December 2018 | Colorado PERA

Retirement Roundup: What retirees would say to their younger selves

Posted on December 26, 2018May 22, 2024 by planeteria

A digest of timely information and insight about finance, investing, and retirement.

Retirement regrets: What retirees would say to their younger selves | Washington Post
Recently, the author asked: If you could, what retirement planning advice would you give to your younger self based on what you know now? She posed this question to retirees and was subsequently overwhelmed with comments from those who wish they could go back and talk to themselves. But the advice doesn’t have to be wasted. There’s still time for others to learn from others’ mistakes.

The 5 fundamentals of retirement planning | Forbes
No matter who you are, retirement brings a time of change. No longer working every day and having to adjust to the financial changes can bring stress to anyone. However, with proper planning, you can look forward to this time with the excitement and the freedom that having a plan provides. Five fundamentals should be considered when planning for retirement.

After 40 years, some say the 401(k) is due for a facelift |Pe nsions & Investments
Of all the major milestones the 401(k) has crossed, its most recent stands out. Forty years ago, Congress paved the way for the birth of the nation’s first 401(k) retirement savings plan when legislators added paragraph (k) to Section 401 of the Internal Revenue Code. Since that day on Nov. 6, 1978, the 401(k) has grown and flourished, settling comfortably into households across America. Yet while many say it has aged well, plenty more say that it’s time for a few nips and tucks.

Politicizing the portfolio | Governing
In California and elsewhere, public employee retirement funds are grappling with the issue of ESG investing, a strategy based on an asset’s environmental, social and governance factors. The idea is that firms with sustainable environmental practices, who are good social stewards and have strong governance practices, are more likely to produce stronger returns over the long run. While the notion of ESG investing has been around for decades under one name or another, its current form has taken off in popularity as more sustainably minded millennial and Generation X investors have entered the stock and bond markets. Many governments have positioned themselves as good ESG investments in order to attract these investors. They’ve even generated new vehicles for investments, such as green bonds and pay for success bonds. But as a result, they’re finding themselves awash in controversy, accused of playing politics.

Before you retire, pay off that debt | CNBC
How you manage debt could have a big impact on how your retirement dreams play out. Four in 10 retirees cite “paying off debt” as a current financial priority—putting it on equal footing with “just getting by to cover basic living expenses” as a top concern, according to a new report from the Transamerica Center for Retirement Studies. Almost three in 10 cite paying down credit card debt as a priority, while 17 percent are focusing on mortgage debt and 11 percent some other consumer debt, such as medical bills or student loans.

Kentucky is in a $43 billion pension hole. Here are some reasons why | Courier-Journal
In 2000, Kentucky’s public retirement plans were fully funded. Since then, they’ve accumulated nearly $43 billion in debts—making Kentucky’s pension system one of the worst-funded in America. Determining exactly how Kentucky got into this mess is a complicated exercise, partly because the reasons vary among Kentucky’s distinct pension plans for teachers, state government workers and local government workers. But, in simplified terms, there are a few common reasons.

Latinos falling behind other Americans in retirement preparedness, research shows

Posted on December 26, 2018May 22, 2024 by planeteria

Recent research by the National Institute on Retirement Security (NIRS) finds that inequalities in access and eligibility for employer-sponsored retirement plans result in retirement savings gaps for Latinos. As a result, Latinos are falling behind in preparing for retirement.

Why does this matter? As the largest minority group in the U.S. workforce, Latinos comprised 16.8 percent of the labor force in 2016. (According to the Pew Research Center, the Hispanic population in Colorado is even higher – at 21 percent in 2014.) Latinos lead population growth in United States, accounting for 17.8 percent of the total U.S. population and numbering over 57.5 million. The U.S. Census Bureau estimates that by 2060, the Latino population will number 119 million and will account for approximately 28.6 percent of the nation’s population. Additionally, the U.S. Administration on Aging predicts the Latino population that is age 65 and older will number 21.5 million and will comprise 21.5 percent of the population by 2060.

