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June 21, 2018

Public Sector Retirement News

Federal Employee Retirement and Benefits News

Tag: retirement plan

retirement plan

6 IRA Myths that Prevented You from Increasing Your Retirement Benefits Busted

When you are planning your retirement, you obviously look for an option that let you grow your retirement benefits easily. One such option is to put your money in an individual retirement account or IRA. But some people fail to invest in this plan despite wanting to because there are so many myths going around. Here we are busting the 6 IRA myths to help you clear your doubts and make better investment decisions.

Retirement Benefits

List of 6 IRA Myths that Prevented You from Increasing Your Retirement Benefits

  1. You cannot contribute to traditional IRA, Roth IRA and a 401(k) in the same year

This myth has prevented many people from increasing their retirement benefits to a maximum limit. Let’s get real, people. You are free to invest in all the accounts if you stay within the annual allowable limits. When you are a part of the employer sponsored retirement plan, you can contribute up to $18,000 and an additional $6000 if you are more than 50 years of age.

You can also contribute to the traditional and Roth IRA on top of that given the total amount in all the plans is not beyond the maximum annual allowable contribution limit of $5,500. You can even add a $1,000 catch-up contribution in case you are older than 50. Adding it all up, it is clear that a saver could save about $23, 500 a year or $30,000 for people who are more than 50.

  1. Big earners cannot contribute to an IRA

It is a fact that if you earn more than $196,000 if you are married and $133,000 if you are single, you cannot contribute to a Roth IRA. But even if you earn a massive check, you can still contribute to traditional IRA. The only thing worth remembering here is that the IRS takes into account your household income and the fact whether your spouse has access to a workplace retirement plan or not while deciding the amount of your IRA contributions.

  1. IRA is not worth it if a person doesn’t qualify for a deductible amount

Though the upfront tax deduction of IRA often gets all the glory, it is a valuable fact that all investment within IRAs grows tax deferred. It is true for non-deductable IRA’s too. So you don’t have to pay any income the retirement benefits savings you do via IRA until you withdraw the money in retirement.

  1. Low earning spouses are not eligible for contributing to an IRA

If you are a stay at home parent or you are married to someone who has a hard earned income and you file a joint tax return, then you can save more towards your retirement benefits via spousal IRA. As per this rule, you can contribute to a Roth IRA or a traditional IRA or the contributions can be made on your behalf. Just remember that the IRA must be set up in your name rather than your earning spouse. The eligibility and the deductibility would be based on what is applicable to the spouse who has a higher compensation.

  1. You should use the IRA only when you retire

Though you must try not to touch your IRA account until you retire and need the retirement benefits for surviving, there are a few exceptions to this rule. You can get a waiver on an early withdrawal penalty on traditional and Roth IRA if you are going for a first time home-purchase or you are paying for certain qualified expenses pertaining to higher education. If you need the money for the reasons other than these, you would be smart to opt for withdrawal from Roth IRA because it is more flexible than 401(k) and traditional IRA. You should remember that the IRS allows penalty and tax free withdrawals of contributions from Roth IRA for any reason and at any time.

It is highly recommended that you let the retirement benefits savings as they are for as long as possible. If you are younger than fifty nine and a half years, you will have to face 10 percent early withdrawal penalty and even an income tax IOU. It’s better to avoid both if and when you can.

  1. The deadline to contribute to IRA for the 2016 tax year has passed

This is a big fat lie. The tax filing deadline is April 18, 2017. You have more than two months to contribute to an IRA for tax year 2016 and increase your retirement benefits savings. Always remember to indicate that it’s your 2016 contribution while adding the money to the account. You are also free to start adding funds to your IRA for 2017. Remember, the earlier you contribute to an IRA, the more time will be given to your money to compound and grow.

Increased Retirement Benefits Savings Lead to Lower Medicaid Spending

A new study has revealed the fact that increased retirement benefits savings lead to lower Medicaid spending. If a state is offering assistance to employees in boosting their retirement savings, it is indirectly contributing towards reducing the Medicaid spending. The study included several assumptions. Though it’s a fact that many states are offering programs to boost the retirement benefits savings, experts say that the other states should also consider initiating such programs by doing a cost-benefit analysis.

