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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!!!!


Averages versus medians March 16, 2015

Posted by forwardfinancialplanning1 in 401k plans, Retirement Savings.
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It’s been said that “the data will say anything if you torture it enough”. Unfortunately, there’s no way to torture this distressing information on America’s collective preparedness for retirement. We often see reports of average 401k balances approaching six figures. While these amounts will only sustain about $4,000 annually to supplement Social Security benefits, the picture is far worse when median balances are considered.

According to the National Institute of Retirement Security, the 2014 median retirement account balance was only $2,500. This figure is so low because roughly a third of households have saved nothing for retirement. When all of those $0’s are included in the calculation of a median, it quickly becomes obvious that we have a major national calamity brewing.

The big question is: “Who’s going to support these millions of people when they can no longer support themselves???”

The good Lord must like defined contribution plans better…. March 1, 2015

Posted by forwardfinancialplanning1 in 401k plans, Pensions.
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A recent survey from USI Consulting Group found that a majority (57%) of Catholic dioceses are planning to freeze or terminated their defined benefit pension plans.

Eighty percent of the diocesan respondents currently offer lay employees a 403b plan while 15% offer a 401k plan.

Private corporations saw that this was the way to go twenty years ago and now we have religious organizations following suit. Living in the state (Illinois) with the nation’s most poorly funded governmental sector pension plans causes me to wonder—“When will our so-called political “leaders” figure this out?”

We’re going in the wrong direction… February 4, 2015

Posted by forwardfinancialplanning1 in 401k plans, Pensions, Retirement Savings, Retirement Spending, Roth IRA, Traditional IRA.
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The Center for American Progress has just released a study that can hardly be deemed as “progress”.

About 31% of Americans have nothing saved for retirement and also lack a defined benefit plan, such as a traditional pension. Among the age group closest to retirement (55-64 year olds), about one fifth (19%) reported no savings at all.

Of the 55-64 year olds who have saved something for retirement, the median retirement account balance was only $14,500. If you strip out the households who have saved nothing, the median retirement account balance of this age group rises only to $104,000.

While $104,000 is not an insignificant sum, it’s not going to support the life style that most of these households expect. Using the withdrawal rule of thumb which allows annual distributions of about 4%, we’re still only projecting about $5,000 per year. And income taxes will eat up a portion of this as well!!

Looks like a lot of people are going to be working well into their 70’s—or depending on the government. Neither of these outcomes look like progress to me.

Who’s responsible for this situation? November 26, 2014

Posted by forwardfinancialplanning1 in 401k plans, Financial Planning, Retirement Savings.
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Numerous articles have been written about how grossly underprepared Americans are for their future retirements. Is it the individual’s lack of discipline in saving? Or, do we point the finger at poorly designed employer sponsored retirement plans?

A recent study by the LIMRA Secure Retirement Institute reveals how employers make this call. The research found that a third of employers give their retirement plans a grade of “A” and 46% give their plans a “B”. However, only a quarter of employers give their employees’ savings habits an “A” and 36% give their employees a “B”. A grade of “C” was given to employees 29% of the time, a “D” grade 8% of the time and an “F” grade 1% of the time.

The research study was conducted in late 2013 and early 2014. More than 1,500 plan sponsors were interviewed.

Useful or Useless???? November 11, 2014

Posted by forwardfinancialplanning1 in 401k plans, Retirement Savings.
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As an avid reader of the financial media, I am exposed to an enormous amount of data and statistics. Often, a survey finding or statistical fact will help to make me a better financial planner. But occasionally, I’ll come across a study that publishes results which cause me to wonder, “Interesting facts, but most likely useless information.”

A recent report from Judy Diamond Associates published employee 401k participation rates by state of residence. Delaware came in at #1 with 85.8% of eligible employees saving within their 401k plans. Nevada came in last at 53%. The top five states in order were: (1) Delaware (2) Connecticut (3) Iowa (4) New York and (5) Arkansas

Should the policy makers from Delaware take a bow? (Thank goodness the elections are over because I’m sure some Delaware incumbent would try to take credit for the top rating). Should Nevada start a retirement planning program in their schools? And, even though the participation rate in Delaware is high, it’s possible that the majority of the account balances are puny, or funded only via non-elective employer contributions. We simply don’t know enough to make any meaningful inferences.