The NIRS research finds that access and eligibility to employer-sponsored retirement plans remains the largest hurdle to Latino retirement security.

However, when offered a retirement plan for which they are eligible, Latinos participate at the same or higher rates than other Americans.

Despite these high take-up rates, Latino workers had the lowest participation rate in employer-sponsored retirement plans, at only 30.9 percent, compared to 53 percent of white workers. The top reason Latinos did not have retirement savings was that they worked part-time, resulting in less access to retirement savings plans. Many employers are allowed by law to exclude part-time workers from participation in their retirement plans.

The NIRS study states that allowing part-time workers to participate in employer-sponsored retirement plans would greatly increase the number of Latinos that could save for retirement.

The gap between Latinos and whites is particularly significant in the private sector, with 47.7 percent of Latinos participating compared to 67.1 percent of whites, a difference of 19.4 percent. In the public sector, retirement plan participation is higher across the board. While the gap in participation for Latinos persists, it is far narrower with 86 percent participation compared to 94.1 percent of whites, a difference of 8.1 percent in public plans.

One part of the solution to the retirement savings gap could be greater awareness of the Saver’s Credit. The Federal Saver’s Credit is a non-refundable income tax credit for taxpayers with adjusted gross incomes of less than $31,500 for single filers and $63,000 for joint filers. Because the median household income for Latinos was $46,882 in 2016, a large number of these households would qualify for the Federal Saver’s Credit if they saved for retirement. By widely promoting the credit, many more Latino households could be rewarded for saving for retirement.

Finally, NIRS recommended that more states explore the adoption of state retirement plans, noting that in 2014, an estimated 103 million Americans between 21 and 64 had no access to an employer-sponsored retirement account. State retirement savings plans can provide low-cost retirement products to working Latinos and other Americans who are not covered by a workplace retirement plan, thereby helping to alleviate the current retirement savings crisis that Latinos, and many others, face.

Read the NIRS study.

Additional PERA on the Issues articles on NIRS retirement research:

Good news for millennials with access to retirement plans

PERA works for Colorado stakeholders

Best of PERA on the Issues 2018

Posted on December 26, 2018May 22, 2024 by planeteria

Looking back on the year, it’s clear that PERA was top of mind—and with good reason. PERA and its future stability dominated the content of PERA on the Issues before, during, and after the 2018 legislative session, as Senate Bill 18-200 (SB 200) became the first PERA-recommended reform legislation to be introduced since 2010. But there were topics aside from legislation that proved to be of interest to readers, including Social Security, health care, taxes, and the recent mid-term elections. Without further ado, here is a closer look at some of the 2018 highlights.

Top Topic of 2018: Senate Bill 200
As was the case in 2017, Legislation was once again the most visited section on the site. PERA on the Issues continued to be the best place for readers to receive timely information on the 2018 legislative session, and SB 200 was the dominant topic of discussion. While the continuously updated 2018 Proposed Legislation Status article received the most traffic from our readers, SB 200-specific articles were not far behind. We followed the PERA-reform bill’s progression through the legislative process, including the bill’s initial introduction in the Senate in March; its approval in the Senate following two committee hearings, a spirited preliminary debate, and remarks from legislators prior to the final vote; its approval in the House after about 90 minutes of vigorous and amicable bipartisan debate; its eventual passing by both chambers late on the last day of the session, and its delivery in final form to Governor Hickenlooper to be signed into law. Following the signing of SB 200, readers were keen on understanding the legislation’s impact on their individual circumstances, as seen through notable traffic numbers to articles that detailed the final law as written, the FAQs heard on June’s telephone town hall meeting, and particular provisions in the new law such as the automatic adjustment.

