A digest of timely information and insight about finance, investing, and retirement.
Surgery study finds costs vary greatly by region in Colorado | The Denver Post
The combined cost of two common surgeries – knee and hip replacement – is twice as high in northeast Colorado as in Denver and Colorado Springs, according to a new study from the Center for Improving Value in Health Care.
Data supplied by health insurance providers found stunning variations by region of the state for the two procedures. The cost of combined surgeries in the northeast and mountain regions averaged $39,000 and $30,000 more, respectively, than the cost in the Denver region. (Learn how PERACare Select offers high quality knee and hip replacement at an affordable cost for Pre-Medicare participants).
Why white label? | PlanSponsor
With white label funds, a plan sponsor creates a generic name for a retirement plan fund, identifying it by its asset classes rather than the brand of the investment firm that manages it. This can bring down costs of investment management, allocate administrative costs more equitably, speed up the changing of managers, provide participants with simpler and more efficient investment choices, or a combination of the above.
The experience of Colorado PERA illustrates the range of potential benefits from white labeling. In its defined benefit plan, PERA undertook one of the first benefit reforms among U.S. public systems after the global financial crisis. And in that process, as Executive Director Gregory Smith recalls, “we realized that people need another means for saving,” but the costs of the DC plans were too high, and the tools were inadequate for people trying to invest on their own behalf. The end result features six white label options in the core menu. (Learn more about white label funds in PERA DC plans.)
Some surprisingly good news about retirement — sort of | Forbes
The vast majority of workers who retire aren’t being pushed out of the workforce by ill health, bad bosses, or age discrimination. Instead, they are being pulled into retirement by the allure of spending more time with family and on other activities they enjoy, according to a new issue brief from the Center for Retirement Research at Boston College. It seems the amorphous financial benefits of working longer must compete against the beckoning non-financial rewards of retirement.
The week in public finance: Contradictory pension reports, brewing pension battles and recession worries | Governing
Two groups published studies looking at whether traditional pensions or 401(k) plans are better and came up with exactly opposite conclusions. A study from the University of California at Berkeley looked at the state’s teacher pension system (CalSTRS) and found that for the “vast majority” of California teachers, a defined-benefit pension provides more secure retirement income than a 401(k)-style plan. Separately, TeacherPensions.org analyzed teachers’ pensions in Illinois and found that traditional pensions disproportionately favor those who stick around for 30 or 35 years.
It’s worth pointing out that TeacherPensions.org produces lots of reports that spell out the shortcomings of traditional pensions, while CalSTRS funded the Berkeley study. But one lesson worth thinking about is that no two pension plans are alike. (Read how an independent study of Colorado PERA found that PERA is more efficient and uses dollars more effectively than other types of retirement plans in use today.)
More evidence that, yes, the retirement crisis is real | Time-Money
Late last year, the Congressional Budget Office issued a report on the outlook for Social Security that included a different measure of replacement rates. Instead of using average lifetime earnings, its report said it would be more accurate to look at the earnings of people in the last five years of their career. This yielded much higher replacement rates: 60 percent for a typical worker born in the 1940s. But earlier this month, the CBO said its calculations were flawed and that it was publishing revised estimates of replacement rates. When it did, that 60 percent replacement rate became only 43 percent – only a bit higher than Social Security’s number of just below 40 percent.
Leakage is a serious problem for 401(k) plans | Plan Sponsor
Roughly one fourth of Baby Boomers cashed out their retirement savings at least once when changing jobs, and this rises to one third of Millennials and Gen X, the Defined Contribution Institutional Investment Association (DCIIA) found in a survey of 5,000 retirement plan participants.
Asset classesA category of similar investments. Common asset classes include global equity (such as publicly traded stocks), real estate, and cash.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.Asset classA category of similar investments. Common asset classes include global equity (such as publicly traded stocks), real estate, and cash.