Retirement Benefits

Study Says Increased Retirement Benefits Savings Lead to Lower Medical Spending

The study that says increased retirement benefits savings lead to lower Medicaid spending was conducted by Segal Consulting. It carried out a review of all 50 states and the District of Columbia to get estimates on the impact of expanded retirement benefits savings by individuals who are not a member of any retirement plan on the future Medicaid expenditures.

The Result of the Study

The analysis performed by Segal Consulting shows that there is a positive correlation between increased retirement savings and reduced Medicaid spending as more retirement savings remove a percentage of the currently vulnerable households from poverty rolls at the time they retire. The study also highlighted that every state saw an estimated reduction in the Medicaid expenses of the state that were a result of increased retirement benefits savings especially in the first 10 years of the plan.

The Money

The study that highlights increased retirement benefits savings lead to lower Medicaid spending also offered some startling figures. It found out that fifteen states would succeed in saving more than $100 million each and the total projected savings were around $5 billion. The amount of savings ranged from $11 million in Mississippi to $604 million in California. It is pertinent to add here that California recently became the eighth state that had enacted a retirement program for the private sector workers.

Key Assumptions

The study that found out increased retirement benefits savings lead to lower Medicaid spending was able to get the said results on the basis of the assumption that the programs would incur savings that start at 1 percent per year reduction in spending for workers who are currently 64 years old or older than that, grading up to 5 percent for the ones who were currently aged 60. The researchers did not assume that the Medicaid access would be eliminated. Instead, they mentioned that it would be delayed.

With these kinds of assumptions, it is not a surprise that the researchers described the impact over time as exponential.   The researchers also noted that they did not take into account the different state eligibility nuances for Medicaid eligibility.

Segal as a Consultant for States Considering a State Retirement Plan

The paper that says increased retirement benefits savings lead to lower Medicaid spending was something of a promotion for the firm’s eligibility to serve as a Consultant to states that are considering the option of establishing a state-run retirement program. Segal Consulting can also help these states in creating as well as executing an RFP for providing the said services.

The Flaw

A flaw in the report that said increased retirement benefits savings lead to lower Medicaid spending is that it did not mention the fact that the same benefits (likely more than those) could be reaped by ensuring the expansion of retirement coverage generally through the existent employment-based savings system.

Already Enacted Programs

There are several states that have already enacted similar programs. It includes Oregon, Massachusetts, Illinois, Maryland, and Connecticut. Similarly, New Jersey and Washington State have launched small plan marketplaces to help people start saving more for retirement. It is also a known fact that around half of the states in the US are considering measures that will close the retirement coverage gap. Unfortunately, none of these programs have become operational till date. Only Oregon has made some progress as it has pledged to open the program for enrollment by July this year.

Opinion of an Expert

Cathie Eitelberg, who currently serves as the Senior Vice President and the Director of Public Sector Consulting at Segal, has expressed her opinion on the results of the study that mentions increased retirement benefits savings lead to lower Medicaid spending. She stated that the study clearly shows that the states could realize meaningful savings on the Medicaid spending when a good retirement savings plan is available to all the private sector workers.

She also added that a majority of jurisdictions still need to consider this option. It’s time that they should at least start evaluating the feasibility of such a program from a cost/benefit perspective.


We also agree that if it has been proved that increased retirement benefits savings lead to lower Medicaid spending, all the state governments need to start considering the launch of a state-run retirement benefits savings plan soon.

Many Americans Are Withdrawing from a 401(k)

A new study says that many Americas are withdrawing from a 401(k). Though this is a not a good news, some viable reasons why they do so were also listed. Some advice on how Americans can prepare a savings cushion to avoid the withdrawals from the retirement funds has also been mentioned.

retirement benefits

Study Says Many Americans Are Withdrawing from a 401(k)

The study that says many Americans are withdrawing from a 401(k) was entitled as the Natixis 2016 Retirement Plan Participant Study. It mentioned that 28 percent of Americans have admitted to making a withdrawal from their retirement plan, which is usually a 401(k) plan.

The Reasons for Why Many Americans Are Withdrawing from a 401(k)

The reasons for why many Americans are withdrawing from a 401(k) were also mentioned by the respondents of the study. The most common reason was that people were going through a financial hardship. The other reasons that were mentioned were the health care issues, debt payouts, medical emergencies and even home repairs or maintenance.