Thus, I’ll toss this study into the “useless” bin.

Movie Review September 28, 2014

Posted by forwardfinancialplanning1 in 401k plans, Pensions, Personal Budgets, Retirement Savings, Retirement Spending.
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We’re generally not in the business of conducting movie reviews, but regular readers know that the woeful state of America’s retirement preparedness is a common theme of this blog. This topic is well addressed by the creators of “Broken Eggs” which is now available at no cost to viewers. It makes our case far better than we could.

Have a look at: http://brokeneggsfilm.com/broken-eggs-movie/#.

Yogi was right September 10, 2014

Posted by forwardfinancialplanning1 in 401k plans, Financial Planning, Retirement Savings, Roth IRA, Traditional IRA.
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New York Yankee icon Yogi Berra is as famous for his euphemisms as he is for his stellar performance on the baseball diamond. One of my favorite “Yogi-isms” is the following: “If you don’t know where you’re going, you might wind up somewhere else………..”

Yogi had it pegged as it relates to retirement planning. Far too many people never take the time to estimate (or request assistance in estimating) the amount of money they will need to accumulate to cover the costs of their prospective retirements. A recent study by Security Benefit quantifies this planning shortfall. It found that 66% of Gen X and Gen Y workers (born between 1965 and 1992) have not estimated the amount they’ll need to accumulate for a secure retirement. This situation persists despite the fact that 90% of the respondents said that saving for retirement was an important goal, and 88% said it was important to maintain their desired lifestyles in retirement.

Only 19% work with a financial advisor, so it’s not surprising that they are moving forward without having taken the important first step of asking, “Where am I trying to go?”. However, it was quite surprising that only 12% prefer to save with a company that they found on the internet and just 18% would go on-line for advice on how to save more.

I wonder what Yogi has to say about overcoming inertia???

“You can’t fix stupid….” August 7, 2014

Posted by forwardfinancialplanning1 in 401k plans, Financial Planning, Retirement Savings, Retirement Spending, Roth IRA, Social Security, Traditional IRA.
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I’ve heard people mutter these words many times over the years, but always felt that they were a bit too fatalistic. After all, everyone has the capacity to learn, although the inclination and motivation to do so may be lacking. However, after reviewing a section of the Federal Reserve’s Report on the Economic Well-Being of the U.S., I’m starting to think there’s some truth to such a cynical adage. When asked how they and their spouse will pay for expenses in retirement, an incredible one quarter of all respondents and 14% of those aged 45 and greater chose the answer, “I don’t know.”

I mean, at least they could have said, “winning the lottery……”

Why should your failure to plan create an obligation for me? July 31, 2014

Posted by forwardfinancialplanning1 in 401k plans, Personal Budgets, Retirement Savings, Roth IRA, Traditional IRA.
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Most of us go through life knowing that we should be addressing some particular need, but often failing to act upon this necessity. For instance, I positively know that I need to lose 20 pounds, yet I’m not making the requisite dietary changes. However, I’m living with the consequences of a larger than optimal waistline and I don’t expect others (society as a whole and taxpayers in general) to come to my rescue.

However, I wonder what’s going to happen when a very large swath of American society hits retirement without having properly saved for it. A recent Harris poll confirms the degree of unwillingness to address an obvious need. Among people in the 68+ age group who have not yet retired, 51% say that having enough money to retire is a major concern, yet only 29% of this group is putting aside anything to meet that need. Among Boomers aged 49-67, three quarters are worried, yet only 43% are saving. Gen X’ers (aged 37-48) are more worried at 77%, but are doing only marginally better with a savings participation rate of 48%. Millennials (aged 18-36) are saving at a 46% rate, with 72% of them being concerned enough to describe it as a “worry”.

So when you look across all of these generations, you see that less than half of Americans as a whole are acting on this critical need. What’s going to happen when they are all aged and too feeble to work? The current “progressive/liberal” movement will surely seek to socialize the costs, and with more than 1/2 of the (voting age) population doing nothing to prepare, they may be able to pull it off!!
If anything causes the “American Experience” to collapse from within, this might be it………………