Retirement Savings – European Forum – Family Mediation Fri, 21 Jan 2022 09:09:57 +0000 en-US hourly 1 Retirement Savings – European Forum – Family Mediation 32 32 “A small tax incentive in the EU budget could help investors build a big pension fund” Fri, 21 Jan 2022 08:29:00 +0000 Some old complaints from savers and investors that the Minister of Finance should settle in this budget
This is the time of year when various people write their letters to Santa, asking for the presents they want. Of course, since Christmas is already over, I am in fact talking about the Union’s budget and the demands that are made of the Minister of Finance. Some of them are various industries and sectors that want part of their deal, so to speak, to be changed, even though in the GST system only non-tax matters are addressed in the budget. Then there’s the media, which includes people like me, who want something or the other done for a segment of the population.
Last year there was none of that, for obvious reasons. In fact, looking back to January 2021, I notice that in the two decades I started writing about personal finance issues publicly, the last year was the only one where I had next to nothing. to say. In many ways this Union budget takes with it two years of an interrupted programme, although with large parts of the country still under some degree of covid restrictions, we are not yet fully back to the normal.
Anyway, when it comes to the various things the budget can and should do in the area of ​​personal finance, the traditional annual request has been to increase the tax savings limit by 80C. However, in recent years there has been something of a disconnect between the kind of tax savings amounts that matter to the middle class and above and what even sizable increases of 80C can deliver.
Sound strange? Well, look this way. Let’s say the 80°C limit is increased from Rs 1.5 lakh to Rs 1.75 lakh, which is a substantial change. If this happens, even those in the highest tax bracket would see their monthly tax bill drop by only around 700 rupees. For anyone earning more than a lakh a month, that’s not even a noticeable amount. For those in lower tax brackets, the equation is similar, except the investment-to-savings ratio is worse.
So, isn’t an 80C rise irrelevant? Not at all! What you save in 80C comes back to you, with a multiple, a few years later. Not only that, for many people it is a gateway to a lifetime of saving habits.
The real story is that an increase in the Section 80C tax savings limit has a huge downstream impact on people’s lives, which has nothing to do with the tax savings of the current year. Most taxpayers make full use of 80C whenever possible. For many, these investments are made through ELSS funds, which become a gateway to becoming a long-term equity investor. An additional tax saving limit of Rs 25,000 or 50,000 has a huge multiplier effect on the total lifetime savings a saver is likely to achieve, and the obvious follow-on effects on overall comfort and happiness seniors. In fact, to enhance this effect, a much-needed reform of tax savings laws would be to limit Section 80C to savings and investments only. Currently, other non-savings related expenses such as education and term insurance are also grouped in 80C. These should have their own limitations.

The other tax policy hot spot that affects savings and investments is the capital gains tax on long-term savings. Since February 2018, capital gains are taxable at 10% plus a supplement with an annual free limit of Rs 1 lakh of gains. There’s nothing wrong with the tax itself, but unlike long-term capital gains tax on other types of assets, there’s no indexation. A portion of nominal capital gains is consumed by inflation. If you invest in a debt fund, this may be offset, but if you invest in stocks, this is ignored. This is a strange anomaly that needs to be removed. Moreover, the tax exemption limit of Rs 1 lakh should surely be revised upwards. Four years have passed and the real value of this Rs 1 lakh is much lower.
Surely, the purpose of tax investments is not just to grant meaningless tax breaks, but to encourage saving in a way that leads to a real improvement in people’s future and old age. Small anomalies can run counter to these objectives and should be tracked down proactively.
(The author is the founder and CEO of search for value) ]]> ‘Take Inventory’ During Financial Wellness Month | News, Sports, Jobs Wed, 19 Jan 2022 07:09:30 +0000

January is Financial Wellness Month and the Alzheimer’s Association encourages people to proactively plan for the financial impact of Alzheimer’s disease, the nation’s costliest disease.

While the costs associated with the disease can be enormous and put enormous economic strain on families, the Association offers advice to help reduce financial stress and ways to proactively plan for the financial impact of illness. Alzheimer’s and dementia. Some include:

– Think of retirement planning as a time to think about how to prepare for the need for long-term medical care. After an Alzheimer’s diagnosis, your options may be more limited.

