Tuesday, July 8, 2014

NAPA Net » ‘Out’ Takes

NAPA Net » ‘Out’ Takes:Nevin Adams 7/8/14 
My first car wasn’t anything special, other than it was my first car. It was an older model Ford, ran reasonably well, with one small problem — it went through oil almost as quickly as it did gasoline. At first I attributed that to being a function of the car’s age, but as the leakage grew, I eventually dealt with it by keeping a couple of quarts of oil in the trunk “just in case.” Eventually, I took the car to a dealership — but by the time they finished estimating the cost of a head gasket repair, let’s just say that, even on my limited budget, I could buy a lot of oil by the quart, over a long period of time, and still be ahead financially.

“Leakage” — the withdrawal of retirement savings via loan or distribution prior to retirement — is a matter of ongoing discussion among employers, retirement plan advisors, regulators and policy makers alike. In fact, EBRI Research Director Jack VanDerhei was recently asked to present findings on “The Impact of Leakages on 401(k) Accumulations at Retirement Age” to the ERISA Advisory Council in Washington.
Ida May Fuller, the first recipient
Ida May Fuller, the first recipient (Photo credit: Wikipedia)
EBRI’s analysis considered the impact on young employees with more than 30 years of 401(k) eligibility by age 65 if cashouts at job turnover, hardship withdrawals (and the accompanying six-month suspension of contributions) and plan loan defaults were substantially reduced or eliminated. The analysis assumed automatic enrollment and (as explicitly noted) no behavioral response on the part of participants or plan sponsors if that access to plan balances was eliminated.
Looked at together, EBRI found that there was a decrease in the probability of reaching an 80% real income replacement rate (combining 401(k) accumulations and Social Security benefits) of 8.8 percentage points for the lowest-income quartile and 7.0 percentage points for those in the highest-income quartile. Put another way, 27.3% of those in the lowest-income quartile (and 15.2% of those in the highest-income quartile) who would have come up short of an 80% real replacement rate under current assumptions would reach that level if no leakages are assumed.
The EBRI analysis also looked at the impact of the various types of “leakage” individually. Of loan defaults, hardships and cashouts at job change, cashouts at job change were found to have a much more serious impact on 401(k) accumulation than either plan loan defaults or hardship withdrawals (even with the impact of a six-month suspension of contributions included). The leakages from cashouts resulted in a decrease in the probability of reaching an 80% real replacement rate of 5.9 percentage points for the lowest-income quartile and 4.5 percentage points for those in the highest-income quartile.
Advisors take note: that effect from cashouts — not loans or hardship withdrawals — turns out to be approximately two-thirds of the leakage impact.
However, and as the testimony makes clear, it’s one thing to quantify the impact of not allowing early access to these funds — and something else altogether to assume that participants and plan sponsors would not respond in any way to those changes, perhaps by reducing contributions,1 potentially offsetting some or all of the prospective gains from restricting access to those funds.
Because ultimately, whether you’re dealing with an old car or your retirement savings account, what matters isn’t how much “leaks” out — it’s how much you put in, and how much you have to “run” on.
  1. An EBRI/ICI analysis published in the October 2001 EBRI Issue Brief found that, “on average, a participant in a plan offering loans appeared to contribute 0.6 percentage point more of his or her salary to the plan than a participant in a plan with no loan provision.” Testimony provided to the ERISA Advisory Council testimony notes that it’s likely that a similar relationship exists with respect to the availability of hardship withdrawals. See “Contribution Behavior of 401(k) Plan Participants,” online here

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Tuesday, October 29, 2013

4 things successful people don't do after 5 p.m.

