Month: August 2021

Survey: Millennials, Gen X Especially Pessimistic About Retirement Prospects

Posted on by planeteria

In this story:

  • Members of Generation X and Millennials are more concerned than other generations about their ability to save enough for retirement
  • Younger generations are also more likely to be worried about the effects of the pandemic on their retirement planning
  • Generations agree on the value of defined benefit plans like Colorado PERA

A recent survey by the National Institute on Retirement Security found that Americans who fall into the Generation X and Millennial categories are more pessimistic than older generations about their retirement prospects and are more likely to be concerned about how the COVID-19 pandemic might have affected their retirement plans.

The survey also found the various age groups have some important points of agreement, including the overall state of retirement security and the need for greater access to retirement plans like those offered by Colorado PERA.

Where the generations differ in retirement outlooks

The National Institute on Retirement Security surveyed 1,203 people in December 2020. For the purpose of the survey, Millennials were defined as those who were 25 to 43 years old, Generation X as 44 to 55 years old, Baby Boomers as 56 to 74, and the Silent Generation as anyone 75 and older.

NIRS found that while the generations agree that there’s a retirement crisis in the United States, Generation X and Millennials have generally more pessimistic views of the situation. Seventy-two percent of Millennials and 59 percent of Generation X said they’re concerned about achieving a financially secure retirement, versus 43 percent of Baby Boomers and 26 percent of the Silent Generation.

Additionally, 64 percent of Millennials and 54 percent of Generation X said they’re more concerned about their retirement in light of the COVID-19 pandemic, while 42 percent of Boomers and 25 percent of the Silent Generation said the same.

The younger generations were also far more likely to have dipped into their emergency or retirement savings during the pandemic, according to the survey.

Where the generations agree

The NIRS survey found broad agreement across the generations on the challenges workers face while saving for retirement, with large majorities of each group saying the average worker cannot save enough money for retirement on their own.

The four generations also agree that it’s important to provide for retirees. Majorities of each group support Social Security and would be in favor of increasing contributions. Each group also agreed on the importance of defined benefit retirement plans, also known as pensions, which provide retirees with a lifetime benefit they can’t outlive. Eighty-one percent of Millennials described their views of pensions as favorable, and 68 percent of the Silent Generation said the same. All four generations agreed that every American worker should have access to a pension plan.

Where PERA factors in

In Colorado, the state’s largest workforce — public employees like state workers, teachers, corrections officers, snow plow drivers and others who serve our state — has access to a pension through Colorado PERA.

PERA is a hybrid defined benefit plan, providing a defined benefit pension to most members and offering a choice between the defined benefit plan and defined contribution plan to others. Of those given the choice between the DB and DC plans, 9 out of 10 choose the DB option.

The average PERA member retires at approximately 59 years old and lives until their early 80s, receiving benefit payments from PERA every month while they’re retired. In 2020, PERA paid more than $4.2 billion in pension benefits to more than 107,000 retirees living in Colorado, with an average monthly benefit of $3,204. At a time when many workers are anxious about their ability to save enough for retirement, defined benefit plans like PERA not only provide peace of mind in retirement, they also serve as an effective recruiting tool for public employers looking to attract and retain employees.

Proxy Voting: Keeping Policy Current

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In this story:

  • PERA casts about 60,000 votes on company ballots every year
  • PERA’s Board regularly updates its Proxy Voting Policy, which guides staff who review proposals
  • The Board last updated this Policy in February

As a shareholder of billions of dollars in thousands of publicly-traded investments, PERA casts a lot of votes on company ballots.

In a recent story, we followed one ballot through the entire process—from the day it arrived in Denver to the day the election results were announced. “Voting is our way to communicate to companies and to other shareholders,” said Luz Rodriguez, PERA’s Senior Analyst in the Investment Stewardship division.

Guiding this entire process is the Board’s Proxy Voting Policy. The first edition of this document was created in November 1979. Since then, the Board has made updates 19 times. While the policy changes to meet the needs of evolving issues, the goal remains the same. As the opening to the Policy states:

“We will continue to seek alignment of corporate management interest with PERA’s investment interests, with the ultimate aim of encouraging companies to adopt sound practices in aspects of business that can enhance profitability and long-term shareholder returns.”

Issues That Matter

The 60,000 votes PERA casts annually cover a wide array of subjects. Although it’s a detailed document, the Policy does not specifically address every issue that comes to ballot.

“Governance has always been our focus,” Rodriguez said. “The core governance issues of a company include things like director elections, executive compensation, and audit.”

Over the years, the ballot topics the Policy covers have grown. The Board updates the Policy for a variety of reasons, including: changes to government or industry regulations; industry trends; the need for further clarification of an existing policy; an uptick of a certain issue on company ballots; and new or more data on an issue.

