1. FIVE WAYSTO AVOID TAKING A LIFESTYLE CUT IN RETIREMENT: Americans have responded to the financial turmoil of recent years with a shift to thrift that has helped bolster their personal household economy and boost their retirement readiness -- but not enough fully to finance the lifestyle they envision. Such is the finding of Fidelity’s new Retirement Savings Assessment. The bottom line: many investors could still, on average, face a potential 28% income drop in retirement. Single women surveyed say they think they will fall even shorter and face, on average, a potential 37% income drop. However, savvy savers who take advantage of both workplace savings plans and IRA savings vehicles say they expect to come out markedly ahead of the average, or 21% short of their retirement goals. Here’s how five strategies can help the hypothetical investor fill his estimated retirement income gaps:
Adjust asset allocation. Too often, investors do not have their portfolios invested in an age-appropriate mix of stocks, bonds and cash. In fact, most survey participants were investing more conservatively than a potential age-based asset allocation would suggest, with low (or even no) stock exposure in their portfolio.
Increase contributions. Even though Americans are saving more, most are still not taking full advantage of their workplace savings plans. Perhaps it is understandable, since incomes have been stagnant over recent years. But it can be a lost opportunity, given the potential power of tax-advantaged compounding offered by 401(k) and other workplace savings plans, and the additional boost offered by employers who match employee contributions.
Delaying full retirement. The line between work and retirement in recent years has been blurring for all sorts of reasons, both economic and personal. Some people need to work longer; others want to. Some love their work; others want to start a new business or just stay connected with people. Whatever the motivation, delaying retirement by working just a few years longer can potentially increase retirement income more than any other single step.
Annuitize a portion of your portfolio. While delaying retirement or working in retirement may require some expectation adjustment, this step does not. Annuitizing a portion of your portfolio can provide a source of guaranteed income that may help protect you against longevity risk -- the risk that you will outlive your money. In fact, many survey participants underestimated how long they will live. When expectations of longevity were compared to actual longevity, the difference was 8.2 years. Why is longevity important? Well, if you underestimate how long you may live, you may also underestimate how long you will need your money to last and find yourself with a shortfall.
Put your home to work for you. Many people downsize their homes after retirement. After all, the kids may be gone. And who needs to heat or air condition all those rooms. For those ready to move to a less expensive house, state or community, their home can potentially be a source of retirement income. Despite a rocky housing market, the study found that many investors still reported holding significant equity in their homes.
Of course, the real power of these steps comes when they are all combined. Saving early and having an asset allocation for your age based on risk tolerance can help harness the power of potential compounding. Retiring later or working in retirement may also help grow your portfolio -- and your Social Security check. Annuitizing may help your money last longer and downsizing your home may help to unlock untapped assets to live on. Good luck.
2. JOB INSECURITY, DEBT WEIGH ON RETIREMENT CONFIDENCE, SAVINGS: Employee Benefit Research Institute has released results of its 2012 Retirement Confidence Survey. Here are some highlights:
- Americans’ confidence in their ability to retire comfortably is stagnant at historically low levels. Just 14 percent are very confident they will have enough money to live comfortably in retirement (statistically equivalent to the low of 13 percent measured in 2011 and 2009).
- Employment insecurity looms large: forty-two percent identify job uncertainty as the most pressing financial issue facing most Americans today.
- Worker confidence about having enough money to pay for medical expenses and long-term care expenses in retirement remains well below their confidence levels for paying basic expenses.
- Many workers report they have virtually no savings and investments. In total, 60 percent of workers report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000.
- Twenty-five percent of workers say the age at which they expect to retire has changed in the past year. In 1991, 11 percent of workers said they expected to retire after age 65, and by 2012 that number has grown to 37 percent.
- Regardless of those retirement age expectations, and consistent with prior survey findings, half of current retirees surveyed say they left the work force unexpectedly due to health problems, disability or changes at their employer, such as downsizing or closure.
- Those already in retirement tend to express higher levels of confidence than current workers about several key financial aspects of retirement.
- Retirees report they are significantly more reliant on Social Security as a major source of their retirement income than current workers expect to be.
- Although 56 percent of workers expect to receive benefits from a defined benefit plan in retirement, only 33 percent report that they or their spouse currently have such a benefit with a current or previous employer.
- Fifty-six percent report that they or their spouse have not tried to calculate how much money they will need to have saved by the time they retire so they can live comfortably in retirement.
Not a pretty picture.
3. ORGANIZATIONS ARE CONCERNED ABOUT BOOMER RETIREMENTS AND SKILLS GAPS: A joint poll released by Society for Human Resource Management and AARP shows that U.S. employers are ramping up skills training and employee benefits aimed at closing skills gaps left when Baby Boomers retire, and at retaining and recruiting older workers. Seventy-two percent of human resource professionals polled described the loss of talented older workers to be “a problem” or “a potential problem” for their organizations. HR managers said that the actions their organizations have taken to prepare for loss of talented older workers who retire include the following:
- increased training and cross-training (45 percent);
- developed succession planning (38 percent);
- hired retired employees as consultants or temporary workers (30 percent);
- offered flexible work arrangements (27 percent); and
- designed part-time positions to attract older workers (24 percent).