– Make an inventory of your financial resources (savings, insurance, retirement, government aid, VA benefits, etc.). A financial planner or an attorney who specializes in elder care can help.

– Improve your understanding of the role and limits of Medicare, Medicaid and other insurance options. A report by the Alzheimer’s Association found that nearly two in three people mistakenly believe Medicare helps pay for nursing home care, or don’t know if it does.

– Find out about long-term care services (for example, home care, assisted living facilities and nursing homes) in your area. Ask what types of insurance they accept and whether they accept Medicaid, because few people with Alzheimer’s disease and other dementias have sufficient long-term care insurance or can afford to pay for services out of pocket. long-term care for as long as they are. needed.

Illness-related costs can compromise a family’s financial security, forcing many families and caregivers to make enormous personal and financial sacrifices. The 2020 Alzheimer’s Association Alzheimer’s Disease Facts and Figures report revealed some staggering findings:

– In 2020, the lifetime cost of caring for someone with dementia was $373,527.

– The average out-of-pocket for health care and long-term care services not covered by Medicare, Medicaid, and private insurance exceeds $10,000 per year.

– Almost half (48%) of contributors have to reduce their own expenses – including basic necessities like food, transport and medical care – to afford dementia-related care, while others have to draw on their own savings or retirement funds.

– Few people with Alzheimer’s disease or other dementias have sufficient long-term care insurance or can afford to pay for long-term care services out of pocket for as long as these services are needed.

– Of the total cost of caring for a person with dementia for life, 70% is borne by families, either through health and long-term care costs or through the value of unpaid care. remunerated

– Alzheimer’s disease can also have a significant impact on the earning potential of a person with the disease or their caregiver. 18% of dementia caregivers moved from full-time to part-time or reduced hours. 9% of caregivers have completely stopped working. 6% took early retirement.

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Australian regulator advises against investing pension funds in crypto Mon, 17 Jan 2022 16:52:39 +0000

In the middle of the growing crypto adoption by institutions around the world, regulators Australia warned residents against investing their retirement funds in the industry.

The Australian Securities and Investment Commission (ASIC) made this known in a publication posted on its website.

Don’t invest your retirement funds in crypto – ASIC

The warning became necessary due to several advertisements and marketing telling Australians to opt for Self-Directed Superannuation Funds (SMSF) to invest in high yield portfolios instead of the usual Australian superannuation funds. industry and retail that are common in the country.

The administrators of the pension fund being advised to invest in cryptocurrencies such as Bitcoin, ASIC called on pension fund members to beware of crypto scams.

In the statement, the commission stressed that creating a self-managed super fund is not something to be done based on social media marketing and online investment opportunities. He called on anyone considering setting up an SMSF to first seek advice from a licensed financial adviser.

The ASIC further described the risks of investing in crypto assets. He said anyone who creates an SMSF would be personally responsible for every decision and compliance, even if they rely on the advice of others. He was referring to previous posts on crypto scams and other relevant investment advice.

Why the regulator issues a warning note

ASIC’s release is not surprising, given the importance of retirement savings to the overall economy. Beyond the social safety net that these funds provide to workers, they are important for the financial sector.

Retirement savings represent a significant percentage of funds invested in the capital market. This means that people who self-manage their funds and put them into crypto will reduce the amount of money available for investment in the traditional financial sector.

Beyond that, the risks of crypto investments mean that investing in retirement funds can hurt economic growth if those investments don’t go as planned. Several countries are already trying to regulate the crypto industry, either directly or indirectly.

In the UK, the Advertising Standards Authority has ban multiple crypto ads to mislead or not provide sufficient information. International agencies such as the IMF have also called for consistent global crypto regulations.

3 reasons why your retirement savings aren’t growing as fast as you’d like Sat, 15 Jan 2022 15:30:00 +0000

You contribute diligently to your retirement accounts, but it seems that your balance barely moves. Sound familiar? You’re not alone. But luckily you’re not unlucky either.

There can be many causes for a stagnant retirement balance, but here are three of the most common and what you can do to fix them.

Image source: Getty Images.

