Retirement Roundup: What to do about the ‘impending retirement crisis’

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

Americans haven’t saved enough for retirement. What are we going to do about it? | Harvard Business Review
Ultimately, the shift from defined benefit pension plans to employee-directed defined contribution 401(k)s is the major driver of the impending retirement crisis. Beginning in the 1980s, this move helped companies reduce their retirement liabilities and better meet their quarterly financial targets, but put an unmanageable burden on employees. For 401(k)s to be effective, for example, contributions must be made consistently throughout a worker’s career. In practice, people tend to make contributions sporadically. They also struggle in choosing contribution levels and investment options, and avoiding the temptation of using their savings for other needs.

Ohio lawmakers kill bill to cut PERS benefits | The Columbus Dispatch
Republican House leaders shut down hearings on legislation to reduce benefits for Ohio’s largest public retirement system after running into fierce opposition from retirees. The measure would implement recommendations by the Ohio Public Employees Retirement System – or OPERS – aimed to shore up the $90 billion fund. After a handful of hearings, the bill did not have enough votes to pass. It was opposed by many Republican and Democratic lawmakers, and even the state representative sponsoring the bill was skeptical about the plan.

Why early retirement can be a killer | MarketWatch
Think twice – nay, thrice – before claiming your Social Security benefits at age 62. Your life might depend on your decision. Literally. That’s because there’s a marked increase in mortality among men who retire at 62 and begin receiving Social Security, according to a fascinating new study that recently was distributed by the National Bureau of Economic Research. Its authors are two economics professors: Maria Fitzpatrick of Cornell University and Timothy Moore of the University of Melbourne in Australia. The increase in the death rate is quite large, furthermore, particularly among males who retire and claim Social Security at 62: By 20 percent, according to the study. Among females, in contrast, the data are inconclusive.

Many Americans try retirement, then change their minds | The New York Times
Sue Ellen King had circled her retirement date on the calendar: March 8, 2015. She had worked as a critical care nurse and nursing educator at University of Florida Health (UF Health) in Jacksonville, Fla., for 38 years; co-workers joked that she was there when the hospital’s foundation was laid, which happened to be true. So the send-offs went on for days — parties in the units where she had worked, a dinner in her honor, gifts including a framed photo signed by colleagues. Ms. King felt ready. She’d turned 66, her full Social Security retirement age. She’d invested fully in the hospital’s 401(k) plan and consulted with a financial adviser. She and her husband, who had already retired, had paid off the mortgage on their three-bedroom ranch. They took a week’s trip to Hilton Head, S.C., to celebrate their impending freedom. But her retirement lasted just three months. “I’d done all the preparation, except to really think about what life was going to be like,” Ms. King said. Days spent organizing recipes and photos, and lunching with friends, proved less engaging than expected.

Minnesota Senate unanimously approves pension bill | Chief Investment Officer
The Minnesota State Senate has unanimously approved a pension overhaul bill that proposes mandatory contribution increases, reduced cost-of-living adjustments, and a lower investment rate of return for the state’s public retirement plans. Backers of the reform say the proposed bill would save Minnesota $6.1 billion over a 30-year period, $3.4 billion of which will be in immediate savings. They also say that if enacted, the state’s public pension plans’ funded status will be between 85 percent and 95 percent by 2048 from approximately 77.8 percent in 2017. “This is the largest pension reform bill in Minnesota’s history,” said the bill’s author, Sen. Julie Rosen (R), in a statement, adding that it “took years of work and negotiations.”

Why women should keep working after their husbands retire | The Wall Street Journal
American women should keep working after their husbands retire if they want to catch up in terms of Social Security benefits, based on new research. Married couples often choose to stop working at the same time, taking advantage of the opportunity to travel or otherwise spend time together. But most married women are younger than their husbands, and some have delayed or interrupted careers due to child-rearing. Waiting longer to retire would bring them disproportionate gains under the formula for calculating Social Security retirement benefits, economist Nicole Maestas said in a recent paper. “If you have had a period out of the labor force, or a period of part-time work, or a period when you were earning much less than you’re earning now….you have an opportunity to replace those zeros with positive numbers that are high,” said Ms. Maestas, an associate professor of health care policy at Harvard Medical School. “I’m not sure people are fully aware of all of that.”

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.