a problem with your 401(k) account, it’s usually not a problem with the investment adviser, but with the recordkeeper.

This will often be where 401(k) MEPs and PEPs have their greatest challenges. Not only do these pooled plans introduce more complex logistics than stand-alone plans, but they also present the opportunity to streamline archaic processes. That may sound good, but it usually takes a few tries before you can be confident all the bugs are worked out.

“Be careful with 360 payroll integration,” says Troy Tisue, President of TAG Resources, LLC. “360 integration means a participant change on the recordkeeper’s site automatically adjusts at the payroll provider level. It’s a lofty goal and when this works, life is good. But bad data hitting a recordkeeper platform remains one of the biggest problems in this industry. 360 integration often just makes bad data hit the recordkeeper firms faster. Tracking eligibility across employers is unique to MEPs/PEPs—when an employee leaves one employer for another inside of a PEP, their eligibility goes with them. Pooled structures don’t just ‘plug-and-play’ with 360 integration—this takes a lot of planning.”

One area where you might benefit the most pertains to your own financial literacy. With stand-alone plans, companies can’t always afford the latest and greatest in employee financial education programs. It’s not unusual for smaller companies to use the same 401(k) vendor for multiple services.

Large companies with huge 401(k) plans can afford to hire specialists. By pooling their 401(k) plans together into a MEP/PEP, smaller companies’ retirement plans will now enjoy economies of scale similar to larger companies. That means they can hire skilled specialists that concentrate solely on employee education.

“Adopters within a MEP/PEP are able to utilize the service providers and fiduciary experts who focus on their vertical,” says Philip S. Scott, Registered Representative at Strategic Capital Advisers. “Participant education is one of these services, which are enhanced as a result of the Adviser(s) being focused solely on participant education and not being pulled into other operations of the Plan.”

Finally, there are some who view the new 401(k) MEP/PEP as a competitive alternative to state-sponsored retirement plans. Though in some sense this is true, it’s just as accurate to think of them as complimentary components on a similar spectrum.

“It’s interesting to me to see how naturally MEPs and PEPs fit into the retirement ecosystem alongside state-facilitated retirement savings programs like OregonSaves, Illinois Secure Choice, and CalSavers,” says Lisa A. Massena of Massena Associates LLC. “State Auto-IRAs give employers a reason to look at MEP/PEP, and MEP/PEP give employers a place to ‘graduate to’ when they’re ready to invest in a retirement program. By then they’ve also mastered the art of payroll deduction into retirement accounts, and they have a workforce savings track record that makes them a good customer.”

Because 401(k) MEPs/PEPs are more robust than state-sponsored plans, employees who have access to MEPs/PEPs will be able to save more. This increases the chances they can retire in comfort without undue reliance on government or their former company.

Financial independence is a goal you should have. The advent of the new 401(k) MEP/PEP will make this goal easier to attain for more and more people.

California’s New State-Run Retirement Program Survives Taxpayer Group’s Challenge

Image result for California’s New State-Run Retirement Program Survives Taxpayer Group’s Challenge images

Source: The Sacramento Bee, by Andrew Sheeler

A federal judge on Tuesday dismissed a California conservative tax group’s effort to block the implementation of a state-run financial savings program that was created to help lower-income workers save for retirement.

The judge’s ruling in favor of the CalSavers Retirement Savings Program allows the program to continue operating. The program comes from a 2016 law that that allowed the state to offer a retirement savings plan to people whose employers do not provide pensions or 401(k) plans.

More than 1,500 employers have registered for CalSavers since the program’s launch in 2019, according to Executive Director Katie Selenski.

Employers with more than 100 employees, who do not already have a retirement plan, must register for CalSavers by June 30 of this year, while employers with more than 50 employees have until June 30, 2021, and those with at least five employees have until June 30, 2022.

“We are very pleased with the Court’s ruling,” California State Treasurer Fiona Ma said in a statement. “CalSavers is pioneering and building momentum. Workers without access to a savings program at work are eager to start saving. There is no reason to deny millions of hardworking Californians access to this savings program when the alternative is to see them work until they drop, or suffer the hardships that come with little to no savings.”

The lawsuit was brought by the Howard Jarvis Taxpayers Association, which argued the program violates a federal consumer protection law that sets standards for retirement plans offered by employers. The federal law is the Employee Retirement Income Security Act, or ERISA.

Judge Morrison England, of the U.S. District Court for the Eastern District of California, rejected that argument, stating that, “In sum, the Court finds that CalSavers is neither an employee benefit plan nor does it relate to an ERISA plan.”

A representative for the Howard Jarvis Taxpayers Association said that the organization “finds it odd” that the judge’s analysis didn’t include a response to a brief filed by the U.S. Department of Justice, which agreed with the taxpayer association’s argument.

“(Howard Jarvis Taxpayers Association) will appeal to the Ninth Circuit (Court of Appeals) and is confident about its prospect on appeal,” a spokeswoman said in a statement.

Congress takes up retirement disclosure proposal

Image result for retirement photos

Congress has begun work on the Lifetime Income Disclosure Act, a bipartisan measure that requires workplace retirement plans to give participants estimates of what retirement income their account balances would produce through an annuity. (4/7)

Commentary: Critical-illness insurance can protect savings

A critical-illness insurance policy can help “bridge the gap” in health coverage, writes Rod Rishel of AIG Consumer Insurance. Such policies offer a lump-sum payment that can help guard retirement savings and also provide continuity for small businesses, Rishel writes.

ThinkAdvisor (free registration) (3/28)

Survey: Young workers like automatic features in retirement plans

Millennials younger than 30 are supporters of 401(k)-plan features that take effect automatically, a survey by J.P. Morgan Asset Management found. They approve of target-date funds and other qualified default investment alternatives, as well as features that automatically enroll workers in defined-contribution plans and automatically increase contributions. (3/29)

Survey: Parents are biggest influence on kids’ financial habits

A T. Rowe Price survey finds that children’s financial habits are formed before high school and that parents’ financial dealings are the main influence. Parents who let children manage money and discuss finances offer real-life grounding, the survey shows, while parents who have trouble financially tend to pass that on to the next generation.

ThinkAdvisor (free registration) (3/24)

Insurance Sector Deal Making Shifting Into High Gear

Expect 2017 to be a year of deal making in the insurance industry, according to a report by KPMG International, with 84 percent of insurance companies surveyed planning to make between one and three acquisitions in 2017, while 94 percent plan at least one divestiture.  Two-thirds of insurers said they expect to undertake a cross-border acquisition this year.

According to the report, “The New deal: Driving Insurance Transformation With Strategy-Aligned M&A,” 33 percent of insurers say transforming their business model will be the primary driver of acquisitions in 2017, with an equal percentage citing enhancing their existing operating model and transforming their operating model as the motivators for deal activity.

“Insurers are clearly hungry for good M&A opportunities,” said Ram Menon, global lead partner at the Insurance Deal Advisory with KPMG in the United States. “They are focused on transforming their business and operating models, and even with geopolitical uncertainties, they are aggressively looking at deals that can help meet their objectives.”

Last Updated 05/25/2022

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