Railroad Retirement Day

The Railroad Retirement Board has designated August 29, 2010, as "Railroad Retirement Day.”

Benefits from the Railroad Retirement Board

During the past 75 years, more than 2 million retired workers, 1.1 million spouses, and 2.4 million survivors have received benefits through the Railroad Retirement Board.

National Railroad Retirement Investment Trust: A Paragon of Success

For the last 7 years, a portion of retiree assets has been managed in the National Railroad Retirement Investment Trust (NRRIT). The NRRIT invests in U.S. and global equity markets, fixed income, and real estate and commodities, much like many private-sector retirement funds. This innovative fund has already returned $7.9 billion to retirees, and has grown 16 percent in the last 7 years, despite payouts and the volatility in the markets and the global economy.

Will Social Security Become Unavailable?

USA Today has published a poll that says that the overwhelming majority of Americans under 34 years old do not believe they will get anything from Social Security.  

Benefit Values Decline, 1998-2008

U.S. workers saw the value of their employer-sponsored retirement benefits -- as measured by percentage of pay -- decline by double-digit levels over a 10-year period ending in 2008, according to a study of eight major industries conducted by Towers Watson.

Towers Watson found that, from 1998 to 2008, the value of total retirement benefits provided to new, salaried employees in the eight industries studied declined by 19%, from 7.88% to 6.36% of pay.

The largest decline took place in the retail and wholesale industry -- a drop of 33%, from 5.72% of pay to 3.82%. Only service industry workers saw the value of their retirement benefits increase — from 4.16% of pay to 4.30% of pay, an increase of 3%.

Law Firms under Fire

Law firms have been increasingly compelled to defend policies and practices that mandate retirement of older partners or otherwise use age as a factor. For example, in 2007, a law firm partnership, Winston & Strawn LLP, settled a suit challenging various aspects of its alleged "decompression" policy, which reduced partners' pay after age 65.

In the same year, another firm, Sidley Austin LLP, paid $27.5 million to settle a suit that the EEOC had brought on behalf of 32 former partners who had been demoted to counsel because of their age.

In January 2010, the EEOC filed a lawsuit against yet another law firm partnership, Kelley Drye & Warren LLP, challenging alleged mandatory retirement of partners at age 70.

Six Retirement Plan Honorees

Prudential Retirement has honored six plan sponsors for redesigning their defined contribution retirement programs to assist plan participants in achieving a more secure retirement.

The honorees were:

1. Ply Gem Industries
2. United Parcel Service
3. The State of North Carolina
4. Munters Corporation
5. Bekaert Corporation
6. EMC Insurance

Savings: Not as Bad as It Seems

Many participants in 401(k) and other defined contribution plans are in fact well positioned for retirement security, according to How America Saves 2010, an annual analysis of defined contribution retirement plans recently released by Vanguard. 

The report—based on records for more than 3.2 million plan participants—found that many participants in 2009 experienced higher account balances, traded minimally in response to market volatility, increasingly diversified their assets through automatic investment programs, and protected their retirement nest egg when they left their employer. Only a very small group of participants appeared to be adversely affected by the tough economy, leading to a modest decline in plan participation and savings rates and slight increases in loans and hardship withdrawals.

 Nurses’ Guide to Financial Planning

The Women's Institute for a Secure Retirement (WISER) and the CENTER for American Nurses (the CENTER) has released The Busy Nurse's Guide to Financial Planning. This booklet is part of the larger Busy Nurse's Toolkit.

The Busy Nurse's Guide to Financial Planning helps nurses identify possible sources of retirement income and what steps they can take to increase their retirement assets. The booklet offers a range of guidance, from financial tips for nurses in every decade of their lives, to developing a retirement plan that fits with their current financial picture and future goals.

EBRI Is Wrong

Freelance writer Linda Stern takes issue with a new study from the Employee Benefit Research Institute (EBRI). The EBRI contends that nearly half of older baby boomers risk running out of money in their golden years.

Stern points out that the EBRI research took some calculating short-cuts that might have made the situation look worse than it is.

Here are some examples:

• “EBRI weighed only retirement accounts and home equity, ignoring any other savings that families might have accumulated.
• “It also assumed that all workers would retire at 65.
• The study assumes “that people will blithely spend their nest eggs at a fixed rate until the day they wake up at 87 or 92 with no money left.
• “And they suggest that retirement is an all-or-nothing proposition: You either can afford to bring your lifestyle into retirement, or you can't. They don't focus -- or often, even acknowledge -- that retirement is a series of budgetary trade-offs.”

Stern then summarizes “the basic math of official retirement planning” as the following:

• “Take your current monthly spending, subtract your expected Social Security payment, and the remainder is what you need from your retirement fund every month in your first year of retirement.
• “Multiply that figure by 12, to get the amount you'd need to withdraw in a year. “Multiply that by 25, and that's the size of the nest egg you need to leave work with, to insure that your money never runs out.”

But Stern points out:

• “You'll spend more than you think for a while, but not forever. Retirement planners make much of the first few years of retirement, when you spend on everything from leisure clothes to long-deferred cruises. But by mid-retirement, many of those expenses disappear.
• “By the time a person passes 75 years of age, his spending is almost half of what it was for the years between 55 and 64, according to figures from the Bureau of Labor Statistics. Older retirees spend about 76 percent of what people between 65 and 74 spend.
• “You won't want to stay in your house forever. You may, but not many people do. So at some point in mid or late retirement, you can sell your home, downsize, and add your accumulated equity to the pot of money you have to spend. Even if you do want to stay in your home forever, new and improved reverse mortgage products will allow you to tap that equity at some point along the road.
• “You can make little adjustments that will stretch your money further. You can increase your annual retirement income by about 7 percent for every year that you defer retiring, according to research from T. Rowe Price. Working a small part-time job and delaying the start of your Social Security benefits for one year will raise the size of your benefit check by about 8 percent for life. If you keep a little bit more of your portfolio in the stock market over long periods of time (even after you retire), that will help it to last longer.
• “A small, low-fee, immediate annuity bought with part of your savings once you are retired will insure that some money comes in every month. A solid long-term care policy will insure that if you do need extensive care in your later years, you won't have to demolish your family nest egg to get it. It will be protected for your spouse or your kids.
• “Live on a budget. You can do everything from downsize to one car to cut back on restaurant meals. You can take in a roommate, move in with family. You can camp and fish on vacation or couch surf at the homes of all of your old friends, instead of flying to Europe or cruising the Caribbean. Remember that you have reasonable options that will help your money last far longer than the spreadsheets say it will.”

Life Expectancy

The average American today is living longer than previous generations. Those who reach 65 today are likely to live another 19 years. That figure is expected to grow to 21 years by 2035.