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.

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:

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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 »

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“).

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Several months ago, I wrote about the pros and cons of converting a traditional IRA to a Roth IRA (see Roth 2010:  Should You Convert?).  Beginning this year, any individual can convert to a Roth IRA and take two years to pay the taxes, regardless of household income level (in previous years, only those with household incomes below $100,000 annually could convert to a Roth).  Further research by “yours truly” indicates that a Roth conversion may be ideal for those who can pay the taxes on the converted amount and are still several years away from retirement (see my new NCPA publication, Should You Convert to a Roth IRA?).  After punching some numbers into ESPlanner, a financial planning software developed by NCPA senior fellow and Boston University economist Larry Kotlikoff, I found that the typical 40-year old couple can increase their living standard by as much as 15 percent at retirement by converting to a Roth now and continuing annual contributions to a Roth.  And who doesn’t want to have a fairly comfortable standard of living at retirement? Read the rest of this entry »

For those of you who have not had the opportunity to pick up a copy of the 2,074-page ObamaCare law (H.R. 3590) for some light reading, the National Center for Policy Analysis (NCPA) has published a short, two-page analysis on the new long-term care entitlement program discussed in the law (see “The New Long-Term Care Entitlement“). Read the rest of this entry »

Here we go again.  Panic in the stock market has set in, yet again, due to every direct or indirect domestic or international incident known to man.   Maybe Greece.   Maybe Senate-passed financial regulations.  Maybe unemployment.  Maybe somebody pressed the wrong button on their computer.  Or maybe somebody sneezed. Read the rest of this entry »

Who is going to pick me up?  Government, according to a new Gallup poll.  Among non-retired respondents, one-third expect to rely on Social Security as a “major source of income” at retirement.  This answer ranks second to retirement savings accounts, of which 45 percent cited as a major source of retirement income.  However, it has increased 7 percentage points since 2007 (when only 27 percent were relying on Social Security as a major source of income). Read the rest of this entry »