1. You don’t contribute that much

The money already in your retirement account should continue to grow if you’ve chosen wise investments. But if you really want to accelerate your path to fortune, you need to make regular monthly contributions to your retirement account. Ideally, you aim to contribute as much as you should based on your estimated retirement costs.

But saving as much as you want for retirement isn’t always easy. Sometimes you can achieve this by reworking your budget. Look for overspending areas or subscriptions you forgot about, then delete them. Instead, funnel that money into retirement savings.

Other times you need to be more creative. You might consider starting a side hustle or looking for a new job elsewhere. You can also try asking for a raise at your current job. Highlight what makes you a valuable employee and take advantage of other job openings if you have any.

Also consider putting one-time earnings into your retirement savings. If you’re expecting a tax refund or year-end bonus, throw that money into an IRA where it can earn you interest.

2. You invest too conservatively

Prudent investing can reduce your risk of loss, but it can also slow your gains. This forces you to save even more money in the future to retire with a nest egg large enough for all your expenses. The risk of loss inherent in investing can be scary, but there are better ways to manage it than sticking to “safe” investments, like bonds.

First, be sure to diversify your money. You need to make sure that you invest in at least 25 different stocks in a few different sectors. Or if you don’t feel comfortable choosing stocks, choose an index fund instead. This instantly gives you a stake in hundreds of companies, and index fund returns tend to be strong over time.

If you’re worried about investing too much money in stocks, follow the rule of 110 minus your age. It says you should keep 110 minus your age invested in percentage stocks. So a 50-year-old would keep 60% of their savings in stocks and invest the rest in bonds and other safer investments. Over time, you shift your money into more conservative investments to protect what you have, but you do so very slowly so that you can still take advantage of the offer of high-gain potential stocks.

3. You are paying too much

Fees can often go unnoticed, especially for newbie investors, because they come directly from your retirement account. But you should make sure you know what you’re paying in fees, as it can affect how quickly your money grows.

Some accounts, like 401(k) plans, have administrative fees that you can’t do much about. But you have some control over what you pay in investment fees. Mutual funds and exchange-traded funds (ETFs), for example, have expense ratios. This is the percentage of your assets invested in the fund that you must pay to the fund manager annually. So if you have $100 invested in the fund and it has a 1% expense ratio, you’ll pay $1 per year.

You want to avoid expense ratios above 1% whenever possible. Sticking to index funds, discussed above, is a great way to cut your costs. They tend to have low expense ratios – in some cases as low as 0.03%. This helps you retain more of your income each year.

If all else fails, sometimes all you need to do is be patient. This is especially true if you are young. Your investments may seem to grow slowly at first, but over time they will begin to grow faster as you begin to earn more interest on top of your interest from previous years.

How small businesses can help employees prepare for retirement Thu, 13 Jan 2022 21:19:00 +0000

Employee pension plans have been hit as the pandemic has forced workers to focus on immediate financial concerns rather than long-term savings, but for some employees — especially those working for small businesses — the idea of ​​a financially secure retirement was never a guarantee.

In the United States, of the 5.8 million small businesses – those with 100 or fewer employees – 90% do not offer their employees a 401(k), according to a study by Guideline, a savings platform. retirement for small businesses. Of the 42 million employees working for small businesses, 75% have no access to any pension plan.

“There is a systemic problem in the way our retirement savings vehicles have changed over the past 30 years,” says Chad Parks, founder and CEO of Ubiquity Retirement + Savings, a 401(k) provider for small businesses. “Pensions are gone and 401(k)s have replaced them, but we haven’t taught people what it means to be a good saver, or to be able to make investments, or to be able plan your personal financial future.

Read more: 10 companies that have adopted the 4-day work week

This fundamental lack of education can lead small business owners to believe that they are unable to help their employees retire comfortably. Offering a full-fledged 401(k) might be too much of an investment (and work) for a small business, Parks says, but there are other ways these employers can help employees secure a financially stable retirement.

Options include a payroll IRA or an employee savings incentive plan – also known as a SIMPLE IRA – which allows small employers and employees to contribute to a traditional IRA as a sort of start-up pension plan if the employer does not offer a sponsored plan. Employers can also participate in a joint employer scheme, a new type of retirement savings plan which was created by the SECURE law. It allows employers of different sizes and from all industries to work under a single plan that will bear the brunt of the administrative burden for the group of employers.

