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3rd Quarter 2009 Executive
Summaries
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The Society of Actuaries has undertaken a significant number of integrated research efforts to identify risks associated with the postretirement period, understand the general public's awareness and perception of those risks over time, and determine approaches used to manage them. This article reviews the categories and specific types of risks identified, observations from Society of Actuaries research about the extent to which they are recognized and acted upon, and challenges that gaps in financial literacy create for managing them. Recommendations to improve financial literacy through employers and others providing benefit guidance are also discussed. The recommendations draw upon testimony presented to the Employee Retirement Income Security Act (ERISA) Advisory Council in 2007.
“Take 5”—Tiffany and Company's Take on Financial Wellness
by Diane Leary, Buck Consultants, an ACS company
Today's financial realities underscore the importance of having a good handle on personal finances. Yet when a bit of planning can make a huge difference in bringing some sense of control over an otherwise seemingly out-of-control world, many people operate in reactive mode. In 2008, Tiffany and Company launched its “Take 5” campaign to proactively provide financial education, tools and resources to employees. As Tiffany's communication consultant, Buck Consultants assisted the company's human resources staff in creating and producing print pieces to support the campaign. This article provides background and practical steps to follow in planning and launching a relatively low-cost financial education campaign for employees.
Benefits Literacy, Bugs Bunny and Bridge
by John Moses and Barbara Hogg, Hewitt Associates
The human resources world is buzzing about literacy— specifically, financial literacy and health literacy. Yet if employers truly want their employees to take action based on that literacy, then employers must add motivation and process simplification to their benefits equation. This article provides employers with things to keep in mind in order to deliver content that improves employees' benefits literacy, and makes taking desired actions both relevant and easy for employees.
Employee Financial Literacy: One Seasoned Perspective
by William J. Arnone, Ernst & Young LLP
The national evidence is clearer than ever in today's economic crisis that plan sponsors need to do a much better job to help us avert a national retirement catastrophe. If employers are serious about changing employee behavior for the better, then employer-sponsored financial education programs must have a measurable positive impact on employee behavior when it comes to the basics of personal financial planning. This article challenges employers to shift to a more proactive and even aggressive mode of employer-driven prevention and intervention. After discussing the guiding principles and critical components of this bold and controversial model, the author introduces its two most significant components: targeted individualized interventions and the positioning of employee financial behavior within employee performance reviews.
Calculating Savings Rates in Working Years Needed to Maintain Living Standards in Retirement
by Gaobo Pang and Mark J. Warshawsky, Watson Wyatt Worldwide
The authors establish an empirically based lifecycle model to gauge savings and replacement rates for maintaining a steady living standard over life. They consider a variety of scenarios and demonstrate that savings rates vary substantially with individuals' economic and demographic situations as well as retirement plan provisions. This result highlights that meaningful retirement planning must be specific to individuals or households and be based on a comprehensive knowledge of living means and needs.
Beyond the Numbers: Planning Issues that Make the Qualified Plan Limits Worth Understanding
by Kenn Beam Tacchino, Widener University and David A. Littell, The American College
Financial planners who understand the details concerning the qualified plan contribution and deduction limits will be better prepared to avoid pitfalls for their clients and to take advantage of tax-saving opportunities. The authors of this article demonstrate through defined contribution plan examples why planners need to go beyond the numbers of the salary deferral limit, catch-up contribution limit, annual additions limit and the 25% limit on deductible contributions that applies to defined contribution plans. They illustrate why financial planners need to be acquainted with several other rules that may have the impact of limiting contributions. These rules present many exceptions, traps and opportunities, especially when a client has two jobs at the same time or switches jobs during the year.
Full text copies of these articles are available through the INFOSOURCE™ Document Delivery Service. Article reprints are also available in quantities of 100 or more. For information, call the Publications Department at (888) 33-IFEBP. You can order your subscription (reprints and back issues) online. Four issues for $125 (or $95 for CEBS registrants).