Crafting a good policy takes work, too. “The policy needs enough guidance to be useful but enough flexibility to do a proper analysis of each issue,” Rodriguez said.

An Addition to the Policy

The Board last updated the Policy in February 2021. One topic on the agenda: Human capital management. As Rodriguez explained: “Interest has been growing about how companies are managing the relationships existing throughout a business: Who are their suppliers? How are they managing employees? How do they interact with their customers? How are they impacting the communities in which they operate?”

It’s a complicated topic. But the COVID-19 pandemic underscored the importance of human capital management in markets, business, and communities. “Companies are confronting social externalities of their businesses that were once difficult to conceptualize,” Rodriguez said.

For example, effective hiring and retention practices at a company can lead to long-term financial benefits and can lead to resiliency when confronted with unforeseen events. The inverse is true as well. Rodriguez said that investors are increasingly considering a company’s human capital management when thinking about its long-term profitability.

Human capital issues can present real financial risks and opportunities to a company, and are appearing on more and more ballot proposals. “This isn’t about taking a stance,” Rodriguez said. PERA staff reviews each proposal in its own context. “We might support a proposal at one company but vote against the proposal at another one.”

So what does staff look at when analyzing a proposal? “Proposals need to be well-targeted and relevant to the company’s operations, and seek financially material disclosures” Rodriguez said. “We need to be able to assess how the company is managing risks and opportunities related to human capital management. We do not support proposals that are overly prescriptive or overly burdensome.”

Voting with Purpose

PERA does not exist to change the way businesses operate. And, while PERA does cast a large number of votes every year, it can’t singlehandedly dictate the outcome of an election. But voting is still a crucial part of the investment operations at PERA.

Voting is part of being a responsible, engaged investor. When the ballots come in, PERA staff must be prepared to vote on every issue, whatever the issues happen to be. The goal of every vote is to align corporate interests with long-term investor interests. Investors benefit from business practices that drive long-term financial performance. And at PERA, these results ultimately benefit PERA members and retirees.

Colorado PERA Seeks an Outside Member for its Audit Committee

Posted on by planeteria

The Colorado Public Employees’ Retirement Association Board of Trustees requests applications for an outside member of its Audit Committee. The Committee meets at least three times per year and assists the Board in fulfilling its fiduciary responsibilities as they relate to accounting policies and financial reporting, the system of internal controls, PERA’s Standards of Professional and Ethical Conduct, the internal audit process, and the practices of the Internal Audit Director. The successful candidate must meet PERA’s guidelines for independence. The deadline for application is August 20, 2021.

Heading

To learn more about the position and to apply please go to “Colorado PERA Seeks an Outside Member for its Audit Committee”.

Colorado PERA provides retirement and other benefits to more than 630,000 current and former teachers, State Troopers, corrections officers, snow plow drivers, and other public employees who provide valuable service to all of Colorado. PERA is a vital and stable contributor to Colorado’s economy, distributing more than $4.2 billion in 2020 to more than 107,000 retirees who live in Colorado.

PERA Receives Clean Audit, Positive Funding Assessment at Committee Hearing

Posted on by planeteria

In this story:

  • Committee members heard from PERA leaders, external auditors and actuarial consultants
  • External auditors gave PERA’s 2020 annual report a clean audit with no issues
  • PERA gets a “green light” on its funding progress

PERA leaders and actuarial consultants appeared before the Colorado General Assembly’s Legislative Audit Committee on Aug. 18. The purpose of the hearing was to review PERA’s 2020 Comprehensive Annual Financial Report, released earlier this summer, and to review the findings of an external audit of the report. Committee members also heard an update from PERA’s actuarial consultants on PERA’s funded status and had the opportunity to ask questions.

Below is a summary of information presented at the hearing. To listen to an audio recording of the full hearing, click here.

Results of PERA’s annual audit

Every year, the Office of the State Auditor hires an independent auditor to review PERA’s financial status and fiscal controls. CliftonLarsonAllen LLP has been auditing PERA’s annual statements since 2015.

For the year that ended Dec. 31, 2020, the auditors gave the annual report a clean audit, with no significant issues or outstanding recommendations.

Click here to read the full audit report.

PERA gets a ‘green light’

As part of its annual financial reporting, PERA enlists actuarial consulting firm Segal to issue an assessment of PERA’s funding progress called Signal Light Reporting. The report uses a simple color-coded system similar to a traffic signal — shades of green, yellow and red — to give a clear representation of whether PERA is on track to eliminate its unfunded liability.