CBS News
MONEYWATCH/ October 24, 2013, 7:58 AM:
(MoneyWatch) Yesterday, this blog listed five things successful people do after 5 p.m. (a spinoff of the popular piece about things those same people do before 8 p.m.) But what about behaviors that can negatively impact your chances for success?  In other words, what are the things that effective employees and executives don't do as the work day winds down? Here are four.
They don't stay at work all night. Effective executives take some time to recharge each evening, said Julie Morgenstern, author of "Time Management From the Inside Out." And they don't just try to turn off their smartphone -- they actually schedule quality personal time. "First, they set an alarm to get out of the office on time. Then, they schedule something fun, relaxing or rejuvenating after work, whether it's an exercise class, meeting with a trainer, dinner with friends or family, etc.," said Morgenstern.
They don't go straight home. If you go directly home from a long work day to a busy home life, you can still feel like you're at work -- or at least, your mind is -- when you're trying to recharge. So avoid answering work emails or speaking to clients on your ride home. "Successful people implement some sort of mindful transition between workday and home -- music, a walk, a visit to the gym -- something that signals [the] workday is over," Morgenstern said. Even listening to music or a podcast, or reading a book, on your commute can ease that transition.
They work through stress in healthy ways. Capping off a long day at the office with more than one stiff drink may not be a good idea, said efficiency expert Andrew Jensen. "Successful people strive for self-control and don't try to temporarily drown out the stresses of life through excessive drinking," he said. After all, nobody ever said that hangovers helped them perform better.
They don't excuse other unhealthy habits. "Very successful people don't neglect their bodies by fueling with junk food or by rationalizing they are too busy or too tired for exercise," Jensen said. That's not to say that there aren't great executives who have climbed the corporate ladder fueled by the vending machine and late-night food orders. But being unhealthy hardly makes it easy to function at your highest level. Plus, companies generally like their executives to look fit and attractive. So if you won't make healthy choices for your health, do it for your career.
© 2013 CBS Interactive Inc.. All Rights Reserved.

Amy Levin-EpsteinON TWITTER »
View all articles by Amy Levin-Epstein on CBS MoneyWatch »
Amy Levin-Epstein is a freelance writer who has been published in dozens of magazines (including Glamour, Self and Redbook), websites (including, and and newspapers (including The New York Post and the Boston Globe). To read more of her writing, visit
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5 things successful people do after 5 p.m.

CBS News:
MONEYWATCH/ October 22, 2013, 11:45 AM
(MoneyWatch) You may have read the popular post by Forbes writer Jennifer Cohen about five things incredibly successful people do before 8 a.m., which highlighted smart suggestions like visualizing their day and making their schedule top heavy. But that's not the only outside of work window in which you can pump up your productivity. Recently, I spoke to some career experts about things you can do after 5 o'clock that can help rejuvenate you and get you prepared for a top-notch tomorrow. Here are five they suggested trying:
Wrap up your day
This includes responding to every email you received during the course of your day, says Julie Morgenstern, author of "Time Management From The Inside Out.""Do this, even if just to tell the sender that you've received their email, and will get back to them within the next day or so with an answer."
Plan for tomorrow
Take a look at the rest of your work. "See what's on their schedule for the next day (and two beyond that), pull necessary prep documents and files, and have everything set to hit the ground running the next morning," says Morgenstern. And prioritize that massive To Do list. "Name your top 3 (to 6) priorities for the next day-to ensure you proactively complete those priorities, no matter what else flies at you unexpectedly," says Morgenstern. Don't forget to do the same for your team. "Plan your team's next day's priorities, and send out instructional emails or check ins."
Take time for friends and family
Successful people invest intentional time in their personal networks, says efficiency expert Andrew Jensen. "They recognize that success at work is empty without success in their home and with their family," says he adds. The key is to make it quality time. "They actively exercise listening, while restraining from dominating the conversations," says Jensen.
They take care of themselves
Investing in your health is always a smart personal, as well as business decision (if you're constantly sick, or even just tired, you won't function at your peak). "[Successful people] eat a healthy dinner, understanding the value of nutritiously investing into themselves and the corresponding returns they can expect. They exercise, channeling away pent up stress while strengthening their bodies and helping ensure a better night's sleep," says Jensen. While you're taking care of your body, don't forget to keep your personal finances healthy, too. "Don't let it pile up and become an increasingly stressful distraction," says Jensen.
They sleep for 8+ hours
Think staying super late is great for your career? While there are some circumstances that warrant it, in general sleep is a good career choice. "A good night's sleep is the secret weapon of highly successful people," says Alex Doman, CEO of Advanced Brain Technologies and author of "Healing At The Speed of Sound." "In the short term, a lack of adequate sleep can affect judgment, mood, ability to learn and retain information, and may increase the risk of serious accidents and injury," says Doman, adding that over time the effects may be even more grave. "In the long term, chronic sleep deprivation may lead to a host of health problems including, diabetes, cardiovascular disease, depression, and obesity."
Make these five behaviors after-hours habits, and you might find that you become efficient -- and successful -- over time.
© 2013 CBS Interactive Inc.. All Rights Reserved.

