A digest of timely information and insight about finance, investing, and retirement.
Public Pensions Have Been Able to Pay Promised Benefits | PLANSPONSOR
Some policymakers want to close participation in a public pension plan to all new hires, cut benefits and increase employee contributions, or convert defined benefit (DB) plan pensions into defined contribution (DC) plans. They usually cite the underfunding of public pension plans as the reason for these ideas. New research shows that funding status has little correlation with a pension fund’s ability to pay its promised benefits. Michael Kahn, director of research for the National Conference on Public Employee Retirement Systems (NCPERS) used data from the annual survey of public pensions by the U.S. Census Bureau for 1993 to 2016 and other data and found that during the last quarter century or so, state and local pension plans have always been able to meet their benefit and other payment obligations.
Retirees say ‘Ugh’ to Medicare Shopping | Squared Away Blog
In terms of popularity, reviewing Medicare plans during the open enrollment period ranks right up there with doing taxes. Retirees on Medicare view healthcare as their most burdensome expense. But they are less likely to comparison shop for Medicare plans than for their groceries and gas, even though plan shopping would probably save more money.
Funds fighting effort to add UBIT measure | Pensions & Investments
As Congressional Republicans rush to pass tax reform before 2018, public pension plan officials are determined to see one new idea not make it to the finish line: the House plan for a new tax on unrelated business income from direct investments, such as real estate and private equity. The Internal Revenue Service already applies the unrelated business income tax, known as UBIT, to state colleges and universities. But its longstanding silence on application of that tax to other state entities has led public pension plans to believe it does not apply to them, particularly since their gross income already is excluded under another part of the IRS code. Under the House bill, being exempt under one section of tax code would not spare entities from UBIT on income from direct investments. With no grandfathering period, public pension funds would be facing a whole new world in January if the measure is passed.
The $275K retirement expense you can’t afford to ignore | CNBC
Before you retire, give your health-care financial plan a checkup. A healthy 65-year-old couple retiring this year can expect to spend $275,000 to cover health-care costs in retirement, according to Fidelity. Those calculations include premiums, cost-sharing provisions and out-of-pocket costs associated with Medicare parts A, B and D — but don’t include other health expenses, such as over-the-counter medications, dental services, and long-term care.
Survey Shows Geopolitical Risk Tops Pension, Asset Managers’ Concerns | Chief Investment Officer
Institutional investors see geopolitical stability as the biggest short- to medium-term risk to the global economy, more than inflation, growth rates, and central bank policy combined, according to a report from asset manager PineBridge Investments. In a survey of pensions, consultants, and asset management professionals, PineBridge found that 55 percent of pension professionals, and 54 percent of asset managers, saw geopolitical risk as the biggest threat to the economy. “The results surprised me, as I believe geopolitical risk is currently quite low by recent standards,” said Steve Cook, co-head of emerging markets fixed income at PineBridge Investments, in a release. “Presumably, respondents are nervous with regard to Korea, Iran, and other potential flashpoints.”
Some Women Attain an Enviable Status: 401(k) Millionaire | The New York Times
Accumulating $1 million in retirement savings is symbolic, even if it means different things to different people. It represents an aspirational amount of wealth to some, financial security to others or a milestone on the way to greater savings still. Of course, in a nation where 44 percent of the population does not have $400 saved for an emergency expense, reaching $1 million may seem unimaginable. For a small but growing number of working women, however, it has become a reality.
Defined benefitAlso known as a pension, this is a type of pooled retirement plan in which the plan promises to pay a lifetime benefit to the employee at retirement. The plan manages investments on behalf of members, and the retirement benefit is based on factors such as age at retirement, years of employment and salary history.Defined contributionA type of individual retirement plan in which an employee saves a portion of each paycheck (along with a potential employer match) and invests that money. The employee’s retirement benefit is based on their account balance at retirement. A 401(k) is a type of defined contribution plan.Private equityA type of investment in which investors purchase shares of a company that is not traded on a public stock exchange.Fixed incomeA type of investment that pays investors a fixed rate of interest over a set period of time. Bonds are a common type of fixed income investment.
