Retirement Reform Blog

What a sad time in California legislative history.  The opportunity to pass tough but meaningful pension reform has resulted in the passage of a bill akin to throwing a bucket of water on a blazing inferno.  (See Barbara Hollingsworth, “California Rejects Even Modest Pension Reform,”) Read the rest of this entry »

Desperate times call for desperate measures, as an increasing number of people are taking hardship withdrawals from their retirement plans (see WSJ’s “How to Tap Retirement Funds Responsibly“).   For some, these withdrawals can make the difference between paying down debt or getting harrassed by collection agencies, keeping up the with mortgage or moving in with the in-laws.  

But before desperation and panic set in, consider all options with the goal in mind of accessing the exact amount of money you need as cheaply as possible.  Although I have pontificated before about the pitfalls of borrowing against a 401(k), this could be an alternative to taking a costly distribution, provided that you are certain of being able to pay the loan back.  See the NCPA publication, “401(k) Loans = Retirement Insecurity.”  Also, check out our 401(k) Borrowing Calculator to get an idea of how much a loan could cost you in the long run.

New on the blog!  A corny economics joke: “How many economists does it take to change a light bulb?”  Answer:  “One, if you assume a ladder.”

If you fail to see the humor, this joke reflects the sometimes dubious assumptions in economic theory when making predictions and forecasts.  The latest example is the just-released Medicare Trustees Report.   (For a summary of the Social Security/Medicare Trustees Report, click here.) Obama administration cheerleaders are ooing and awing over the projected unfunded liabilities (the difference between the payroll taxes and seniors’ premiums used to fund Medicare and the benefit payouts.)  According to the 2010 report, the Medicare shortfall into the infinite horizon is expected to be just $36.6 trillion, less than half of last years’s reported liability of $89.3 trillion! What is going on here?  Some highly skeptical assumptions based on the provisions laid out in Obamacare, that’s what.  For example: Read the rest of this entry »

If the latest proposed class action suit picks up speed, shareholders of British Petroleum will be in worse shape than they are now. The Wall Street Journal reports that public pension funds in New York and Ohio are considering a class action suit against BP, citing that the company allegedly misled them about the protocols it had in place to deal with an oil spill.  (See Nathan Becker’s, “Pension Funds Hope to Lead BP Suit“). An expensive, drawn out lawsuit to recover a fraction of the shares held in these pension funds is counterproductive for many reasons. Read the rest of this entry »

On Wednesday, the Senate approved an extension of federal unemployment insurance benefits  through Nov. 30 only for states with unemployment rates greater than 8 percent.  Proponents argue the extension will provide a temporary lifeline for the unemployed and a stimulus for the economy as the money will be spent on goods and services.  However, the 59-39 split vote illustrates the widespread debate about the federal government continuing to provide these benefits.  Three arguments against them come to mind:

Read the rest of this entry »

Today, several business groups, representing the spectrum of large to small enterprises across America, are convening in Washington to present their case.  A highlight of the summit is a letter written by the U.S. Chamber of Commerce that is being presented to the President (See “Jobs for America:  An Open Letter to the President of the United States, the United States Congress, and the American People“).  This letter spells out simply and eloquently why government cannot create jobs and what the private sector needs from government in order to create jobs:  low taxes, free trade, fewer and more streamlined regulations, less government debt, and more certainty about the administration’s policies going forward.   I urge all of you to read this, as my pontificating will not do it justice.

I figured by the time I  read an article about government employers taking a page from the private sector, I would be too old to read the small print and too senile to care.  But low and behold, the Wall Street Journal (see Jeannette Neumann, “States Shift to Hybrid Pensions“) reports that states are waking up to the fact that their  pension funds are sorely lacking the money needed to pay retirees’ generous benefits.  Utah and Michigan have begun “hybrid” plans for newly hired public workers.  These plans are a combination of defined benefit (the state contributes to the worker’s pension) and defined contribution where the worker contributes his or her own money to the pension – similar to a 401(k) plan.

As Neumann notes, six other states have hybrid plans as well…not enough, in my opinion, but hey, it’s a start.  If I am a bit enthusiastic about this undertaking of pushing workers to fund more of their retirement plans, it is not for a lack of compassion.  Indeed, hybrid plans are compassionate, progressive  and environmentally responsible.  Let me explain: Read the rest of this entry »

According to the latest ADP jobs survey for June, the private sector’s contribution to the job market is smaller than expected. (See the WSJ article, “Private Sector Adds Few Jobs,”)  Yep, looking at the bare-bones private sector, minus Census jobs (which do quite well of padding the employment numbers), the results are somewhat troubling.   Large and medium-sized businesses have added jobs, but small businesses with fewer than 50 workers have cut jobs.  What’s going on? Read the rest of this entry »

An interesting tidbit for today’s blog: An article appeared in today’s Wall Street Journal that does not bode well for small businesses. (See Emily Maltby’s “A Credit Crunch that Lingers.“)

Fear of another banking crisis, complicated SBA loans, and what banks feel is pressure from regulators not to lend (among other factors) has put small business in a predicament. While there is no easy solution, it will be interesting to see what effect financial regulatory overhaul will have on banks’ willingness or ability to take on risk.

Let’s hope that that small businesses survive financial regulatory reform. This coupled with the recent onslaught of new taxes, mandates, and perverse incentives via health care reform are creating horrific challenges for entrepreneurs.

I don’t think anybody needed to get out the crystal ball to see this one coming:   According to the Wall Street Journal, now that the new credit card laws are in effect that all but prevent financial institutions from pricing credit card usage based on risk, banks are looking to recoup revenue losses by spreading costs to well-behaved checking account holders.  (See Robin Sidel’s and Dan Fitzpatrick’s,  ”End is Seen to Free Checking“).

Read the rest of this entry »