“It really depends on employee savings needs and how complex or simple a company is looking for,” Parks says. “In any case, if the company is in a state with a mandate, all of these types of plans would satisfy that.”

Read more: 3 easy ways to improve your work from home setup

As of December 2021, 14 states have enacted mandates that require employers to provide employees retirement savings plans. In California, businesses with five or more employees must offer a plan or face a $250 fine per eligible employee; the fine doubles to $500 per employee after 180 days of noncompliance, according to Vestwell, a 401(k) platform. Other states, including New Jersey, have similar requirements and fines for employers.

“A lot of states have started looking at the lack of retirement savings for small business employees, and they know that’s going to be a societal issue, because all of those people are going to be underprepared for retirement, and then they’re going to start shooting social services,” Parks says. “In 2022, more state warrants will come online, and you’re going to see [small businesses] finally start moving in that direction. Deferring a portion of a paycheck to a retirement account is truly the most efficient way to fund retirement.

Almost a quarter of non-retired owners have no retirement savings Wed, 12 Jan 2022 11:49:30 +0000

Almost a quarter (22 percent) of non-retired homeowners have no retirement savings, a study by Legal & General Home Finance (LGHF) found.

The study also found that 35% of non-retired owners had less than £ 10,000 in their pension funds.

LGHF research found that 22 percent of people planning a later life expected to use the value of their home to fund retirement.

The company noted that insufficient pension funds and high house prices made more people consider using their real estate wealth to fund retirement.

The change was due to the large number of small and empty pension funds, as well as a 24% increase in median house prices in England and Wales since 2016, according to LGHF.

LGHF explained in detail how people expected to use their property in retirement, with 10% planning to downsize, 9% planning to sell their property and 6% planning to access equity through a lifetime mortgage. .

Commenting on the results, Claire Singleton, CEO of LGHF, said: “The significant increase in house prices in recent years has likely changed the expectations many people have about the role that real estate wealth will eventually play in supporting retirement.

“We predict that using your home to fund your retirement will become more common in the future, whether that’s downsizing to free up funds or freeing up money locked in your home through products like loans. lifetime mortgages.

“It’s never too early to start thinking about how you plan to fund your retirement and seek the right advice to get your affairs in order, and for many homeowners, their property could be the key to getting the lifestyle they desire.

Singleton also stressed the importance of these new funding methods, suggesting they should be standardized to help savers “achieve better financial results in retirement”.

Every retirement plan should include these 5 points Sun, 09 Jan 2022 09:30:04 +0000

Life expectancy is longer today. Interest rates are low and inflation is rising. Taxes will likely increase over the next few years. Will the stock market continue its steady rise? You can hope, but who knows? Volatility could be part of this equation in the long run.

All of these factors create financial uncertainty for the future and make retirement planning more complex. With that in mind, here are five key elements of retirement preparation:

1. Get an income plan

How much money do you need and where will it come from?

These are two very important questions. As you enter your prime earning years, it’s important to think ahead of time about how much income you’ll need in retirement. So invest accordingly.

When you work, investing is pretty straightforward. Your money just has to grow. When you retire, your money must provide income, pay taxes, and grow in order to support your lifestyle. Investing becomes much more nuanced and even more difficult once you start earning income.

As you approach retirement, here are some steps you can take to get started with an income plan:

  1. List all your sources of guaranteed retirement income – Social Security, pension, an annuity with a guaranteed minimum amount, etc.
  2. List retirement savings and investment accounts, such as a traditional IRA, 401 (k), Roth IRA, or Roth 401 (k).
  3. Ask yourself if your projected income will cover your expenses and the lifestyle you desire. Keep in mind that a common rule of thumb is that in retirement most people need to replace about 60% to 80% of their pre-tax income before retirement in order to maintain their lifestyle.

2. Maximize your social security income

To maximize Social Security benefits for you and your spouse, you need to know which of the 567 separate claim strategies estimated for married couples is right for you. Sometimes it makes sense to start taking Social Security while letting your nest egg grow. For others, it makes sense to dip into the investments to keep your Social Security benefits increasing until you reach full retirement age (usually around 67) or until your retirement age. amount of benefits peaked (70 years) before claiming benefits.