The Solution

As most of the reasons for why many Americans are withdrawing from a 401(k) are short-term financial shocks, it is suggested that the Americans should have an emergency fund that should contain 6 month worth of expenses so that they can easily deal with financial emergencies without having the need to raid the 401(k).

How to go about it?

Setting up a savings cushion is a very simple process that starts with figuring out how much money one will need to save. One should also calculate the nondiscretionary expenses for each month by taking into account the necessities like rent, utilities, insurance, food, car payments, etc. One should take the total of all the nondiscretionary expenses and multiply it by 6 to decide the amount of the short-term savings cushion. After the calculation is done, one needs to decide which expenses they can forgo to increase the savings. It can be anything from eating out less or bringing lunch from home for a few weeks.

Another Idea

Another thing one can do to increase the savings cushion to avoid being amongst people who are said to be a part of the reports that says many Americans are withdrawing from a 401(k) is to treat the savings like a 401(k) plan. The savings should be deducted from the salary so that one cannot have access to it and doesn’t have to deal with the urge to spend it.

California’s Secure Choice Retirement Savings Program to Roll Out Soon

The Secure Choice Retirement Savings Program of California will come into effect from January 1, 2017. This program intends to help people save more towards retirement benefits by ensuring that employers who don’t offer a retirement plan sign up the employees for a state-run retirement program. The California Treasurer’s Office has named it the most ambitious move towards boosting retirement security since the passage of the social security.

retirement savings

The Impact of California’s Secure Choice Retirement Savings Program on Employers

The employers who have more than 5 employees would be required to enroll their employees in the California’s Secure Choice Retirement Savings Program if the employer is not offering any retirement plan. These employers would be exempt from Employee Retirement Income Security Act requirements because of a new rule to exempt compliant state-run retirement programs from the federal ERISA preemption crafted by the U.S. Department of Labor.

Program Development and Enrolment

The Secure Choice Retirement Savings Program will be developed by The Secure Choice Board that’s led by State treasurer John Chiang.

Key Phases

The program would be phased in many stages. The employers with over 100 employees would need to be a part of the program within 12 months while those with over 50 employees will need to be a part of the program in 24 months. The employers with 5 or more employees would need to be a part of the program in 36 months’ time. Employers with less than 5 employees are not required to participate.

Impact on Employees

As a part of the program, the employees would automatically be enrolled by the employers unless the employee opts out. If the employee doesn’t opt out, about 3 percent of the salary would be automatically added to a personal tax-deferred retirement savings account. The employee can opt out or change the contribution anytime he or she wishes.

The deductions would begin at 3 percent of the employee salary and they will escalate by 1 percent until they reach the 8 percent mark.

No Action Plan against Non-Compliance

It has not been decided that what will happen to those employers who refuse to participate in the California’s Secure Choice Retirement Savings Program or do not comply with the regulations. People just have to wait for the day when the enrollment is announced and the action to be taken against non-compliance is announced.

Women with 401(k) Plan Prefer Wealth over Health in Retirement

A survey has revealed that most of the women who have a 401(k) plan would opt for wealth over the health. The survey also pointed out that women usually have longer careers than men and explained its reasons. It found that Millennials, in general, have less confidence for retirement but their confidence increases once an advisor helps them make financial decisions. Experts believe that automatic investment advice should be available to all Millennials.

Money Matters Most in Retirement for Women with 401(k) Plans

The results of the survey say that seven out of ten women would like to have more money to enjoy the retirement over the ability to stay healthy during the golden years. In contrast, just 30 percent of women give a lot of value to health than anything else. The survey was conducted by Schwab Retirement Plan Services online by polling 288 people between the ages of 25 to 35 who had 401(k) Plans. The polling was done in June this year.

Working Late

In the survey 3 of ten women admitted that they would be working when they reach 70 years of age as compared to 20 percent of men.  Catherine Golladay who serves as the Senior Vice President of 401(k) participant services and administration at Schwab Retirement Plan Services said that women usually expect to have longer careers than men. He also added that some of the reasons why women need to work longer are because they spend a lot of time out of the workforce for caring for a family member.

