Month: March 2019

Retirement Roundup: Using your tax return for retirement savings

Posted on by planeteria

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

Why using your tax return for retirement savings is a really good idea | Motley Fool

Roughly 7 percent of Americans plan to use this year’s tax return to save for retirement, according to GoBankingRates. The figure rises to 10 percent for older millennials between 35 and 44, and for soon-to-be retirees, aged 55 to 64. Is this a good way to put the lump sum you get back from the Internal Revenue Service (IRS) to work? In a word, yes. Putting windfall profits into a retirement plan is a time-tested way of growing your retirement nest egg. Funding retirement savings is a valuable way to use the money because it lets your assets grow by compounding, a powerful and invisible market force that grows your money exponentially.

The 6 factors that make up a “sound” retirement plan | MarketWatch

Worry most about the things you can control – but don’t ignore the rest. That seems to be the advice from J.P. Morgan Chase, which recently released its 2019 Guide to Retirement. One of its leading charts, which it notes is a “sound plan for retirement,” is a look at the factors that those planning for retirement can – and can’t – control. The company reveals that saving and spending are in your “total control,” while market returns and policy regarding taxation, savings, and benefits are “out of your control.”

Boomers’ retirement reality requires careful planning | Forbes

Work longer or reduce your standard of living – or do some combination of the two. These are the hard choices facing most working boomers as they transition out of the workforce and into retirement. The fact is, most boomer workers haven’t accumulated sufficient savings to retire full-time at age 65 and meet the goals that financial advisors commonly express for retirement income, according to a recent report from the Stanford Center on Longevity. This report analyzes boomers’ assets, debts, and the amounts they’re saving for retirement.

Why retirement planning must start at the end | Kiplinger

Stephen Covey, the author of The 7 Habits of Highly Effective People, advises readers to begin with the end in mind. After all, how can someone progress toward a goal if the goal is undefined? Unfortunately, that’s exactly how many people approach the biggest goal of their lives: retirement. Some 70 percent of Americans feel they have inadequate retirement plans, according to a 2018 study by Northwestern Mutual. They don’t know how much money they’ll need. To avoid falling into the same trap when planning your own retirement, begin with the end in mind. Start out by determining the annual income you will need during retirement. Decide what you want out of life after you retire and what kind of price tag would be associated with it.

The best way to recession-proof your retirement | Yahoo Finance

An estimated $2.4 trillion disappeared almost overnight from Americans’ 401(k)s and IRAs when the market crashed in 2008, devastating many Americans’ retirement prospects. Stocks have since recovered spectacularly, and recently the bull market celebrated its 10th birthday. Still, there’s a growing sense that this rally is on borrowed time, and as economists warn that another recession is likely to happen in the next two to three years, many people are asking themselves what they can do to prepare for the next financial disaster. Those who are near retirement are especially vulnerable to drops in the stock market, due to the lack of time they have to recover and the fact that – in the case of those already retired – they’re drawing down savings instead of working and adding to it. But if you plan ahead, you can build a financial buffer to help ensure you survive the passing storm and enjoy your hard-earned retirement.

Here’s how many working Americans aren’t saving enough | CNBC

Working Americans are still struggling when it comes to saving money for both their short-term and long-term goals: More than one in five (21 percent) don’t save any of their annual income. That’s according to a new survey from Bankrate.com, which asked 1,000 working American adults how much of their annual income they set aside for retirement, emergencies and other financial goals. And those who do save, Bankrate finds, aren’t setting aside a lot: 20 percent save only 5 percent or less of what they make, and 28 percent save 6 to 10 percent. Just 16 percent are saving more than 15 percent of their income. Experts generally recommend earmarking 10 to 20 percent of income just for retirement savings.

Advocating for investors benefits PERA members and retirees

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Council of Institutional Investors Board Re-Elects Colorado PERA Executive Director Ron Baker

Colorado PERA Executive Director Ron Baker was recently re-elected to the Board of Directors for the Council of Institutional Investors (CII). Baker was first elected to the CII Board in 2018. CII is a nonprofit, nonpartisan association of pension funds and endowments and a leading voice for effective corporate governance and strong shareowner rights. CII members collectively have more than $4 trillion in assets under management.

“I am honored to be re-elected to the CII Board and to continue PERA’s decades-long role in promoting ethical corporate governance and shareholder rights on behalf of institutional investors and the PERA membership,” said Baker.

As an institutional investor, PERA has long been active in advocating for strong corporate governance policies that ensure transparency and ethical behavior. See the following PERA on the Issues posts for more on PERA’s leadership role in corporate governance:

2019 Proposed Legislation Status

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A summary of proposed legislation affecting Colorado PERA. Check back often for new bills and updated status reports. Last updated: May 20, 2019.

House Bill 19-1217

PERA Local Government Division Member Contribution Rate

Concerning the elimination of the 2 percent increase in the member contribution rate for members in the Local Government Division.