Important Note: If you and your spouse were born on or before January 1, 1954 and have both reached full retirement age, you can apply for spousal benefits and let your own benefits increase. At 70, you can upgrade to the next level. The policy is an option called “restricted deposit” and it is not available to people born January 2, 1954 or later.

3. Explore your tax strategies

Taxes catch many retirees off guard, as conventional wisdom suggests that with less income than they earned during their working years, taxes would be considerably lower in retirement. Many retirees find that this is not the case. A key part of your planning strategy is to reduce taxes on funds withdrawn from tax-deferred accounts, such as 401 (k) or IRAs.

The minimum distributions required for tax-deferred accounts begin at age 72, so it is essential to have a plan in place well before that date.

One effective strategy is to convert tax-deferred funds into Roth IRA or Roth 401 (k). Although the conversion amount is taxable in the year of the conversion, the advantage is that these Roth accounts allow your retirement savings to grow tax-free and are not taxable at the time of withdrawal ( as long as you are 59 and a half or older and have owned a Roth for at least five years). Don’t let the initial tax bill stop you from transferring your retirement funds from taxed accounts, no matter when you are transferring them to non-taxable accounts. The point is not to be nearsighted at the cost of being hit by tax time bombs in retirement.

Roth IRA conversions are just a strategy to keep your Social Security from being taxed. If your interim income is between $ 25,000 and $ 34,000 (for single filers) or between $ 32,000 and $ 44,000 for joint filers, then up to 50% of your Social Security is taxable. If your provisional income is more than that, up to 85% of your benefits may be taxable. These additional taxes may require you to withdraw more money from your nest egg to support your lifestyle.

4. Plan your medical expenses

Health care continues to be one of the biggest expenses in retirement. Many people assume that Medicare will cover all of your health care costs in retirement, but that is not the case. One way to prepare is to sign up for a Health Savings Account (HSA), which some employers offer. By contributing to an HSA, you can save pre-tax money (and possibly collect employer contributions), which have the potential to grow and can be withdrawn tax-free in retirement if used for eligible medical expenses. For 2021, the regular HSA contribution limit is $ 3,600 for individual coverage ($ 3,650 in 2022) and $ 7,200 for family coverage ($ 7,300 for 2022). People enrolled in Medicare cannot make new contributions to an HSA.

Another way to fill the void not covered by Medicare is long term care insurance. Although long term care insurance premiums are not affordable for everyone, an alternative is to purchase a life insurance policy that has the option of adding a long term care insurance rider.

5. Plan your estate

Estate planning isn’t just about how you want your assets distributed after your death. It’s about preparing for eventualities if you become unable to make your own financial or medical decisions. It is about creating a smooth transition for those close to you in settling your affairs.

The key elements of an estate plan include a will; the assignment of a power of attorney, which gives the person you appoint the power to manage your financial affairs if you are unable to do so; a health care attorney, who authorizes someone you trust to make medical decisions on your behalf; and a living will, a statement as to whether you want life-saving medical intervention if you become terminally ill and unable to communicate. Take the tough decisions out of your kids by making them follow the legal guidelines of the estate plan. Work with a lawyer to make sure you get the right estate planning documents for your situation.

For something as important as your financial future, working with a financial professional is important. Everything in the plan needs to be coordinated – taxes, social security, income planning and investments. Your advisor should understand your big financial picture, how things like taxes and income generation relate, and how they can help you meet your retirement goals.

Dan Dunkin contributed to this article.

These documents are provided for general information and educational purposes. Echelon does not provide any investment, tax or legal advice. The information presented here is not specific to an individual’s situation. As this material relates to tax matters, it is not intended or written for use and may not be used by a taxpayer to avoid penalties imposed by law. Each taxpayer should seek advice from an independent tax expert depending on their situation.

Co-founder, Financial Echelon

Chris Wilbratte has worked in the financial services industry for 30 years and is co-founder of Echelon Financial in Austin, Texas. He received his BBA in Finance and Marketing from the University of Texas.

The appearances in Kiplinger were obtained through a public relations program. The columnist received assistance from a public relations firm to prepare this article for submission to Kiplinger has not been compensated in any way.

