Month: July 2015

Doing More, Not Less, To Save Retirees From Financial Ruin

Posted on by planeteria

The New York Times’ journalist Eduardo Porter asks a critical question in his Economic Scene column: “How can workers and their employers be convinced, cajoled or compelled to consistently save more?”

He begins by making the case that most Americans lack the skills to make investment decisions and manage their own retirement savings. (Take an interactive quiz to test your own financial literacy.)

Of respondents to a nationally representative Health and Retirement survey of Americans age 50 and over, only one-third correctly answered all three fairly basic questions about interest rates, inflation and investments.

Along with their poor preparation to understand the intricacies of saving and investing, most American workers are also not very good savers.

From 1990 to 2010, the typical contribution to 401(k) accounts ranged from 4.7 to 5.2 percent of earnings. (Note that not every American worker has access to a 401(k) account.) Even the age group who tends to save the most – those aged 65 to 69 – typically saved 7.5 percent in 2005. If employers were to match half of their workers’ contributions, American workers at retirement still would not be “anywhere near where they must be.”

Coupled with low savings rates, early withdrawals from retirement savings accounts and large fees diminish the savings workers have available at retirement.

So Porter argues that employers, the government, or both, may need to step in to “prevent a demographic catastrophe.”

“That might require enhancing Social Security rather than limiting it,” Porter writes. “Or it might require employers to take back more of the responsibility for employee’s retirement savings.”

He concludes with an argument from Brad Delong, an economist at the University of California, Berkeley:

“The 21st century will see longer life expectancy, and thus a greater role for pensions,” Delong explains. “Yet here in the United States the privatization of pensions via 401(k)’s has been an equally great disaster.”

How to Be a Smart Consumer of Information

Posted on by planeteria

Our world has become increasingly complex and the big issues we face have no simple solutions. That’s especially true when it comes to the topic of retirement security. With all the news and commentary on the sustainability of public retirement plans, how are we able to discern the facts?

As typical consumers, most of us compare the features and prices of the products we purchase before letting go of our hard-earned dollars. But do we comparison shop and evaluate the “features” of the information we receive every day? Here are a few tips (and some caveats) on how to be a smart consumer of information.

Don’t believe everything you read or hear

We’ve probably heard this from our parents, but we need to practice it. Just because something is on the Internet, on TV or radio, or in the newspaper doesn’t mean it’s valid. This is especially true now that it’s relatively easy for anyone to have their “news” published online.

Consider the source

Here’s another bit of advice we all need to heed. Where was the information originally published? As the media industry has consolidated over the last decade, a lot of content printed in local newspapers and aired on evening news programs is originally from somewhere else. What do you know about the source? Who owns the original content? Keep in mind that the source of the information is a business after all, and as such, they are selling you a product. Is it something you want to buy?

Compare different “channels” for competing views on the issue

Whether you’re watching TV, listening to the radio, reading a newspaper in print, or reviewing information on your tablet or smart phone, you may want to see what others are saying about the topic. You might be surprised at how differently the subject is covered by different media outlets. The Internet makes this very easy to do, but always remember the first caveat: Don’t believe everything you read or hear.

Do your research

One of the more recent trends in media is for foundations, “think tanks,” and advocacy organizations to publish “news.” Again, here’s where the Internet is useful. Find out where a particular group gets its funding and ask similar questions of the funders. Do you share their world view? Do you know any of the people who sit on the board? Do they have an agenda? What are they selling?

Use perspective

As humans, we are highly motivated by our emotions. Advertisers, entertainers, and politicians know this. Is the information you are consuming pushing your hot buttons? If so, and you’ve considered the source, compared differing viewpoints, and done your research, it may be time to step away and put the information aside for a while. Or it could be time to become even more engaged with an issue, sharing your own opinion with friends and family, through social media or even a letter to the editor. Just be sure to reflect the perspective you’ve gained by thoughtfully evaluating the information at hand.

Become a critical thinker

If you adopt these practices, you will have all the tools you need to be a smart consumer of information. By thinking critically about complex issues including retirement security and the sustainability of public retirement plans, you will be better informed and better positioned to help others see your side of the story.

Consider becoming a PERA Ambassador

One of the benefits of being a PERA Ambassador is being among the first to hear directly from PERA on issues affecting our members. Ambassadors receive timely legislative updates, participate in exclusive telephone conferences with PERA executives, and have an opportunity to represent PERA in communities across the state. Our 800 ambassadors play a critical role in PERA’s strategy to communicate the value of PERA to Colorado, from submitting Letters to the Editor to meeting with legislators and other community leaders. Learn more about getting involved to represent PERA locally and being an informed consumer – and communicator – of PERA information.