RetireSecure Blog

December 7, 2015

Fixing The Weakest Link: Strengthening Retirement Security By Default

Filed under: Personal Finance,Planning for Retirement — The Pension Research Council @ 11:11 am

Fixing The Weakest Link: Strengthening Retirement Security By Default

By: Richard Fullmer – Richard Fullmer is an asset allocation portfolio strategist at T. Rowe Price, where he focuses on research and development of retirement investment strategies, spending strategies, and ways to mitigate longevity risk.

One drawback of defined contribution (DC) retirement plans is that they place the burden of making financial decisions on participants who are often ill equipped for the task. This has contributed to widespread concerns about retirement security. Will people have enough savings when they leave the workforce to afford a comfortable retirement? Will they then draw on their nest eggs efficiently while in retirement, enabling them to avoid financial ruin over an uncertain lifetime?

Click here to read the full article.

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July 1, 2015

What Do the Experts Say About Long-Term-Care Insurance?

Filed under: Personal Finance,Planning for Retirement,PRC in the News — The Pension Research Council @ 8:53 am

The median price of a private room in a nursing home in 2014 was $240 per day ($87,600 per year). Despite the staggering cost of long term care, very few insurers sell policies covering it. A recent study by Wharton Professor Daniel Gottlieb and Wharton Professor of Insurance/Risk Management & Applied Economics/Policy, and Director of the Pension Research Council, Olivia Mitchell explains why.

“People hate buying insurance, thinking they could die the next day,” Mitchell said. “They feel they won’t get value for their money.”

Erin E. Arvedlund of the Philadelphia Inquirer asked a panel of financial advisers what kind of long-term care insurances they buy for themselves.

To read their answers click here.

June 5, 2015

Burnishing Our Golden Years

Filed under: Personal Finance,Planning for Retirement,PRC in the News — The Pension Research Council @ 11:22 am

Robert Powell recently interviewed Olivia S. Mitchell, Wharton Professor of Insurance/Risk Management & Applied Economics/Policy, and Director of the Pension Research Council, to discuss solutions for America’s retirement system problems.

Dr. Mitchell and a few of the country’s other leading retirement experts outlined several ways to help Americans preserve their living standards through retirement, including:

  • Workers must save more;
  • People can claim their Social Security benefits later;
  • Retirees can buy insurance products to hedge longevity risk;
  • Homeowners can access their home equity via reverse mortgages;
  • Policymakers can reform Social Security by pegging benefit growth to price rather than wage inflation;
  • Plan sponsors can boost access to retirement saving plans;

As Americans live longer into retirement, following these recommendations will help maintain our standards of living and ensure the promise of our golden years.

Read more about this story here.

July 29, 2014

Don’t Bother Discussing Interest Rates and Bond Prices

Filed under: Financial Literacy,New Research,Personal Finance,PRC in the News — The Pension Research Council @ 12:40 pm

Olivia S. Mitchell, Wharton Professor of Insurance/Risk Management and Applied Economics/Policy and Director of the Pension Research Council, and her coauthor Annamaria Lusardi of George Washington University, designed a simple financial literacy survey, which they fielded on older Americans. Shocked at the poor results, they then launched an international study to determine how our population compares to other countries.

The Germans and Swiss were relatively savvy, where a small majority (53% and 50%, respectively) got all three questions right. Only 30% did so in the U.S and 27% in Japan. Russians fared worst of the nations examined.

Click here to read about the results on BloombergView.com

July 2, 2014

Treasury Comes to the Aid of Retirees with Deferred Payout Annuities

Filed under: Personal Finance,Planning for Retirement — The Pension Research Council @ 8:39 am

Mark Iwry, senior adviser to the Secretary of the Treasury and deputy assistant secretary for retirement and health policy, recently announced new regulations that help retirees do a better job managing their 401(k) withdrawals. The new rules allow plan sponsors to offer retirees payout lifetime income streams,  while protecting people from running afoul of the minimum distribution requirements. Financial advisers will need to take a good look at these for their clientele.

Click here to read more at InvestmentNews.com

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June 10, 2014

401(k) Loans Not Without Penalty

Filed under: New Research,Personal Finance,Planning for Retirement,PRC in the News,Uncategorized — The Pension Research Council @ 2:43 pm

A new study by the Pension Research Council of the Wharton School of the University of Pennsylvania found that an average of 20% of 401(k) participants take out loans from their accounts each month for a median of about $4600. Loans from 401(k) accounts must be repaid out of workers’ paychecks, and may incur an opportunity cost – if the market goes up, you miss out on those gains. Moreover, roughly 10 percent of these borrowers default on their 401(k) loans, typically due to an unanticipated job change. This triggers income tax and (for those younger than age 60) a penalty as well.

