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Government ineptitude strikes again May 29, 2015

Posted by forwardfinancialplanning1 in Retirement Spending.
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All of us rely on government statistics to some degree as we make decisions in life.  Of course, central to that decision making process is the belief that the data spewing out of Washington is accurate.  At the risk of being labeled as “cynical”, I’ve always wondered how accurate these number really are.

A recent analysis by the non-profit Employee Benefit Research Institute (EBRI) highlights the validity of my concerns.  We often read about doomsday predictions based on aging baby boomers’ collective lack of retirement preparedness.  Many of these forecasts lament that while a large portion of today’s elderly population has exhausted their retirement resources (and thus, rely solely on Social Security), it’s going to be even worse for the baby boomers.  Yet, somehow, we Americans seem to muddle through and we don’t hear stories of widespread deprivation of the elderly.  I expect that the baby boomers will do likewise.

The EBRI estimates that the US Census Bureau’s “Current Population Survey” (CPS)  has been underestimating the income of Americans aged 65 and older by $133 billion.  Phrased another way, the CPS was under-reporting IRA and 401k income by more than 250%!!  The Annual Social and Economic Supplement to the CPS is a widely cited source of income data for those 65 and older.  The survey questions misclassified income because they had not been adjusted to reflect the change in the nature of private sector retirement plans from primarily defined benefit plans to defined contribution plans.

So, here’s a heads-up to the government workers who still overwhelmingly have generous defined benefit retirement plans (which are bankrupting many states, and eventually the federal government).  Wake up!!  The people who pay your salaries and your pension benefits don’t have the same sweet deal that you do.

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To some, even free money is not sufficiently attractive………… May 15, 2015

Posted by forwardfinancialplanning1 in 401k plans.
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One of my friend’s favorite sayings is, “You can’t fix stupid.”  And while we can’t dismiss the behavior described below as merely ‘stupid”, it sure has to be on the list.

Much has been written about America’s collective failure to save enough for retirement.  Financial Engines has done an analysis of the 401k plans it works with and they have found that “free money” is not even a strong enough incentive.  Financial Engines found that 25% of 401k plan participants do not contribute enough to capture all of the employer’s matching funds.  In total, this represents $24 billion of forsaken contribution matching dollars or an average of $1,336  per employee annually.

I once heard matching dollars described as “the easiest money you’ll ever make.”  Apparently for many, it’s not easy enough!!!!