Summary: During the 2018 Legislative session, the General Assembly enacted Senate Bill 18-200, which made modifications to PERA’s hybrid defined benefit plan to eliminate the unfunded liability of the plan within the next 30 years. Senate Bill 18-200 included a 2 percent increase in the member contribution rate to PERA for employees in all divisions of PERA. The increase is phased-in over three years with the first increase occurring on July 1, 2019. This bill eliminates the 2 percent increase in the member contribution rate for members in the Local Government Division.

Sponsors: Rep. KC Becker (D-Boulder) | Sen. Lois Court (D-Denver) and Sen. Jack Tate (R-Centennial)

Status: Passed House Third Reading on March 19; passed Senate Third Reading on April 10; signed by Governor on May 20.

PERA Board position: The Board’s original recommendation to the General Assembly presented in late 2017 included increases in employee contributions across all divisions.

House Bill 19-1270

PERA Board Assess Climate-related Financial Risks

Concerning a requirement that the PERA Board of Trustees take certain actions in connection with climate-related financial risks to the trust funds.

Summary: The bill requires that the PERA Board of Trustees administer a selection process to retain a third-party organization with certain credentials by October 31, 2019, to perform a study to include:

  • A comprehensive analysis of any climate-related financial risk of the association’s portfolio, and exposure of the fund to long-term risks;
  • A summary of climate-related financial risk-related engagement activities undertaken;
  • A description of additional action that should be taken, or planned to be taken, by the Board to address climate-related financial risk, including a list of proxy votes and shareholder proposals initiated by the Board.

Sponsors: Rep. Emily Sirota (D-Denver) and Rep. Chris Hansen (D-Denver)

Status: Postponed indefinitely by the House Finance Committee on April 8.

PERA Board position: The PERA Board directed staff to continue to work with the bill sponsors and members of the General Assembly to provide further education on PERA’s investment process related to risk.

Retirement Roundup: Investors see worst performance since Great Recession

Posted on by planeteria

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

Institutional investors see worst calendar year performance since Great Recession | PlanSponsor
Institutional plan sponsors lost ground in 2018, as fourth-quarter losses dragged down returns for the year, according to Northern Trust Universe data. The fourth quarter wiped out gains through the third quarter and resulted in the worst calendar year performance for plans included in the measurement since the 2008 global financial crisis.

Retirement and the age gap dilemma | MarketWatch
Nearly two in 10 married couples in America have at least a six-year age spread between them, according to the Census Bureau. So there are millions of people looking for a logical way to balance their age differences with retirement decisions. The simple answer to age-gap retirement planning is that there is no simple answer. Everyone’s life journey and retirement plans are different. That said, retirement—particularly for age-gap couples—requires forethought aplenty.

Can the KonMari Method help you declutter your retirement? | Forbes
Best-selling author, Netflix star, and professional organizer Marie Kondo has sparked a movement to declutter your home with a powerful style and simple approach. All of which centers around one basic question: “Does this bring you joy?” Moreover, can a simple question about “joy” be applied to the concept of retirement?

Willyour kids be able to retire? | US News
Parents worry that their children will have it worse than they do when it comes time for them to retire. Many millennials areburdened with student debt, suffer from lagging wage growth, probably do not benefit from a company retirement plan and can look forward to rising health care costs. But is the future really so bleak for your children? Millennials have approached work a little differently, and they may do retirement their own way as well.

Americanswant government to play a larger role in retirement planning | P&I Online
Americans of all political stripes are worried about retirement security and want government to play a bigger role, according to a research report published in February by the National Institute on Retirement Security at its Washington policy conference. “Retirement Insecurity 2019: Americans’ Views of the Retirement Crisis,” is based on 1,250 online interviews conducted by Greenwald & Associates in January. Asked if there is a retirement crisis, 80 percent of Democrats, 75 percent of Republicans and 75 percent of Independents agreed.

Suspected elder abuse claims quadrupled in 4 years – here’s what to know and how to protect your loved ones | Money
Older Americans are at risk for losing more money than ever, thanks to a rise in financial exploitation targeting the elderly. Financial scams and other crimes singling out older Americans quadrupled from 2013 to 2017 and involved more than $6 billion in fraud, according to a new report from the Consumer Financial Protection Bureau (CFPB). To avoid being taken advantage of by a family member or a stranger, the CFPB recommends some basic steps to protect yourself or a loved one, such as securing private financial documents and not allowing caregivers to pay bills or use a potential victim’s credit card.