The Confidence

The survey also exposed that only a quarter of women participants were very or extremely confident about the investment choices made by then with regard to the 401(k) plans. Men were more confident as 57 percent of them agreed to being very or extremely confident with regard to the investments in 401(k) plans.

Need for Guidance

Another vital thing highlighted by the survey is that people with professional investment guidance feel very or extremely confident with their investment decisions. About three-quarters of men and women accepted that they need professional guidance with regard to the 401(k) plans’ investment decisions. Golladay stated that the most comprehensive solution for this trend would be to ensure that all the Millennials get automatic investment advice from time to time. It would help them to boost their savings as well as their confidence in retirement.

Health Care Benefits would be most affected in Trump’s Presidency: Survey

A recent online survey has revealed people’s expectations on the areas that would be affected by Trump’s presidency health care benefits topped the list. The survey also highlighted the fact that many people were worried about their future post the selection of Donald Trump as the new president of the nation. The verbatim responses were filled with fear and anxiety too.

health insurance

Survey on Health Care Benefits Being Most Affected

The survey that revealed that the health care benefits would be most affected by Trump’s presidency was done by Plan Sponsor. The topic of the survey was which benefit related item would be most affected by the Presidency of Trump. The respondents were from varied categories. About 63 percent were plan sponsors, 19.1 percent were advisors or consultants and 13.5 were record keepers, TPAs, and investment managers. About4.5 percent were CPAs.

The Results

The results of the survey state that more than 83 percent of the respondents believe that health care benefits would be most affected by the Presidency of Donald Trump. Then comes the Department of Labor fiduciary rule which was opted by 4.4 percent of the respondents. About 3.3 percent say that the tax treatment of retirement plan contributions and benefits would be most affected. Just 2.2 percent of the respondents said that the social security and medicare would be affected. Interestingly, not even one survey respondent selected the option of retirement plan investing due to interest rate and market expectations.

Other Responses

In the other responses, people admitted that FSA/HSA max, EAP and the benefit of living in a multicultural & diverse nation that respects the equality of genders & civil discourse between leaders, citizens, and other countries while putting the nation before self. One respondent also mentioned that the firms might want to reconsider the sexual harassment policies while another mentioned that the things that get affected could be anything or nothing. The same person added that Trump won’t be able to change anything for a few months so people should stop worrying now.

The Verbatim Comments

In the verbatim comments, the respondents mostly expressed fear over the health care benefits and other changes under Trump’s rule by mentioning words and expressions such as good luck to us all, it cannot be good, terrifying, Oy vey!, god help us all and a disaster. Some of the respondents also expressed hope that Trump will roll back the new rules like the DOL fiduciary rule.

Retirement Readiness in Monroe County is not good: Survey

A new survey has revealed that the retirement readiness in Monroe County is not good. Neither the Gen Xers nor the baby boomers are sure that they will retire comfortably. They have not initiated planning in most cases and think that living expenses, especially the food expenses are too high. Experts think that there is a need to help people manage their finances better.

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No Retirement Planning Leads to Poor Retirement Readiness

The survey conducted by the Siena College and AARP New York states that more than 62 percent of people belonging to the Gen X and baby boomer categories have poor retirement readiness as they have not done any retirement planning. They worry that they would not have enough money to retire and live comfortably.

Lack of Research

About 52 percent of Gen Xers have not even researched the social security benefits while 62 percent of both the generations accepted not researching the medicare benefits. Over three-quarters of Gen Xers have no written retirement plan and about three in 10 respondents haven’t discussed retirement with their spouse.

Financial Impact

More than 60 percent of the respondents between the ages of 36 to 70 confessed that the cost of housing has a serious impact on their housing. About 60 percent of both generations said that health insurance and utilities had a financial impact too. Even food prices had a lot of impact on finances for 40 percent of both the generations.

Expert Opinion

Beth Finkel who holds the post of AARP New York State Director stated that developing a financial nest egg is becoming harder and the elected leaders must help people save more and protect their existing savings.

Don Levy who serves as the Siena College Research Institute Director said that about 9 in 10 respondents thought that saving enough for retirement was a problem. He added that about a quarter of the people of both the generations were living comfortably.

