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Cypen & Cypen
February 13, 2014

Stephen H. Cypen, Esq., Editor

1. TOWERS WATSON GLOBAL PENSION ASSETS STUDY:Towers Watson’s 2014 Global Pension Assets Study covers 13 major pension markets (“P13”), which total USD 31,980 billion in pension assets, and account for 83.4% of the GDP of these economies (Australia, Brazil, Canada, France, Germany, Hong Kong, Ireland, Japan, The Netherlands, South Africa, Switzerland UK and U.S.). A deeper analysis for seven of these markets was preformed (“P7”), excluding the six smallest (Brazil, France, Germany, Ireland, Hong Kong and South Africa). Here are some key findings as to P13 pension assets at the end of 2013:

  • Pension assets were estimated at USD 31,980 billion, representing a 9.5% rise compared to the 2012 year-end.
  • Pension assets relative to GDP reached 83.4% in 2013, representing a 7.8% increase from 2012 ratio of 75.6%.
  • The largest pension markets are the U.S., UK and Japan with, respectively, 59.0%, 10.2% and 10.1% of total pension assets in the study.
  • In USD terms, the pension assets growth rate of the three largest markets was, respectively, 12.0%, 13.3% and 2.2%.

Here are some key findings as to P7 pension assets at the end of 2013:

  • During the last 10 years, DC assets have grown at a rate of 8.8% per annum, while DB assets have grown at a slower pace of 5.0% per annum.
  • Currently DC assets represent 47% of total pension assets, in line with the established trend towards the growing dominance of DC pensions.
  • DC is dominant in Australia and the U.S. The Netherlands, Japan and Canada, historically only DB, are now showing signs of a shift to DC.
  • The average global asset allocation was 52% equities, 28% bonds, 1% cash and 18% other assets (including property and other alternatives).
  • The asset allocation has changed somewhat compared to last year. Allocations to equities increased, while allocations to bonds and other investments fell. Allocations to cash remained somewhat the same.
  • The U.S., Australia and UK have higher allocations to equities than the rest of the P7 markets. More conservative investment strategies -- more bonds and less equities -- occur in the Netherlands, Japan and Switzerland.

Total U.S. assets, including IRA’s, reached almost $32 trillion. In the P7 group, 66% of assets are held by the private sector and 34% by the public sector.  (In the U.S., the breakdown is 72% private and 28% public.) Only in Canada (55% vs. 45%) and Japan (71% vs. 29%) does the public sector hold more assets than the private sector. 

2.  A BRIEF HISTORY OF RETIREMENT IN THE U.S.: Here are some interesting facts and figures from Accounting Degree Review:

  • In the beginning there was birth, a very brief childhood, work, and death. In other words: no retirement.
  • If you lived, you worked. In 1850, 77% of men over 65 still worked.
  • If you stopped working, you were probably dead.
  • Average life expectancy: 38.
  • Percent of men over 65 who retired:
  • 1880: 23%
  • 1890: 26%
  • 1910: 42%
  • 1930: 42%
  • In 1935 the Railroad Retirement Act required older people to retire, and younger people to be hired. 
  • In the 1920s, 84% of railroad workers were covered by pensions.
  • Percentage of men over 65 who were retired:
  • 1930: 42%
  • 1940: 56%
  • (Note Social Security was enacted in 1935.)
  • Percent of workers who had pensions:
  • 1940: 12%
  • 1945: 17%
  • 1955: 32.1%
  • 1965: 45.7%
  • 1975: 55.2%
  • Over the next 40 years, people over 65 will account for more than 20% of U.S. population.
  • The 85+ age group will be fastest growing age.

Here are more facts and statistics:

  • 50% of all workers in the United States have less than $2,000 saved for retirement!
  • 36% of Americans do not contribute anything to retirement savings.
  • 24% of U.S. workers say they have postponed their retirement at least once during the past year.

3. HOW DO SUBJECTIVE LONGEVITY EXPECTATIONS INFLUENCE RETIREMENT PLANS?: The rapid increase in life expectancy over the past several decades -- remaining life expectancy for the 65-year-old male cohort has increased from 14.7 years in 1980 to 18.7 years in 2012 -- has changed the calculus behind Americans’ retirement decisions.  According to new Working Paper from Center for Retirement Research at Boston College, a longer retirement increases funds needed to support one’s lifestyle, but assuming healthy life expectancy has also increased, workers should be better able to continue working. Extensive literature has documented the ways in which financial and health incentives have affected retirement expectations and the ability of older workers to continue working. But less attention has been paid to how information about the dramatic increase in longevity has been transmitted to individuals approaching retirement, altering their perceptions about ability, willingness and need to work at older ages. This study examines how subjective life expectancy influences planned retirement age and expectations of working at older ages, and how individuals update those expectations with new information. WP2014-1 (January 2014).

4.  TAXATION OF SOCIAL SECURITY BENEFITS: Your Social Security benefits may be taxable; about one-third of people who get Social Security have to pay income taxes on their benefits:

  • If you file a federal tax return as an "individual,” and your combined income is between $25,000 and $34,000, you may have to pay taxes on up to 50% of your Social Security benefits. If your combined income is more than $34,000, up to 85% of your Social Security benefits is subject to income tax.
  • If you file a joint return, you may have to pay taxes on 50% of your benefits if you and your spouse have a combined income that is between $32,000 and $44,000. If your combined income is more than $44,000, up to 85% of your Social Security benefits is subject to income tax.
  • If you are married and file a separate return, you probably will pay taxes on your benefits.

At the end of each year, Social Security will mail you a Social Security Benefit Statement (Form SSA-1099) showing the amount of benefits you received. You can use this statement when you complete your federal income tax return to find out if you have to pay taxes on your benefits. Although you are not required to have federal taxes withheld, you may find it easier than paying quarterly estimated tax payments. Note: on the 1040 tax return, your “combined income” is the sum of your adjusted gross income plus non-taxable interest plus one-half of your social security benefits. For more information, call Internal Revenue Service’s toll-free number, 800.829.3676, to ask forPublication 554Tax Guide for Seniors

5. ENLIGHTENED PERSPECTIVE BY ANDY ROONEY: I have learned... that everyone wants to live on top of the mountain, but all the happiness and growth occurs while you're climbing it.

6. CLEVER SIGNS: At an Optometrist's office: "if you do not see what you're looking for, you've come to the right place."
7. TODAY IN HISTORY: In 1924, the tomb of King Tutankhamun tomb opened.

8. KEEP THOSE CARDS AND LETTERS COMING: Several readers regularly supply us with suggestions or tips for newsletter items. Please feel free to send us or point us to matters you think would be of interest to our readers. Subject to editorial discretion, we may print them. Rest assured that we will not publish any names as referring sources.

9. PLEASE SHARE OUR NEWSLETTER: Our newsletter readership is not  limited  to  the   number  of  people  who  choose  to  enter  a  free subscription. Many pension board administrators provide hard copies in their   meeting   agenda.   Other   administrators   forward   the   newsletter electronically to trustees. In any event, please tell those you feel may be interested that they can subscribe to their own free copy of the newsletter at


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Items in this Newsletter may be excerpts or summaries of original or secondary source material, and may have been reorganized for clarity and brevity. This Newsletter is general in nature and is not intended to provide specific legal or other advice.

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