People who borrow from their 401(k) open themselves up to double taxation. Olivia S. Mitchell, Professor of Insurance/Risk Management and Applied Economics/Policy and Director of Wharton’s Pension Research Council, explains. Since loan repayments of both principal and interest are made with after-tax dollars, this results in double taxation of the interest piece. When you retire, you must pay tax on the full benefit from the plan, a portion of which is due to the after-tax interest you paid to take out the loan. Nevertheless, in most cases, she notes, “the opportunity cost of plan borrowing plus the double taxation of the interest from a plan loan will still be less than, say, borrowing on a credit card or payday loan.”

Read the full story here at USNews.com.

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May 15, 2014

Big Retirement Questions

Filed under: Financial Literacy,Personal Finance,Planning for Retirement,PRC in the News,Uncategorized — The Pension Research Council @ 8:28 am

Should I relocate in retirement? Should I move abroad? Will I have enough money throughout my retirement? Olivia S. Mitchell, Professor of Insurance/Risk Management and Applied Economics/Policy, and Director of Wharton’s Pension Research Council, tackles all of these questions and more in a one-on-one interview with Chris Kahn from Bankrate.com.

  •  “Americans now are starting to move overseas for their retirement…to take advantage of the lower cost of living and lower housing [costs].  Medical care can also be very cheap, depending on the country you pick.”
  •  “One of the answers to the retirement savings shortfall for many people can and should be to work longer. For example, if you delay claiming your Social Security from 62 to age 70, your monthly benefit checks go up by 76 percent.”

 To read the full interview on Bankrate.com click here.

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April 17, 2014

It’s Financial Literacy Month! The Perfect Time to Educate the Future

In their recent study, Olivia S. Mitchell, Professor of Insurance/Risk Management and Applied Economics/Policy, and Executive Director of the Wharton’s Pension Research Council at the Wharton School of the University of Pennsylvania, and Annamaria Lusardi of George Washington University, found that financial literacy is most pronounced among the young, women and the less-educated.

The inability to understand things like compounding interest rates, the importance of saving for retirement, or the cost of carrying credit card debt can have devastating lifetime effects. For instance, it can prevent someone from being able to borrow for a home or saving enough to retire. To celebrate Financial Literacy Month, join the Pension Research Council in promoting a strong foundation of financial education.

Click here to read their study.

Click here to visit the Pension Research Council’s Financial Literacy Center

Click here to read the full story in The Hill
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April 4, 2014

Will There Be Life after Graduation? How to Manage Debt and Plan For Retirement from the Get-go

Filed under: Financial Literacy,Personal Finance,Planning for Retirement,Uncategorized — The Pension Research Council @ 3:11 pm

Many younger Americans find it hard to save while paying back student loan debt which stands at an all-time high, according to the USA Today. Olivia S. Mitchell, Professor of Insurance/Risk Management and Applied Economics/Policy, and Executive Director of the Wharton’s Pension Research Council at the Wharton School of the University of Pennsylvania, reminds these young adults that “it is important to get in the habit of ‘paying yourself first’ – that is, saving for retirement.This is particularly true if your employer offers a tax-qualified 401(k)-type plan with a match.”

The Vanguard Group reported that average retirement savings for those younger than age 25 was $3,900, which rose to $21,500 for Americans age 25-34. JP Morgan Asset Management recently released its yearly Guide to Retirement, where it reports that young adults must start saving for retirement right away.

Read the full USA Today College story here.

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March 20, 2014

The Success of 401(k)s

Filed under: Personal Finance,Planning for Retirement,Uncategorized — The Pension Research Council @ 11:28 am

The American Council of Life Insurers, American Benefits Council, and the Investment Company Institute recently released a report entitled Our Strong Retirement System: An American Success Story. The report argues that defined contribution plans have become a vital part of a robust retirement security system:

“In 1975 when the Employee Retirement Income Security Act took effect, household retirement assets were just over $27,000, adjusted for inflation. Now they are six times higher at nearly $168,000.”

Defined benefit plans have been waning in recent years while defined contribution (DC) plans continue to gain steam. Olivia S. Mitchell, Professor of Insurance/Risk Management and Applied Economics/Policy, and Executive Director of the Wharton’s Pension Research Council at the University of Pennsylvania, argues that these DC plans have been a success despite criticism by those who wish to revamp the current benefits system with government-backed programs. Ultimately, it is counterproductive, Mitchell argues, to discourage savings in tax deferred accounts in favor of immediate tax revenue:

“…Sooner or later the government gets the money back because when you withdraw the funds you pay income tax on them. They don’t take into account the fact that more saving now will generate more income later.”

There are many ways to help encourage retirement savings including proposals to have automatic 401(k)s or Australian-style pensions. Other ideas include “de-linking” 401(k) plans from employers to allow automatic payroll deduction into IRAs, like the Obama Administration’s 2014 MyRA plan.

Read the full ThinkAdvisor article here

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