7 Reasons You May Never Retire

If you ran out of money at age 80 what would you do? Sobering but true, below are only 7 reasons you may never retire. These items should alarm you but it won’t. That’s because unless you study this stuff, and I do, you won’t see the problem or what it means to you.

I’m not a doomsday sayer. I’m just a guy watching this story unfold, and watch it get bigger. I do like the image of politicians, “kicking the can down the road.” But, really, aren’t we all kicking it down the road?

So, listen up, here’s the list of 7.

1) 10,000 Americans reach age 65 every day.
2) Companies offering Pensions has dropped from 112,000 to 23,000
3) 45% of workers cannot access employer-sponsored 401k or pensions.
4) Medicare and Social Security will run out of money by 2028 and 2034.
5) $300 Trillion dollars are owed for unfunded public pensions
6) Americans don’t save, in fact, Americans have a negative savings rate.
7) Politicians have too many competing interests, so they kick the can.

The earlier one starts to save, the easier it is to accumulate sufficient wealth at retirement. The corollary to this is that the longer a country (or an individual) waits to address these issues, the fewer options there will be for solutions, and the options that remain will become more and more difficult to successfully implement (source noted below).

The authors of the article I quote grade our current 401k system as a letter grade of “D+.” I’m not sure what the plus sign means, but I can tell you many individuals are not prepared to retire because so few have pensions (that’s what your Grandpa or Grandma had), and those with a 401k have put too little in it.

Work for a City or other governmental unit?

There is a combined $300 Trillion in unfunded liabilities for employees of these places of work. And, these employees are going to look for their retirement check and receive something like what Detroit retirees received, which was pennies on the dollar.

Your parents and grandparents retired with a pension. They received a check each month for as long as they lived, that, plus social security, made a very comfortable retirement for many people. With the list of 7, you can hopefully see you’re unlikely to retire the way you might be thinking.

You can save now, try closing your Amazon account. Or, find any other way to save. Whether you’re by yourself or at a company or government, the time to do something is now. Make saving and asking questions to protect retirement important to you. After all, I have a friend who says;

“What gets attention, gets done.”

I love these conversations, either to help you as an individual, or your employer. I am happy to help or steer you to better resources.

Building a Strong Retirement Program: One for the AGES, Benefits Quarterly, International Society of Certified Employee Benefit Specialists, Brookfield, Wisconsin; www.iscebs.org.

How is a benefit plan like a bus route?

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School bus flashers are for the safety of the children on and off the bus.

A benefit office is supposed to make decisions for the benefit of the beneficiaries. A bus route should be concerned first for the safety of the children.

On the main road connected to my subdivision, two different school districts have bus routes running in opposite directions. The road is a two lane semi-rural, 50 MPH road. I’d add, drivers routinely move at 60 MPH or more.

Lake Orion School District buses travel southbound. Rochester Community Schools travel northbound on the very same road; it’s Adams Rd. for those interested in the particulars. In both districts, the bus stops on the road or shoulder but does not turn into the subdivision.

Lake Orion has chosen to tell bus drivers not to use the red flashing stop safety lights when picking up the children. And, by contrast, Rochester Community Schools does instruct drivers to turn on their red safety flashers. Continue reading “How is a benefit plan like a bus route?”

How is it financial firm doesn’t understand it’s own fees?

It is remarkable that a financial institution like Citigroup is being sued by it’s own employees, who should have known they had fees included in their own 401k’s. How is it that employees who build these plans for use by small business accepted the practice of excessive fees in their customers plans.

Where was the outcry, education to their own customers?

Nearly seven years after their awsuit was filed, the plaintiffs in a “self-dealing” case against Citigroup will be allowed to move ahead with their claims.

On Sept. 30, U.S. District Judge Sidney Stein denied Citigroup’s motion for summary judgment, which would have thrown the case out of court based on Citigroup’s assertion that the statute of limitations had passed.

The suit, brought by former Citigroup employees Marya Leber and Sara Kennedy, is one of a number of excessive-fee cases filed in recent years.