Other Top Topics: Social Security, Health Care, and Taxes
A number of non-SB 200 matters also interested our readers. There were, of course, the usual articles related to Social Security, which are always popular with PERA on the Issues readers. One article addressed proposed federal legislation that would replace the Windfall Elimination Provision (WEP) with a more fair formula that would ensure Social Security benefits be based on actual work history. Another looking at the Social Security Fairness Act of 2017 experienced a resurgence in traffic and comments over the course of the year. Other top-of-mind topics for PERA on the Issues readers in 2018 were the rising cost of health insurance premiums, retirement age requirements (and how PERA compares to similar public employee retirement plans across the country), tax-related information, and Colorado’s recent mid-term elections.

Thank You for Being Part of the Conversation
Posting your comments and questions to PERA on the Issues articles is a great way to engage with PERA and others. This year’s post with the most comments didn’t have quite enough participation to pass the all-time most-discussed post—that honor is (still) held by a 2015 post on WEP—but the 2018 Proposed Legislation Status article did generate a whopping 112 comments, just a dozen shy of the WEP record holder. This is similar to last year, when the most commented post was 2017 Proposed Legislation Status.

Looking Ahead to 2019
The First Regular Session of the 72^nd General Assembly will convene on January 4, 2019. Democrats have a “trifecta,” in which one party controls the governorship and both chambers of the Legislature. This will be a major shift from the divided state government Colorado has known the past two years where Republicans held a one-vote majority in the Senate.

Many issues introduced by Democrats but defeated in the Senate with the previous split-chamber will undoubtedly be brought up again in the new political environment of 2019. The agenda will also be heavily influenced by a total of 30 new Representatives and Senators, as well as a Governor who is expected to be more heavily involved in policymaking than his predecessor. While we expect next year’s legislative session to be less active for PERA-related issues than it was this year, we will, as always, keep you apprised of any noteworthy legislation. We hope that you will continue to turn to PERA on the Issues for credible, timely information on policy, retirement, health care, finance, and other topical areas – and share your thoughts, comments, and questions with the PERA on the Issues community.

On behalf of everyone here at PERA, we wish you a safe and healthy holiday season. See you in 2019!

2019 Legislative Session Preview

Posted on December 12, 2018May 22, 2024 by planeteria

The First Regular Session of the 72nd General Assembly will convene on January 4, 2019. Democrats now have a “trifecta,” in which one party controls the governorship and both chambers of the Legislature. This will be a major shift from the divided state government Colorado has known the past two years where Republicans held a one-vote majority in the Senate.

In the days following the election, each caucus chooses their leadership. The new Democratic majority in the Senate selected former Senate Minority Leader Leroy Garcia (D-Pueblo) to be the next President with Senator Stephen Fenberg (D-Boulder) serving as the new Majority Leader. On the Republican side, former Senate Majority Leader Chris Holbert (R-Parker) will transition to Minority Leader and Senator John Cooke (R-Greeley) will be the Assistant Minority Leader. The Democrats will have a 19-16 majority in the state Senate this upcoming session.

Not only did the November blue wave flip the state Senate that was previously under Republican control, it also gave the Democrats an additional five seats in the lower chamber. In January, there will be 41 Democrats and 24 Republicans in the House. Representative K.C. Becker (D-Boulder) and Representative Alec Garnett (D-Denver) will serve as the new Speaker of the House and Majority Leader, respectively. Republican Patrick Neville (R-Castle Rock) will continue to serve as the Minority Leader and the new Assistant Minority Leader will be Representative Kevin Van Winkle (R-Highlands Ranch).

Leaders in both the House and Senate appoint the chair and vice-chair for each committee of reference, as well as assign members to those committees. Each committee will have more Democrats than Republicans and the nearly 2:1 ratio of Democratic control of the House means they will have a three-vote majority on House legislative committees, which were announced earlier in this month. Meanwhile, Democrats in the Senate will have a one-vote majority on most committees.