Stop procrastinating on your retirement plan! here’s how Sat, 08 Jan 2022 09:30:04 +0000

As a financial advisor, I have had the privilege of sitting down with real people and hearing their unique stories for over 15 years. I heard the financial stories of about 4,000 people during this time. My clients come from all walks of life and bring things to me that they might never discuss with anyone else. What is the problem that comes up regularly, at all levels? Procrastination.

How can we get people to recognize the corrosive impact of procrastination? Here are some symptoms and suggested remedies to relieve them and actively fight procrastination.

The professional life arc has provided me with some perspective on the human psyche and how and why people do what they do. To say it was fascinating would be an understatement. Based on my observations, here are some key points I learned. These points are simple, common sense rooted in real life, and from real people.

Procrastination symptom # 1: I’m in no rush

“I have years before I have to make this decision.”


You have time, but often it doesn’t take the form of years. Any decision deserves careful consideration, but decisions can and should be made in days or weeks, not months or years. Choose a reasonable period of time to commit to acting on the choices offered to you. If you feel pressured into making a financial decision, step back and approach it with a different person or from a different perspective.

Procrastination Symptom # 2: Back Priorities

“I will eliminate the debt and prepare for retirement. “


In these times of extraordinarily low interest rates, take on the “good” debt and avoid the “bad” debt. Debt is like cholesterol – there are good things and bad things. Adopt 30-year mortgages in your 20s, 30s, and 40s, and consider an eight, 12, or 15-year mortgage in your 50s and 60s. Too often, I have seen people proudly released from debt in their early 50s, but woefully behind when it comes to saving for retirement. Your home will be able to provide $ 0 of your retirement income, and starting to save for retirement in your 50s will also mean you miss out on the most crucial element of retirement planning: time.

Procrastination Symptom # 3: One Day Syndrome

“I invest cautiously because I don’t want to lose money. Maybe one day I’ll be more comfortable with adding risk.


If you are uncomfortable with risk in your younger years, get so! If you can’t, you’ll have to save three to four times as much, which is probably impossible. Most of us, at some point, will have to make decisions that require blind faith and trust – as difficult as it may be at times – to accept the risk of getting proportional reward. The patient and well-allocated investor can reasonably expect a 5-6% return over the long term.

Procrastination symptom # 4: spend now, save later

“I love it when I get a raise, a promotion, or write off a debt! My cash flow suddenly improves! “


Whenever you see an improvement in cash flow, sit down with rigor and discipline and answer this question: what should I do with the extra cash each month? If you get a 3% increase, this may be an opportunity to increase your contribution to the pension plan by 1%. You get a new job and a 10% raise; increase your pension contribution by 4%. You take out an auto loan of $ 300 per month; start adding that $ 300 per month to your savings as a down payment for the next vehicle purchase. Improving cash flow without applying this discipline is like a glass of red wine in financial blood. In no time at all, your lifestyle has adjusted to the increased cash flow and it’s harder to make a change.

Symptom of procrastination # 5: rely on mom and dad

“I will inherit the money that will be used in retirement. “


I advise clients to generally reject possible inheritances. If that happens, so much the better. But many tidy nuggets have been wiped out by long-term care spending. An 80-year-old patient admitted to the dementia unit of a specialty care facility could go through a million dollar portfolio in as little as six to ten years.

Procrastination Symptom # 6: Partner Problems

“My partner is a ‘living for the day’ person and I can’t seem to get him to adhere to long-term planning. “


It’s very common and it’s a difficult dynamic. Get on them and stay on them. Your future may depend on them, and a reluctance to participate in the process reduces your chances in the long run. I like to show resistant or ambivalent people how much they can save over the next 10, 20 or 40 years with even small contributions and moderate risk. For example, if a 25-year-old adds $ 6,000 to a Roth IRA each year for 40 years and earns 7%, he could have almost $ 1.5 million by age 65. This is a serious incentive to take savings more seriously. These “time value” calculators are all over the web.

If nothing works, you have no choice but to take responsibility for it yourself. It can be stressful and lonely, and maybe not possible if the partner is also spending a lot.