Segal simulates thousands of possible scenarios to test the effects of different variables — like investment returns and public employer payroll changes, for example — on the likelihood of PERA reaching its target of full funding by 2048. The projected results range from dark green (fully funded ahead of schedule) to dark red (insolvent within 20 years). As of Dec. 31, 2020, all five division trust funds were in “green” or “dark green” status, meaning they are expected to be fully funded by 2048.

Click here to read the full Signal Light report.

The Legislative Audit Committee is one of several legislative committees and subcommittees that PERA reports to regularly. Others include the Joint Budget Committee, Joint Finance Committee, Pension Review Subcommittee, and Pension Review Commission. These regular meetings with lawmakers allow for robust oversight and transparency into the state’s largest public employee retirement system.

News You Should Know: Lawmakers Look to Create National ‘Lost and Found’ for Retirement Accounts

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Lawmakers want to help retirement savers find their lost 401(k) and pension plans | CNBC

Workers who leave their jobs sometimes leave their retirement accounts behind — to the tune of more than 16 million accounts holding less than $5,000 left sitting in workplace plans between 2004 and 2013, according to one study. Part of a retirement legislation package under consideration in Congress is a plan to create a national “lost and found” database for such accounts, making it easier to find money that’s been left behind.

Saving for retirement on TikTok? Gen Z invests differently | MarketWatch

TikTok may have a reputation as an app for teens to share dance videos, but it’s a growing platform for sharing financial literacy information as well. As financial institutions change their strategies to reach younger audiences, some of them are branching out into social media apps like TikTok and recruiting influencers to help spread brand awareness.

Annuities make it easier for retirees to spend, research finds | CNBC

Retirees who rely on retirement accounts like 401(k)s/IRAs and their personal savings may worry about outliving their account balances and overspending. Purchasing an annuity, which provides guaranteed lifetime payments, may help ease that anxiety — a recent research paper found retirees with guaranteed income may spend as much as twice the amount spent by those relying on their savings.

Aging in place is gaining popularity among retirees. How to prep your home. | Barron’s

More older Americans are choosing to stay in their homes as they age, either to avoid or postpone moving into an assisted living facility. Here are some things to consider and some tips for making sure a home is well-equipped for aging adults.

News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.

News You Should Know: Could Expanding Medicare Address Inequalities?

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Could expanding Medicare eligibility reduce racial disparities? | Verywell Health

Communities of color often face bigger challenges accessing health care. Expanding access to Medicare by lowering the eligibility age could allow doctors to diagnose and treat health problems that result from those inequalities sooner.

People adopted better financial habits during the pandemic | Marketplace

The COVID-19 pandemic upended many people’s lives and made clear the importance of saving money for a rainy day. Two recent surveys show how the pandemic led many to get more serious about saving and planning for the future.

“Plus-up” stimulus checks have already been sent to 9 million Americans – will you get one too? | Kiplinger

If you received a third-round stimulus payment, you might be one of the millions of Americans receiving another “plus-up” payment. The additional payments are being sent to those whose previous payment was based on tax information from 2019 but who are eligible for a larger payment based on their information from 2020.

Opinion: These are the 3 elements of a happy retirement | MarketWatch

Everyone’s retirement is different, and one person’s advice won’t necessarily apply to others, but a recent retiree says he’s found that a happy retirement includes these three key elements.

News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.

News You Should Know: 2 Retirement Bills You Should Know About

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2 retirement bills you should know about: ‘SECURE 2.0’ and ‘Cardin-Portman’ have strong bipartisan support | Benefits Pro

Two bills at the federal level could tweak a number of retirement-related laws, including changes that simplify plan administration and communication, raising the required minimum distribution age, and raising catch-up contribution limits. Onlookers say the lack of controversial issues in the bills mean that each has a good chance of passing.

Polis: Colorado program keeps health insurance costs low | AP

Rates on Colorado’s insurance exchange in 2022 will likely look a lot like they do in 2021, according to Gov. Polis. One reason cited for the price stability: the state’s reinsurance program. The program, which began in 2019, reduces the impact that high-cost patients have on the entire insured population. While prices will remain relatively stable across the state, some regions, including Western counties, will see higher costs.

Proposed legislation aims to make long-term care insurance more affordable | McKnight’s Senior Living

The cost of long-term care can quickly eat through retiree savings. A new law introduced in the U.S. Senate would allow people to pay for long-term care insurance, which helps cover some of these costs, using money in retirement accounts. This allowance would have a $2,500 annual cap.

7 Money Lies We Tell Ourselves | Kiplinger

Money is emotional. This can make it a tough topic to talk about with a partner, parents, or friends. But don’t forget another person for whom talks about money can get tricky: you. Humans are great at avoiding hard truths about money. Read more about these seven common pitfalls.

News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.