PERA annually reports to the Joint Finance Committee as part of the “State Measurement for Accountable, Responsive, and Transparent Government Act,” or “SMART Act” Hearings. Members of both the House and Senate Finance committees of reference hear from each department assigned to their committee regarding any regulatory or legislative agenda, performance plans, as well as any budget requests. This hearing presents an opportunity for PERA to educate lawmakers and answer questions. Representative Leslie Herod (D-Denver) will chair House Finance and Senator Lois Court (D-Denver) will be the chair for Senate Finance in 2019.

The Joint Budget Committee (JBC) is charged with analyzing the inner workings of the agencies and departments comprising Colorado’s state government. This permanent committee sponsors the annual appropriations bill, or “Long Bill,” which allocates and balances the more than $30 billion state budget. The JBC has six members: the chairman, one majority and one minority member of the House Appropriations Committee, and the chairman and one majority and one minority member of the Senate Appropriations Committee. With Democrats in control of both chambers, the committee is now made up of four Democrats and two Republicans with Senator Dominick Moreno (D-Commerce City) and Representative Daneya Esgar (D-Pueblo) serving as the Chair and Vice Chair, respectively. The JBC initiates its annual budget-writing process in November by meeting with all agencies and departments, including PERA, and this effort culminates in the Long Bill’s passage typically in late March or early April.

In addition, PERA reports to the Legislative Audit Committee, comprised of four senators and four representatives with equal representation from the two major political parties. This permanent standing committee reviews and releases audit reports, as well as recommends special studies. Assignments for the Legislative Audit Committee members have yet to be announced for 2019.

With the passage of SB 18-200, the existing Police Officers’ and Firefighters’ Pension Reform Commission, which is a legislative interim committee, was renamed as the Pension Review Commission. SB 18-200 created a subcommittee of the Commission to study and develop legislation concerning PERA. The composition of the Commission was unchanged during the 2018 interim session. The new membership of the Commission and newly created Subcommittee should be announced soon.

PERA on the Issues – your best resource for information throughout the 2019 legislative session.

PERA staff keep legislators prepared for 2019 legislative session

Posted on December 12, 2018July 15, 2024 by planeteria

PERA staff are committed to providing regular, transparent updates to state legislators about the status of the PERA trust funds and the economic impact of the public employee retirement plan across Colorado.

Currently, four different legislative committees have oversight responsibility of PERA. Each committee held hearings this fall where PERA staff provided general updates as well as specific information tailored to the needs of the different committees. Recent presentations to reporting committees in 2018 included:

Legislative Audit Committee, held on August 14
Pension Review Commission, held on August 15
Joint Finance Committee (SMART Act hearings), held on November 26
Joint Budget Committee, held on December 4

Led by Colorado PERA Executive Director Ron Baker, PERA staff presented information about PERA’s status and impact as well as major developments in 2018.

PERA continues to have significant economic impact around the state. Contributions to the Colorado economy come from $4.1 billion in total Colorado distributions, creating $6.5 billion in economic output. PERA provides retirement and other programs to one in every 10 Coloradans, paying benefits in every Colorado county, including over 25 percent of payroll in some of the state’s most rural counties.

The investment program continues to meet benchmarks through a diverse asset allocation and a long-term investment time horizon, while maintaining low costs by managing more than half of its portfolio internally, saving approximately $40 million annually in investment fees.

Senate Bill 200 (SB 200) significantly improved PERA’s funded status and every division is expected to reach full funding within the next 30 years. Major provisions of the legislation, approved during the 2018 legislative session, include increased contributions, modified benefits, and an automatic adjustment provision.

The automatic adjustment provision in SB 200 is designed to keep each division on schedule to full funding by 2048, with three components that include employer contributions, employee contributions, and the annual increase that can be adjusted over time if PERA falls behind or moves ahead of schedule to reach full funding. The direct distribution from the State’s budget could also be adjusted but cannot exceed the current funding level of $225 million. The first eligible year for any needed adjustments would be on or after July 1, 2020.

No legislative agenda items have been identified by the PERA Board for the upcoming 2019 legislative session.