It alleges that Citigroup breached its fiduciary duty by including its own fund options, and those of its affiliates, in the company’s 401(k) plan despite having higher fees than competing funds of equal

Specifically, the plaintiffs allege that Citigroup’s funds “charged higher fees than those charged by comparable Vanguard funds— in some instances fees that were more than 200 percent higher than those of comparable funds.”

Court documents show that in 2003 Citigroup’s investment committee eliminated 10 unaffiliated funds and added the new funds, including three of Citigroup’s own options. Participant assets were then automatically transferred to the new or remaining funds, four of which were Citigroup’s own or Citigroup-affiliated.

Citigroup’s motion to dismiss the case was rooted in the claim that the plaintiffs were aware of both the affiliated status of

the funds in question and their fees more than three years prior to the suit’s filing.

Under the Employee Retirement Income Security Act, if plaintiffs have “actual knowledge of the breach,” then they must

bring their claim to court within three years of acquiring that knowledge.

Stein wrote that the plaintiffs did not have “actual knowledge,” as Citigroup claimed, because Citigroup failed to prove that

the plaintiffs were given data on the fees of comparable funds.

In denying the motion, Stein said Citigroup had “not even attempted to offer evidence that plaintiffs possessed the fee data

“Citigroup employees could have earned millions more for their retirement if Citigroup had followed the law,” alleged Greg

The plaintiffs are expected to ask the court to certify theirs as a class-action claim.

Benefits Pro; link: http://www.benefitspro.com/2014/10/08/judge-rejects-citigroup-bid-to-dismiss-401k-fee-ca

Gabriel Roeder sued by Detroit Pensioners

This is a good article bringing into focus the struggles of Cities and governmental units who have unique decision making processes that influence the decisions of pension plans. This phrase is a quote from the article, “We just got blindsided,” it sounds like the actuaries didn’t do their job and omits the board that made decisions.

Whether the actuary did or didn’t do their job; the phrase implies the actuaries made decisions to bankrupt the retirement plan. In addition, it makes it sound like the retirement plan board had nothing to do with the decisions.

Gabriel Roeder’s job was to help Detroit’s pension trustees run a sound plan, she says, but instead the firm covered up a growing shortfall and encouraged the trustees to spend money they did not really have. Her complaint contends that the actuaries did this knowingly, “in concert with the plan trustees to further their self-interest.” The lawsuit seeks to have the pension plan made whole, in an amount to be determined at trial, and to have Gabriel Roeder enjoined “from perpetrating similar wrongs on others.” New York Times, , October 28, 2014; Link:http://dealbook.nytimes.com/2014/10/28/lawsuit-contends-consultant-misled-detroit-pension-plan/?_php=true&_type=blogs&_php=true&_type=blogs&_php=true&_type=blogs&emc=edit_dlbkpm_20141028&nl=business&nlid=66184561&_r=2&

There is a difference between being “blind sided” and blaming someone else, as quoted, and accepting the decision made as city and other governmental units have done. There needs to be a recognition that the board made decisions they should not have.

 

Alcoa shifts retirees to private health insurance exchanges | TribLIVE

Private Exchanges cost more money than traditional group insurance. But, they can still be the right answer for groups looking to expand and simplify at the same time.

“Typically, private exchanges are set up by a consulting company or an insurance carrier and offer a broad range of health plans. Employers contribute a set amount that may cover most or all of the cost of a basic plan. It’s up to the worker or retiree to pay for a higher level of coverage.”

The biggest concern for employers is the change in who delivers these complicated new products. For many employers who have National Consulting firms providing information to employers, like those mentioned in this article, it’s self-serving on the part of those organization to also be the pedalers of their own product.

In this article, Towers and Mercer, two of the largest consulting firms are also the creators and sellers of their own private exchanges. It’s a bad idea for the pedalar of the product to also be the advisor. While most anyone would say that’s obvious, it is important to remind individuals responsible for company purchases to get an independent third party to confirm a decision, or help in the evaluation process.

BenStaff is in the business of providing valuation advice to large and small employers. A second opinion will help many employers or unions from making a poor decision.

via Alcoa shifts retirees to private health insurance exchanges | TribLIVE.