In conclusion, the most important asset we all have is time. Every day, this asset is dwindling for us. Morbid? Yes. But a fact. I work with clients in their 50s who have been doing what they were supposed to do from their 20s and who show up to my office with wide eyes at what they’ve built over time. They didn’t have to earn a lot of money. All is relative.

People of All Ranges Can Create Six-Figure Retirement Accounts with Relative Ease if:

  • They show rigor and discipline.
  • They don’t procrastinate.
  • They can accept a reasonable level of risk.

Start by saving a minimum of 5% in retirement accounts and increase this amount with discipline by 1 to 3% each year. If you must retire for life event reasons, do so, but resume this crucial cycle when circumstances permit.

I wish you good luck on this journey.

Financial Advisor, CUNA Brokerage Services

Jamie Letcher is a financial advisor with CUNA Brokerage Services, located at Summit Credit Union in Madison, Wisconsin. Summit Credit Union is a $ 3 billion UC serving 176,000 members. Letcher helps members achieve their financial and financial goals through a process that begins with a “get to know” meeting and ends with a collaboration plan, completed with action steps.

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Match Against Default Values ​​| AMERICAN SOCIETY OF PENSION PROFESSIONALS AND ACTUARIES Tue, 04 Jan 2022 21:34:14 +0000

Which is more powerful: a generous consideration or a high default savings rate?

Turns out Christmas Eve brought us a new white paper with the rather innocuous title, “The Impact of Employer Defaults and Match Rates on Retirement Savings.” Indeed, there have been plenty of surveys (and tons of data) that address this problem (many of which are cited as references in the article) – but under that bland title the authors address an intriguing question, in Particularly how and how else, the deployment of specific plan design features (employer match or default enrollment) affects retirement savings.

Regarding the former, there has been a lot of real data to support the idea that employer matchmaking acts as a virtual target for retirement savings – employee contributions clustering around those as employees. moths, regardless of the savings needs or income of which the participant. Likewise, we have a long time – but more since the advent of the Pension Protection Act of 2006 – given the dynamic impact that default savings rates – forcing individuals to opt out rather than enroll – for retirement savings regularly produce participation rates north of 90%.

However, these plan designs have long been viewed by employers (and those who support them) as positive forces to encourage workers to take advantage of these essential benefits. On the other hand (and somewhat cynically), both can be viewed as devices to produce sufficiently high retirement deferral rates to allow pension schemes to successfully pass the various non-discrimination tests to which they are expected. are submitted. And let’s face it, both come with costs for the employer (s) sponsoring the program. Indeed, if there is a flaw in these mechanisms, it is that employees have seemed to assume that they represent an answer to the question “how much should I save”, rather than simply a function of the amount that the employer chooses to spend for benefits.

‘Better idea?

It turns out that the researchers (David Blanchett of PGIM DC Solutions, Michael Finke of the American College of Financial Services, and Zhikun Liu of Empower) have an answer to the question of who is “better” – well, “better” meaning the plan a design that results in the highest employee savings rates, the greatest acceptance of default investment, and the lowest disparities in savings rates per income – this would be one that uses a rate of high default and lower employee matching.

More precisely, on the basis of a report of the activities of approximately 157,000 participants[1] who recently signed up to an employer-matched 401 (k) plan, they conclude that “a higher default rate has the greatest impact on employee savings rates.”

Not only that, they warn that “plans with low default rates (say 3% or 4%) that correspond to a high percentage of employee earnings cause higher income members to actively move away from low default rates.” savings by default, resulting in greater savings. gap between high-income and low-income employees. On the other hand, setting a default value high means that “fewer deviations from the default savings rate translates into higher and more equal savings rates among employees.”

other considerations

There are other considerations. They note that the low default rates and high match rates also translate into a significant decrease in the number of employees remaining in the default investment, and that if “increasing the level of default savings should increase rates savings for new participants, it will not necessarily help existing participants ”. As a result, the researchers comment that “Plan sponsors may also consider different types of plan re-enrollment or reset options to utilize the positive impact of the increased default savings rate. Additionally, plan sponsors should also consider including provisions for automatic increases in savings rates to further increase plan members ‘savings levels,’ because the only thing we know about most savers is for retreat is that, like Newton’s 1st law of motion, an object at rest remains at rest. And that’s what happens to most participants who default on a specific savings rate and investment – they stay there.