In addition to the general overview, PERA staff offered more specific information for the various committees. For example, a PERA audit response plan for the Legislative Audit Committee detailed a process of examining current procedures in place for the review of actuarial reports and a review of controls over financial reporting. For the Joint Budget Committee, staff responded to several questions, such as looking for more detail about the automatic adjustment provision of SB 200 and how funded status might trigger an adjustment in the future.

At each hearing, PERA staff reminded legislators of their willingness to serve as a resource during the 2019 session as retirement security and the financial stability of Colorado’s largest public employee retirement plan continue to be priorities.

Stay up-to-date by following PERA on the Issues and subscribing to our newsletter for insights throughout the First Regular Session of Colorado’s Seventy-second General Assembly, convening on January 4, 2019.

Retirement Roundup: This investing expert says there’s a big problem with index funds

Posted on December 12, 2018May 22, 2024 by planeteria

A digest of timely information and insight about finance, investing, and retirement.

Investing legend says there’s a big problem with index funds | Time
A generation ago, Jack Bogle invented the index fund. Now he’s warning his creation may have a negative impact on the stock market. Bogle, who founded The Vanguard Group in 1974, wrote recently in The Wall Street Journal that if current trends continue, index funds will soon own half of all U.S. stocks. He thinks that could lead to a dangerous vacuum in corporate governance – with nobody to effectively police the corporate executives who run America’s largest companies. “Public policy cannot ignore this growing dominance, and consider its impact on the financial markets, corporate governance, and regulation,” he wrote. “These will be major issues in the coming era.”

Many retirees outspend planned budget | PlanSponsor
Thirty-nine percent of retirees are spending more than they had expected, according to the “Global Atlantic Retirement Spending Study: Perception vs. Reality.” Forty-nine percent of pre-retirees believe planning for retirement is more difficult for them than it was for their parents. The typical non-retired U.S. consumer older than 40 spends an average of $2,993 a month, and retirees spend 32 percent less ($2,008), according to Global Atlantic Financial Group. The areas where retirees are spending less are entertainment (29 percent less), dining out (24 percent less), traveling (18 percent less) and on housing (23 percent less on mortgage payments and 22 percent less on rent).

Don’t retire early unless you can answer “yes” to these 4 questions | Motley Fool
Retiring early is a dream for many, but jumping the gun by retiring too early can leave you pinching pennies at the end of your life when your savings run dry. Before you decide to retire, it’s important to make sure all of your finances are in order to avoid this grim picture. The four questions you should be able to answer “yes” to if you’re truly ready for a premature retirement relate to your debt, savings, health care plan, and retirement account withdrawals.

By choice or necessity, more adults are working past retirement age | Denver Post
A National Press Foundation seminar in Washington, D.C., earlier this year explored the topic of why Americans are working longer. “The population is getting older, fertility rates are quite low, and people are living longer,” Richard Johnson, director of the program on retirement policy at the Urban Institute, said during the seminar. Johnson provided several reasons for the change in the labor landscape, including tightening of labor markets, pension uncertainty, and the availability of less physically demanding jobs.

Everyone is having some trouble saving for retirement | CNBC
In a perfect world, saving for retirement would be easy. That world assumes everyone makes an adequate salary, can afford all their necessities and a few frills, and feels comfortable setting aside some money for the future. Yet the reality is that retirement saving is not easy for everyone. Lower income and debt, whether from credit cards or student loans, are two items that can make it difficult to save for the future. When 30 percent of people surveyed by Stash feel financially squeezed, they start eyeing retirement contributions as a place to cut back. The investing app surveyed more than 2,100 people online in November.

Are you retirement ready? Easy fixes for 4 common planning mistakes | Forbes
The 2018 Retirement Confidence Survey (RCS) conducted by the Employee Benefit Research Institute (EBRI) and research firm Greenwald & Associates, found that only 32 percent of retirees are very confident in their ability to live comfortably throughout retirement. But what does that mean for the remaining 68 percent of retirees who are less confident? Equally important, what does it mean for working Americans actively saving for life in retirement?