|
Employers and employees are
out of synch on some key retirement issues according to MetLife’s Annual
Employee Benefits Trends Study. The study found that many employees and
employers see the retirement landscape so differently that a gap has developed
between what employees are seeking and what employers are currently willing to
offer.
Employees seek the following:
- Guaranteed income for life similar to the traditional
defined benefit pension
- Retirement education
- A workplace that offers delayed or post-retirement
opportunities
An
Erosion of Confidence in the 401(k)
Barclays Global Investors has
released the results of a comprehensive survey showing how the ongoing economic
downturn is eroding the retirement confidence of 401(k) participants. The rapid
decline in the global economy has cast a cloud over investors with 63% of
retirement plan participants saying their confidence in reaching their
retirement goals has declined in the past twelve months.
A 65-year-old couple retiring in
2009 will need approximately $240,000 to cover medical expenses in retirement
even with Medicare insurance coverage, according to Fidelity Investments’ latest
health care cost estimate. This figure is a 6.7 percent increase over the 2008
estimate of $225,000.
The estimate does not include
other health-related expenses, such as over-the-counter medications, most dental
services and long-term care.
An increasing number of U.S.
companies are suspending their employer 401(k) match in response to continued
cost pressures, and according to a new analysis by Hewitt Associates, a global
human resources consulting and outsourcing company, most companies could save
millions of dollars by suspending their 401(k) match for only one year.
Hewitt’s analysis shows
companies can save, on average, more than $1,500 per employee each year by
suspending their 401(k) match. A typical large U.S. company, thereby, would see
savings of $25 million a year. The average mid-sized company could save more
than $10 million, and the average small company, nearly $2 million annually.
Congressman Jim Moran, Virginia
Democrat, has introduced the Federal Retirement Reform Act of 2009, which would
modify the existing federal employees' retirement system.
The Act consists of three parts.
The first would allow an individual who has returned to government service and
who has received a refund of retirement contributions under the Federal
Employees' Retirement System (FERS) system to deposit the amount that was
received, with interest, to the credit of the Civil Service Retirement and
Disability Fund. This piece of the legislation might entice experienced federal
workers to return to government service, a boon in the context of the
government’s retirement “brain drain.”
The second would allow unused sick
leave to become part of the FERS annuity computation. This provision might
dissuade federal workers from “calling in sick” as they approach retirement to
avoid losing their leave.
The third would
authorize the Civil Service Retirement System to include part-time service for
purposes of annuity computation. |
American Families’ Future Act
Congressman Earl Pomeroy, Democrat
of North Dakota, has introduced legislation to help low- and moderate income
Americans save for retirement. The Savings for American Families' Future Act
would make important updates to the Saver's Credit to encourage more Americans
to save for retirement.
The bill would expand the number
of families and individuals who would be able to use the full Saver's Credit by
more than doubling the existing income limits for the full credit. The new
limits would be set at adjusted gross incomes of $32,500 for individuals and
$65,000 for couples.
Retirement Wisdom from Richmond
The Richmond Times
Dispatch recently published some words of retirement wisdom from several
financial planners in the Richmond area. The following highlights their tips:
- Consider
converting part of your investments to an annuity. Annuities are contracts
that guarantee income. They fell on unpopular times during the booming stock
market because they did not offer much opportunity for growth. But
annuities are becoming popular again.
- Pay off your
mortgage before retirement. Your cash flow will be healthier and your need
for income less when you retire.
- Though your 401(k)
may have tanked, you can protect it by diversifying your assets. Above all,
do not concentrate your investments in your company’s stock. The closer you
are to retirement, the more conservative your portfolio should become.
- Do not let your
emotions influence your investment decisions.
- Realize that
Social Security will cover only about one-third of what you need for
retirement. And plan accordingly.
Dipping
into the 401(k)
A new survey by Consumer
Credit Counseling Service of Greater Atlanta found that 29.6% of people who
called the nonprofit agency for foreclosure prevention counseling received an
early distribution from their 401(k) or other retirement plan within six months
before contacting the agency.
In eight years, 90% percent of
civil service federal executives will be over age fifty and nearing retirement.
Combining Retirement Systems in
Arkansas
The Arkansas State Legislature
is considering a bill aimed at encouraging local fire and police retirement
plans to consolidate with the Arkansas Local Police and Fire Retirement System.
The bill would create an additional allocation of insurance premium taxes to
cover a 3% cost-of-living increase for local retirement plans that consolidate
with the system in the future.
|
|