They also note that a high adequacy appears to motivate workers to make an active decision to save more only when placed in a low initial default rate. Additionally, they found that a higher match prompts high-income workers to save more, but only motivates low-income workers who are in default (at the aforementioned 3% or 4% savings rate). They found that, in the event of default at a higher savings rate, the match rate only motivates high earners to increase their savings rate.

Overall, correspondence seems to matter to those who are more actively involved in the decision to join the plan – and those who are by default in the plan, in general, don’t seem to be those. It is also felt that higher paid individuals are more aware of and actively participate in match maximization, although this can create problems with non-discrimination testing, as lower paid workers appear to be more inclined to just stay with the default rate.

Ultimately, of course, what matters is the default rate and the conditions of the match; and with a little luck, it’s not one or the other, but both!


[1] It doesn’t matter, but the document specifically cites “the second largest custodian of pension plans in the United States, serving more than 12.8 million defined contribution plan members in about 67,000. pension plans in the third quarter of 2021 ”—Empower.

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Six New Year’s Resolutions to Boost Your Pension Fund | Personal Finances | Finance Sun, 02 Jan 2022 12:43:19 +0000

Experts estimate that around £ 30,000 per year is needed for a comfortable retirement, and for many that will translate into more than £ 600,000 in retirement savings needed when they leave the workforce. It might seem like an overwhelming estimate, and with inflation it will likely increase a lot more in the years to come, but Romi Savova explains why prioritizing your pension now can make saving for retirement a lot easier on the job. to come up.

Ms. Savova, Founder and CEO of online pension provider PensionBee, shared her tips for getting the New Year off to a good start.

She noted that many may have “Organize Finances” on their January resolutions list, but few see their retreats as part of their resolutions.

Ms Savova said: “By not prioritizing their retirement next year, savers could put themselves at serious risk of missing their retirement ambitions and facing a retirement deficit later in life. .

“The retirement landscape is proving increasingly difficult for future retirees: National insurance contributions are rising for those who are still working, the retirement age is rising and inflation is expected to peak at four to five. percent before the end of the year. In this difficult climate, anticipating retirement has never been more important and a little can certainly go a long way in terms of retirement savings.

Ms Savova said that instead of just trying to add an extra £ 10 or 20 to her savings, consumers should increase their contribution levels by just one or two percent of their pay.

She continued, “Over time, this could have a significant impact on their retirement fund, through compound interest. In addition, the earlier a saver begins to make additional contributions upon retirement, the longer they will need to grow into 2022 and beyond. “

Ms. Savova shared her top six tips for tracking and supplementing retirement savings in 2022.

Automate savings

Staying dedicated to your savings goals can be difficult when the money is simply deposited into your bank account waiting to be used.


Ms Savova suggested that consumers should use digital finance apps like Snoop to budget properly, see their spending more clearly, and see what extra income or unnecessary spending could go to pension funds instead.

Change energy supplier

As a result of the energy crisis and with so many companies going insolvent, many are wary of the situation with their energy supplier.

However, as this is one of the biggest monthly household bills in the UK, Ms Savova noted that consumers could be much better off if they just did a few purchases to make sure they get the best. best deals.

“Switching energy providers can save households up to £ 180 to £ 259 per year, and using energy comparison sites like uSwitch can help you find out how much you could save on your retirement at home. instead, ”she added.

Ms. Savova explained, “By taking advantage of these times to buy in advance for special occasions, you can avoid feeling overly stretched during your high spending months.”

Cancel old subscriptions

While it’s only a few pounds here and there each month, subscriptions can add up to hundreds of unnecessary expenses each year that could instead be used for retirement savings.

Ms Savova said: ‘Recent research has found that 21% of people in the UK pay £ 265 each year for subscriptions they no longer use. These unwanted subscriptions, such as gym memberships and online streaming services, could put undue strain on household finances. “

Check investments

Retirement investments must be controlled, regardless of their duration, passive or risk-free.

Additionally, investors who invest in their beliefs are advised to check where their money is actually located to ensure that the companies they are investing in match their values.

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