A Saner Retirement

Age Wave, a San Francisco-based think tank and consulting firm that specializes in demographic and retirement-related issues, has concluded that a saner approach to money and retirement may be a positive outcome of the current economic downturn. "Retirement at the Tipping Point: The Year That Changed Everything," a newly-released study by Age Wave, found "new fears, new hopes, and a new purpose for retirement" compared to a similar survey a year ago. "After years of out-of-control spending, Americans have been jolted into realizing that they must get back to basics and learn to live within their means in order to find financial peace of mind," said the study.

Among specific findings:

-         Nearly 60% of Americans lost money in mutual funds, stocks, and/or 401(k) plans in the past year, with those near retirement suffering the greatest losses. On average, Americans think it will take seven years to recover those losses.

-         People working now say they will need to postpone retirement 4.2 years on average. If that happens, it would be the first time the retirement age increased substantially in the United States.

-         Four of five Americans said they've learned valuable lessons about financial responsibility, with the most important financial advice for parents to pass to their children being "live within your means" and "begin saving at an early age." The so-called "Millennials" (those twenty-one to thirty-two years old) were the most likely to have learned a lesson and had the biggest jump in their concern about living within their means.

-         Many Americans have gone back to financial basics. The U.S. savings rate has increased to 4.2%, double that over the past decade, and household credit card debt has gone down 9.7%.

-         A new and in some ways more optimistic vision for retirement is emerging, with 60% of Americans viewing retirement as "a new, exciting chapter in life" compared to 52% a year ago.

-         Seventy percent want to continue working in retirement as a way to contribute, remain stimulated, and pay the bills.

Leaving Behind the Dough

Charles Schwab has released new data showing a significant number of 401(k) assets held by workers who leave their jobs have been left behind in former employers’ plans. According to the data taken from plans administered by Schwab, 43% of assets held by 401(k) participants who left their jobs in the first quarter of 2008 had not been moved a year later.

According to the data, 57% of assets held by 401(k) participants who left their job in the first quarter of 2008 had been distributed from former employers’ plans by the end of the first quarter 2009. Of those distributed assets,

-         75% of assets were rolled over into IRAs,

-         14% of assets were taken in cash distributions,

-         7% of assets were moved into new employer plans,

Sensenbrenner Sense

Wisconsin Congressman Jim Sensenbrenner has introduced legislation that would delay the mandatory withdrawal of retirement savings through 2010 and raise the mandatory withdrawal age to seventy-five.

Federal law mandates that if you are 70½ or older, you must take a required minimum distribution (RMD) from your individual retirement account each year. Given the current market, late last year, Congress passed, and the President signed into law, the Worker, Retiree, and Employer Recovery Act into law, which suspended all RMDs from IRAs, 401(k)s and 403(b)s for 2009.

The RMD rules, though, will return next year in full force. The Sensenbrenner legislation permanently raises the mandatory withdrawal age to seventy-five, allowing retirees to keep more of their money longer.

GROWTH

People investing for retirement through the use of mutual funds should not pay capital gains taxes until those shares are sold, according to Senators Mike Crapo (R-Idaho) and Tim Johnson (D-South Dakota). To keep retirement savings earning more money for a longer period of time, Crapo and Johnson have introduced the Generating Retirement Ownership Through Long-Term Holding (GROWTH) Act.

The premise behind the bipartisan legislation is simple: allow investors to keep their money working instead of removing part of it each year through capital gains taxes paid on growth in mutual funds. The GROWTH Act allows investors in mutual funds to be treated the same as those investing in the stock market. They would pay taxes only when shares are sold.

Deferring taxes on reinvested mutual fund capital gains distributions until the investor sells fund shares would allow investors to let their money work longer toward building personal savings.

Retirement, a Golden Industry

The US retirement market generates $183 billion in annual revenue for financial services firms,

Losses in Washington State

The Washington State Investment Board has suffered a 27.3% decline in the value of its retirement fund holdings on behalf of state employees over the past year. In the fiscal year ending June 30, 2008, investments had lost just 1.2% of their value and in the prior fiscal year ending June 30, 2007, investments increased in value by 21.3%.

Those Secret Swiss Bank Accounts

A fight between the U.S. Justice Department and Swiss bank UBS AG over secret accounts may have cost the Swiss banking giant its business with the Arkansas Public Employees Retirement System. Trustees of the Arkansas system has voted 5-3 to sever its contract with a UBS investment manager who has been managing about $160 million in stock market investments for the system.

The Internal Revenue Service has sued UBS to try and force the bank to turn over information about 52,000 account holders the agency says have an estimated $14.8 billion in assets and are using Swiss bank secrecy to shield the money from U.S. taxes.

Paying It Back in Missouri

A Cole County, Missouri, Circuit Court judge has ordered a former Liberty, Missouri, schools superintendent to pay $245,000 to a state retirement agency because he allegedly collected retirement benefits improperly while he was working for the district. The ruling allows the agency to withhold retirement benefits from the former superintendent until the $245,000 is recovered.

The former school manager has also pleaded not guilty to felony charges of stealing by deceit and attempted stealing by deceit.

Paying It Back in Georgia

More than 15,000 retired Georgia teachers or their beneficiaries will receive a lump sum of retirement payments they should have been receiving all along from the Teachers Retirement System of Georgia (TRS Georgia).

At the crux of the lawsuit is the contention that TRS Georgia, which has about $42 billion in retirement funds, did not correctly calculate retirement benefits. Because of those miscalculations, the plaintiffs argued, some retirees were underpaid for years. How much the retirees or their beneficiaries will receive is unclear. It could take 60 days to calculate the amount each person will receive.

Brandeis’ Decision

The Brandeis University Board of Trustees has approved a plan to suspend University contributions to the retirement fund for faculty and staff for one year, effective July 1, 2009. The plan is expected to save the University almost $7.4 million.