Future Prospects

Only one in 5 respondents stated that they were prepared for pay healthcare costs of $476 per couple in retirement. About three-quarters of respondents admitted that they won’t be able to pay $50,000 annually for long-term care. Around 62 percent stated that they were not sure of maintaining a standard of living during retirement. Over half of the respondents said that the government was doing a poor job of making it possible for New Yorkers to save a good amount of money for retirement which obviously hampers their retirement readiness.

Nearly Half of Young Americans have Zero Retirement Benefits Savings

The retirement savings of young Americans are not up to the mark. It has been proven again by a survey which found out that nearly half of young Americans have zero retirement benefits savings. Their chances of getting regular income post-retirement are also low and they also don’t trust the social security system. Still, the majority of young Americans believe that they will have ample amount of money in retirement.

retirement benefits

Survey Exposing Zero Retirement Benefits Savings

The survey that revealed the retirement savings problem was conducted by the Black Youth Project at the University of Chicago in association with Associated Press-NORC Center for Public Affairs Research. The survey was conducted via a GenForward poll. It stated that 48 percent of Americans who were between the ages of 18 to 30 have zero retirement benefits savings and they don’t have access to a traditional pension either. Over 4 in 10 respondents between the ages of 25 to 30 have admitted that they have saved nothing for retirement.

Fewer Traditional Pensions

In the survey, it was also revealed that younger Americans won’t be able to access the traditional pensions that were enjoyed by earlier generations. Only 7 percent of the respondents said that they would be getting the rare benefit so that they get a pre-defined monthly amount post retirement.

No Faith in Social Security

The age in which the Americans receive social security is climbing high too. It is up to 67 rather than 66 so young Americans would have to wait longer for it as compared to their parents and grandparents. Young Americans don’t have faith in the social security system. Only 5 percent have admitted to having full confidence in this benefit while 28 percent said that they are somewhat confident.

The Self Confidence

Despite the sad fact that many of the young Americans have zero retirement benefits savings, their confidence in their own abilities is not lacking. A majority of the respondents admitted that they would have enough money they need in retirement and they will not be dependent on others. About 53 to 56 percent of Asian Americans, African Americans, and white Americans are sure that they will have enough money post-retirement. Only the confidence level of the Latinos is not that high. Just 43 percent think that they are either very confident or somewhat confident that they would have enough money to live comfortably in retirement.

Penn University Offers Voluntary Retirement Packages

Penn University has decided to deal with it workforce problems and rising cost issues by offering the employees to opt for Voluntary retirement. Those who choose this option would get a huge sum of money. The staff will also get the opportunity to choose a date when they retire. All the members of the staff are not eligible for this program. Only over 1,200 are eligible from staff strength of 17,000 across various campuses.

retirementThe Details of Voluntary Retirement Packages

The voluntary retirement packages are offered only to 1270 faculty and academic personnel. He total workforce strength of the University is 17,000. Those who are eligible are being sent a letter and they have until September 30 to make a decision. People who opt for a voluntary retirement option would be receiving a lump sum payment that will be of 100 percent of their annual base salary.

Two Options

The staff members of Penn University who opt for this program would have the opportunity to decide the date on which they would retire. They have two options. The first is December 31, 2016, and the second is June 30, 2017. Faculty members will only have to retire on June 30, 2017.

The Benefit

Eric Barron who serves as the University President released a statement in which he said that this plan would allow the university to provide the eligible staff and faculty who opt for retirement with a substantial benefit. It will also allow various units across the university to be active in dealing better with budget and continuing workforce challenges.

Eligible Employees

Out of 17,000 personnel, only 1270 are eligible for this program. About 590 of them are faculty members and 340 are from the university’s other campuses present in the commonwealth. The eligibility of every candidate for the program was decided on the basis of various factors such as ensuring that the research & education activities are not interrupted and the business needs of the university are not impacted much.

The University also decided which employees and faculty members are eligible for the voluntary retirement plan by considering the age of the candidate as well as the years of service with the University. The selection criterions were very different for academic staff, nonacademic staff and the faculty members. It could be so because their job roles are very different too.