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Thursday, October 17, 2013

Study shows how to fix big flaw with 401(k) plans

retirement (Photo credit: 401(K) 2013)
CBS News:
MONEYWATCH/ October 1, 2013, 7:39 AM

(MoneyWatch) Most 401(k) participants plans are on their own when it comes to deciding how to turn their retirement savings into reliable, lifetime income. ... Most employers pay retiring employees a lump sum from the 401(k) plan and don't provide any help with the critical task of generating retirement income from that savings. 
... To set the stage for future changes, a new study from the Stanford Center on Longevity (SCL) and the Society of Actuaries (SOA) shows employers how they can help their older workers plan for a secure retirement. (Disclosure: I was the primary author of this report).
What are the challenges?
The long-term shift from traditional pensions to defined contribution and hybrid defined benefit plans places significant responsibility on retirees to generate lifetime retirement income. For example:
  • Given people's longer life expectancy these days, the money set aside for retirement may need to last a long time -- potentially 20 to 30 years or more.
  • Market volatility complicates the challenge of managing savings in retirement. Since 1987, there have been four major market meltdowns. Retirees can expect -- and should plan for -- more meltdowns.
  • English: Proportion of pay to save.
    English: Proportion of pay to save. (Photo credit: Wikipedia)
    Many employees don't know how to calculate the amount of savings they need to generate adequate income during their retirement. They often guess at this amount, and they usually guess too low. 
  • English: Retirement savings for various period...
    English: Retirement savings for various periods with squirrel and nut analogy (Photo credit: Wikipedia)
  • There's also evidence that retirees are doing a poor job of managing retirement risks; many lack a formal plan to generate retirement income from their savings, and as a result, they're planning to spend down assets at an unsustainable rate. Others are under-spending in retirement for fear of running out of money, leaving them with less money for necessary expenses.
These challenges could all be addressed if 401(k) plan sponsors provided retirement income programs within their 401(k) plans instead of just pre-retirement investment vehicles. So why aren't more employers offering such programs? The primary reason seems to be how plan sponsors view their defined contribution plans. According to one study, 91 percent of plan sponsors view them as savings plans, while only 9 percent view them as vehicles for providing retirement income.
A cultural shift is needed: Employers and plan sponsors need to commit to operating their 401(k) plans not just as a way to save for retirement but as plans that help employees before and during their retirement.
Help is on the way
Several reputable financial institutions offer an array of retirement income products, including AllianceBernstein, Fidelity Investments, Financial Engines, Great-West Insurance, Guided Choice, Income Solutions, Prudential, Schwab, Transamerica, UBS and Vanguard. Many of these products and services are available on the platforms of 401(k) plan administrators, such as AonHewitt, Fidelity Investments, J.P. Morgan, Mercer, T. Rowe Price, Vanguard, Wells Fargo and Xerox/Buck. The bottom line is that plan sponsors now have realistic retirement income products they can offer in their 401(k) plans.
The SCL/SOA study provides employers with guidelines for selecting the products and services that employers can offer in their 401(k) plans and implementing a successful program of retirement income. The report describes common retirement income generators (RIG), such as annuities and systematic withdrawals, and provides projections of the amounts of retirement income that each RIG might generate. These projections show that a retiree's choice of a RIG can have a significant impact on the amount of income they'll receive, when they initially retire and throughout their retirement.
One important conclusion from the SCL/SOA study is that plan sponsors can significantly increase the amount of retirement income employees might receive by offering retirement income products that come with institutional pricing instead of the standard retail pricing individuals have to pay for such plans. Institutionally priced products have the potential to increase retirement incomes by five to 20 percent.
Plan sponsors and employers are uniquely positioned to help their employees convert their retirement savings into income without any economic incentive that might bias individuals' decision-making. This objectivity will help older workers retire with confidence and security.
If this scenario sounds promising to you, show this blog post to your employer and diplomatically ask them to consider implementing a program of retirement income in your 401(k) plan. Employers often respond to employee requests, and if enough of your coworkers make the same request, you can make it happen.
© 2013 CBS Interactive Inc.. All Rights Reserved.