PERA Board of Trustees updates divestment policy statement

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In recent months, Colorado PERA has received inquiries about its approach to divestment from certain categories of its investments. The idea of divestment – making investment decisions based on national, or even international, public issues, with the goal of avoiding investments that are in conflict with specific public policy objectives – has become a political football of sorts for public pension funds throughout the United States. Various interest groups have called for divestment on political or environmental, social, and governance (ESG) grounds, while others have argued that pensions’ sole investment responsibility is a fiduciary one, and that past divestment efforts in states such as California have resulted in significant costs to public servants’ retirement funds. Throughout 2018, the PERA Board of Trustees worked to update the divestment policy that it first adopted in 2007, seeking input from fiduciary counsel and investment consultants, as well as hearing from PERA members.

In January 2019, the PERA Board finalized and adopted an updated Statement on Divestment. The Statement notes that PERA will implement divestment mandates from the Colorado General Assembly, but also that the Legislature should consider any such proposals with caution and fiduciary care. As the statement explains, PERA serves the singular purpose of ensuring the retirement security of Colorado’s current and former public servants.

The statement concludes:

The issues facing our world today are not easily separated into gradations of severity or importance. Consensus as to the priority of these types of issues and the proper recourse is difficult to achieve. As a result, once a divestment mandate is imposed to address one issue, the resulting “slippery slope” makes differentiation among the remaining issues contentious and divisive. Increased divestment is costly and limits PERA’s ability to effectively seek the best risk-adjusted returns to secure the retirement benefits of public servants. For these reasons, PERA will oppose divestment efforts unless such opposition is inconsistent with its fiduciary duty, but will implement divestment mandates passed by the Colorado General Assembly.

For more information on the PERA Board of Trustees, see the following PERA on the Issues posts:

Policies and practice shape oversight and involvement of Trustees in PERA investments

Understanding the role of Trustees

We Hear You: PERA’s Investment Program

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New video series answers your questions about PERA’s investment program.

What investments are included in PERA’s portfolio? How does PERA staff make those decisions? How does PERA manage the risk that comes with any kind of investment?

Questions like these are addressed in a new series of videos recently released by PERA. The genesis of the series started with frequently asked questions from PERA members and stakeholders. Titled the “We Hear You” series, the video collection features interviews with PERA’s Chief Investment Officer as well as members of the investment staff answering questions from actual members. The purpose of the series is to broaden awareness of PERA’s investment program, guiding practices and the goals it seeks to achieve on behalf of the membership.

The video program is designed to complement the extensive information about these practices – everything from asset allocation to performance metrics – available on PERA’s website and included in the Comprehensive Annual Financial Report.

The first video in this series covers the ABCs of PERA’s Investment Program. You can watch it below, on the copera.org website, or on PERA’s YouTube channel. Have a question? Please keep them coming using this link; future videos will be based on your questions and will include information about the important work done at PERA to serve its members.

We Hear You Video: PERA’s Investment Program

Women face unique challenges in retirement

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A public service career addresses many of them

A growing amount of research reveals that women approach retirement planning differently than men, and International Women’s Day on March 8 marks a good opportunity to consider both the risks in retirement that women disproportionately shoulder and ways that they can be prepared.

According to a 2018 report from Transamerica Center for Retirement Studies, 55 percent of women fear outliving their retirement savings, compared to 49 percent of men, and women are growing more concerned: A survey from the Nationwide Retirement Institute revealed that in 2017, 31 percent of women anticipated that their post-work life would be better than their pre-retirement life but that dropped to 26 percent last year.

These fears are well founded. Women live longer than men, to the point that there are 5.7 million more American women than men at age 65, and 67 percent of the over-age-85 population is female. These and other factors, including lower average income and shorter average careers, contribute to an increased risk for women of falling into poverty as they age.

Despite this seemingly grim information, there also are signs of hope for women who are in, or nearing, retirement. In the 2018 election, arecord number of women were elected to Congress. According to Nancy Altman, president of Social Security Works and chair of the Strengthen Social Security coalition, this diversity in elected representatives is seen as a driving force behind upcoming hearings and potential legislation designed to strengthen retirement security and address health care programs and affordability.

Not only that, when women save and invest their money, they tend to outperform men by an average of 40 basis points. They prepare better than men for unexpected events and more closely track their daily expenses. They’re more open to seeking the counsel of a financial adviser. (For more about the issues women face in this area, see Retirement Voices, an information-sharing project about retirement concerns designed for late-career women.)

If these figures demonstrate anything, it’s that women who work for an employer that offers a defined benefit plan such as PERA’s are far more prepared for retirement than are average American women. Even if pay is low, PERA members are saving for a future retirement distribution. This is important because the proportion of female PERA members and retirees is 66 percent—including a robust 74 percent who work in or have retired from the School and DPS Divisions—and they have or are earning a retirement income that cannot be outlived and can be passed on to survivors. They also have health careoptions that those who spend their careers in the private sector may not have access to, as well as the ability to participate in low-cost voluntary savings vehicles like PERAPlus.

Women who have chosen a career in public service in Colorado have, almost by definition, set themselves on a productive path toward retirement. To further strengthen their financial security, they should continue to take advantage of the many ways PERA can help ensure a secure retirement.