The poll, which focused on strategic workforce planning, also asked human resource professionals to identify the greatest “basic skills” and “applied skills” gaps between workers age 31 and younger compared to workers age 50 and older. Thus,
- Basic skills– Fifty-one percent of human resource managers indicated they find older workers have stronger writing, grammar and spelling skills in English;
- Applied skills– Fifty-two percent of human resource managers said older workers exhibit stronger professionalism/work ethic.
Despite the proactive steps being taken, the poll finds that many U.S. organizations are largely unprepared for the brain drain and skills void that talented, retiring older workers will leave. About 71 percent of those polled still have not conducted a strategic workforce planning assessment to analyze the impact of workers 50 and older who will leave their organizations.
4. SOME OFFICIALS TROUBLED BY DISCLOSURE OF PUBLIC EMPLOYEE PAY: Many public officials are uncomfortable with subjecting their compensation to scrutiny as governments and transparency groups work to open the information to the public, according to a new survey from Governing. Nearly 30 percent of state and local government officials say their pay should not be considered part of the public record, while half would react negatively to names and salaries posted online. Overall, results show public employees generally favor disclosing basic compensation information, but many feel they should not be identified by name. Governing randomly surveyed more than 200 senior state and local officials across the country. Survey participants included only officials and administrators, who are not representative of all government workers.
5. RETIREMENT SAVINGS AND TAX EXPENDITURE ESTIMATES: American Society of Pension Professionals & Actuaries has released “Retirement Savings and Tax Expenditure Estimates.” Each year the staffs of Congressional Joint Committee on Taxation and the Treasury Department’s Office of Tax Analysis publish estimates of Federal tax expenditures. These tax expenditure estimates generate considerable attention because people often view them as the cost of loopholes in the Federal income tax system. The attention paid to tax expenditures, particularly retirement savings tax expenditures, continues to intensify as policy makers and researchers enter the debate. The paper focuses on two critical issues regarding retirement savings provisions as tax expenditures. First, the paper examines the theoretical rationale for excluding retirement savings provisions from the definition of tax expenditures. Second, if retirement savings provisions are treated as tax expenditures, the paper explores the proper methodology to measure the value of these provisions. The current methodologies employed by the JCT and the OTA do not capture fully the lifetime benefits and tax payments associated with retirement savings provisions. In addition, as with many policy debates, the focus becomes quantifying a single point estimate of tax expenditures, but this focus serves only to distract from policy issues. In an effort to characterize and clarify these two important issues, the paper strives to provide a better general understanding of tax expenditures as they pertain specifically to retirement savings tax expenditures. In theory, tax expenditure estimates measure foregone revenue from certain Federal income tax provisions that provide benefits deemed to be outside the “normal” income tax system. The Congressional Budget and Impoundment Control Act of 1974 defines tax expenditures as “those revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of tax liability.” The overall conclusion is
Retirement savings provisions provide a deferral of tax, rather than an exemption from tax. Current tax expenditure estimates for retirement savings provisions overstate the size of these provisions relative to other tax expenditures because the current method for measuring tax expenditures measures retirement savings provisions on a cash flow basis rather than on a present-value basis.
6. LAW ENFORCEMENT RECORDING OF TELEPHONE CALLS: The Florida Attorney General was recently asked for her opinion on substantially the following questions:
Pursuant to Chapter 934, Florida Statutes, if a telephone call to the Springfield Police Department is initially answered with a verbal notice that the line is recorded, is a periodic, audible beep sufficient notice to a caller who has been transferred that the telephone line he or she is speaking on is recorded or is the police department obligated to further notify the caller that the transferred call is being recorded?
Pursuant to Chapter 934, Florida Statutes, is the Springfield Police Department required, when an agency employee makes a call outside the department on agency equipment, to notify the person receiving the call that the line is recorded or must the department purchase and maintain non-recorded phone lines for outgoing calls?
Once a caller has been given notice that his or her telephone call into the Springfield Police Department is being recorded, a periodic, audible beep would appear to be sufficient notice to that caller that a transferred call continues to be recorded.
Pursuant to Chapter 934, Florida Statutes, the Springfield Police Department must request permission from the recipient of any outgoing call from the police department which the department intercepts and records unless such outgoing call is placed to the telephone number from which an emergency assistance call was made in order to obtain information required to provide requested emergency services.