  • Steve VernonON TWITTER »
    For more than 35 years, consulting actuary Steve Vernon helped large employers design and manage their retirement programs. Now he's a Research Scholar for the Stanford Center on Longevity, where he helps collect, direct, and disseminate research that will improve the financial security of seniors. He also delivers retirement planning workshops and has authored Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck and Recession-Proof Your Retirement Years.
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Tuesday, October 15, 2013

Why ‟Keeping It Simple” Can Be a Complicated Mistake

strategy+business magazine:
Sally Helgesen
Sally Helgesen is an author, speaker, and leadership development consultant, whose most recent book is The Female Vision: Women’s Real Power at Work(with Julie Johnson; Berrett-Koehler, 2010).

Our people are dealing with complex problems. We’d like to bring you in so you can stimulate a thoughtful conversation, and hopefully stir up some big ideas that will take us forward.”
As a self-employed leadership consultant, I used to hear this kind of thing a lot, mostly before the 2008 financial crisis. ...
English: Dow Jones Industrial Average Jan 2006...
English: Dow Jones Industrial Average Jan 2006- Nov 2008 ‪中文(简体)‬: 道琼斯工业平均指数(2006年1月-2008年11月) (Photo credit: Wikipedia)
I rarely hear this kind of sentiment anymore, despite the fact that so many organizations are focused on the mantra of fostering change. In fact, during the initial planning stages of a retreat or conference, I’m often told just the opposite, with some version of the following message:
“One thing you need to know is that our folks are very busy. They don’t have the time or bandwidth to deal with a lot of big-picture concepts or ideas about the future. What they want are a few simple takeaways––three things they can do on Monday morning.”
Leaving aside the question of whether the leaders in question are really looking for three things to add to their already jammed Monday calendars, I find myself increasing skeptical of this approach. It seems to be based on a faulty understanding of what professionals operating in a complex and demanding environment actually require. Harried and rushed, distracted by technology overload, struggling with compliance issues that keep them mired in a welter of detail, and assailed by requests whose claims of urgency have become routine, the executives I meet these days often seem to be in need of refreshment and renewal rather than additional to-do’s.
Instead of three tips on how to manage invasive technologies, leaders need opportunities to articulate a broad vision of what they’re trying to achieve, so they can better distinguish which tasks require diligence and which can be let go. Instead of exhortations about the need to “manage up,” they need to understand how the erosion of barriers that defined industrial-era culture is leaving the employees they manage exposed to uncertainty and fear. Instead of quick fixes to address shifting markets, they need support to recognize how intersecting trends are creating whole new categories of unmet needs. ...
... By focusing potentially profound conversations on three action points or five bullets, those who plan seminars and retreats risk squandering the opportunity for thoughtful engagement and short-circuiting creative solutions that smart people, given the time and permission to think, are likely to come up with on their own.
Being able to shoot the rapids in an era of constant change requires robust thinking skills. People do not develop these skills by responding to prescriptive formulas, however neatly packaged as takeaways. Planting seeds that may germinate in the coming years is also a useful antidote to the sense of unrelenting urgency that pervades organizational life and that can undermine peoples’ ability to make good decisions.
Solution of the Nine Dots puzzle
Solution of the Nine Dots puzzle (Photo credit: Wikipedia)
Given companies’ oft-stated desire to help people “think outside the box,” I believe consultants and other service providers do a disservice when we go along with requests to deliver overly simplified solutions to problems that will just grow more complex. Instead, we should push those who engage us to think more profoundly about what thriving in a highly demanding global environment requires. Only by doing so can we support leaders in delivering programs that extend their employees’ capacity to respond to the complexities of today’s economic and technological frontier.

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