The Attorney General noted in passing that any recordings of telephone conversations made by the Springfield Police Department in the usual course of business would be public records subject to inspection, copying and retention requirements of Chapter 119, Florida Statutes. Any such public records would likewise be subject to the exemption and confidentiality provisions of the Public Records Law. AGO 2012-07 (January 25, 2012)
7. PRIVATE INDIVIDUAL TEMPORARILY RETAINED BY GOVERNMENT TO CARRY OUT HIS WORK ENTITLED TO SEEK QUALIFIED IMMUNITY FROM SUIT: Delia, a firefighter employed by the City of Rialto, California, missed work after becoming ill on the job. Suspicious of Delia’s extended absence, the City hired a private investigation firm to conduct surveillance on him. When Delia was seen buying fiberglass insulation and other building supplies, the City initiated an internal affairs investigation. It hired Filarsky, a private attorney, to interview Delia. At the interview, which Delia’s attorney and two fire department officials also attended, Delia acknowledged buying the supplies, but denied having done any work on his home. To verify Delia’s claim, Filarsky asked Delia to allow a fire department official to enter his home and view the unused materials. When Delia refused, Filarsky ordered him to bring the materials out of his home for the official to see, which prompted Delia’s attorney to threaten a civil rights action against the City and Filarsky. Nonetheless, after the interview concluded, officials followed Delia to his home, where he produced the materials. Delia brought an action under 42 U. S. C. §1983 against the City, the Fire Department, Filarsky and others, alleging that the order to produce the building materials violated his Fourth and Fourteenth Amendment rights. The District Court granted summary judgment to the individual defendants on the basis of qualified immunity. The Court of Appeals for the Ninth Circuit affirmed with respect to the individual defendants except Filarsky, concluding that he was not entitled to seek qualified immunity because he was a private attorney, not a City employee. On review by certiorari, the United States Supreme Court reversed, holding that a private individual temporarily retained by the government to carry out its work is entitled to seek qualified immunity from suit under §1983. In determining whether the Court of Appeals made a valid distinction between City employees and Filarsky for qualified immunity purposes, the Court looks to the general principles of tort immunities and defenses applicable at common law, and the reasons the Court has afforded protection from suit under §1983. The common law as it existed in 1871, when Congress enacted §1983, did not draw a distinction between full-time public servants and private individuals engaged in public service in according protection to those carrying out government responsibilities. In according protection from suit to individuals doing the government’s work, the common law did not draw distinctions based on the nature of a worker’s engagement with the government. Therefore, immunity under §1983 should not vary depending on whether an individual working for the government does so as a permanent or full-time employee, or on some other basis. Nothing about the reasons the Supreme Court has given for recognizing immunity under §1983 counsels against carrying forward the common law rule. Filarsky v. Delia, Case No. 10-1018 (U.S., April 17, 2012).
8. FEDERAL APPEALS COURT DEALS WITH “HAIL MARY PASS”: For 20 years, George was a clerk-magistrate. In 1995, he was charged with conspiracy to commit honest-services wire fraud for selling blank search warrants, then used to commit robberies. George entered a plea for a sentence of 20 months and a $10,000 fine. He retired before his plea, and began receiving a monthly benefit of about $1,500. In 2003, the state retirement board suspended benefits; his attorney had advised him that he would remain eligible if he started receiving benefits before he entered a plea. The federal district court denied his petition for a writ of error coram nobis. The First Circuit Court of Appeals affirmed. The board authorized recoupment of benefits in excess of contributions. In 2010, the United States Supreme Court held that intangible right of honest services would be unconstitutionally vague unless limited to schemes involving bribes or kickbacks. George’s second petition was denied. The court found that, in light of the U.S. Supreme Court ruling, a fundamental error had occurred but that cessation of benefits did not constitute a continuing collateral consequence sufficient to justify the remedy. The court referred to a writ of coram nobis as the criminal law equivalent of a Hail Mary pass. A court has discretion to withhold the remedy where interests of justice dictate. This summary comes courtesy of justia.com. United States of Americav. George, Case No. 11-1815 (U.S. 1st Cir., April 17, 2012).
9. PHYSICIST USES EXPERTISE TO BEAT TRAFFIC TICKET: A California physicist has used his deep understanding of physics to beat a $400 traffic ticket. Dmitri Krioukov wrote a four-page paper to the judge explaining how the ticket he had been given defied the laws of physics, according to abajournal.com. Krioukov had been ticketed for failing completely to stop at a stop sign. Using his knowledge of linear and angular motion, he explained in his paper how what the officer who ticketed him saw would easily be confused by the angle of speed of this hypothetical object that failed to stop at the stop sign. Therefore, what the officer saw really did not reflect reality. It worked. The ticket was dismissed. Krioukov warns others who would try the same defense that it took a “perfect combination of events” for his argument legitimately to hold up in court. Sure.
10. GOLF WISDOMS: Bets lengthen putts and shorten drives.
11. PARAPROSDOKIAN: (A paraprosdokian is a figure of speech in which the latter part of a sentence or phrase is surprising or unexpected in a way that causes the reader or listener to reframe or reinterpret the first part. It is frequently used for humorous or dramatic effect.): I discovered I scream the same way whether I'm about to be devoured by a great white shark or if a piece of seaweed touches my foot.
12. QUOTE OF THE WEEK: “This time, like all times, is a very good one, if we but know what to do with it.” Ralph Waldo Emerson
13. ON THIS DAY IN HISTORY: In 1912, first homerun hit at Fenway Park (Hugh Bradley, Red Sox).
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