Oregon has a Clear Path for State Retirement Benefits Plan

The state of Oregon can now easily help the private sector employees to get access to a state-run retirement benefits plan. This plan was earlier facing a key federal hurdle that has cleared now. This plan would be implemented in stages and ensure that all the workers of Oregon who have no access to a plan from their employer could have some retirement savings.

retirement benefits planThe State-Run Retirement Benefits Plan

The state-run retirement benefits plan of Oregon was narrowly approved by the State lawmakers last year. This plan allows all the workers who do not have employer-sponsored retirement benefits plan to enroll in one run by the state. This plan would work like a 401(k) plan in which the money would be deducted from the salary of a worker on a regular basis and the money would be invested so that the worker can have a regular income post retirement.

The Hurdle

Unfortunately, the state-run plan earlier had a federal hurdle as the federal government had not taken a stand over such plans. But a few days back, the department of labor finalized the rules that would pave the way for the Oregon state-run retirement plan to be operational by next July. The Obama administration now clearly mentions that state-run retirement plans are allowed under federal law. This announcement has paved the way for state-run retirement plans in not only Oregon but seven other states as well.


A spokesperson for Oregon Department of Treasury, James Sinks has recently cleared the air on the implementation of this vital state-run plan. He said that the state government is planning to implement it in stages. This plan would be offered to only a handful of private companies present in Oregon that are not offering any such plan. If it’s successful, then the state would ramp up the plan and offer it to more such companies.

The Reason

A major reason that highlights the necessity of a state-run retirement benefits plan in Oregon is that about a million Oregon workers lack access to an employer-based retirement plan and hence they don’t have much savings. They may not have enough money to live comfortably in retirement. It is also a fact that several private sector companies are already offering a retirement plan so they would not be impacted by the change much.

California to Initiate a State-Run Retirement Plan

The California lawmakers would probably pass a new bill in a few days in which a new state-run retirement plan would be given a nod. This plan will help all those people in California who have got no access to a retirement plan from their employer. The plan would be managed by a board that will make low-risk investments. The employers with more than 5 workers would be required to participate in the plan and the workers would automatically get enrolled in this program.

retirement planning

Who will Benefit from this State-Run Retirement Plan?

It is being estimated that more than 7.5 million residents of California would benefit from this state-run retirement plan because they do not have access to a good employer sponsored retirement savings plan right now. About two-thirds of the aforementioned numbers of people are employed at a business that has less than 100 workers at present.

Who will Manage the Plan?

The retirement plan would be managed by a board, the California Secure Choice Retirement Savings Investment Board that was established in 2012. It has state officials and political appointees as its staff members.

Expected Investments

It is being predicted that the state-run plan would invest in low-risk debt securities such as Treasurys until the board develops more investment options for all the participants.

The Key Details

If the plan proposal is approved by the lawmakers, all the employers who have hired over 5 workers and do not offer a retirement savings plan would be required to be a member of the state-run plan. The workers of these employers would be automatically enrolled and they will have the choice regarding opting out of the plan. It is estimated that 3 percent of the workers’ salaries would be contributed to the plan and the contribution limits would be same as those of IRAs.

The Support

The bill is supported by many people including a senior legislative representative with AARP (an advocacy group for older Americans), Sarah Gill. She believes that the bill would soon become a law. She also said that the program would pay for itself in the future and small business owners would want to give some retirement security to their employees. She added that there is bipartisan support for bills like this and the state-run retirement plan was a conservative idea which was developed by the Heritage Foundation.

U.S. Lagging Behind on Retirement Index

It is a fact that the outlook for retirement security is improving in the U.S. But another fact that came to light recently is that the country is lagging behind several Western European nations when it comes to the Retirement Index. This was recently revealed in a study. The study also pointed out the factors that boost the Retirement Index in the nation and the factors that pull the country’s ranking down.

The Study on Retirement Index

The study was conducted by Natixis Global Asset Management. The company has a strong base in Boston and Paris along with having $884.9 billion under management. The company conducted the study with the aim to find out how well the retirees are living in 43 nations. The study used 18 measures that influence the retirement security of citizens. The measures include factors like per capita income, longevity figures revealed by WHO and the Organization for Economic Cooperation and Development. The study placed U.S. on the 14th place while it was at the 15th place last year.

The Positives

The positive aspect of the U.S. with regard to the Retirement Index positioning are that the country has a high rank on per capita income, a strong economy and low levels if inflation and unemployment. These are all boons for the retirees.

The Negatives

U.S. lags in the Retirement Index due to poor access to healthcare. The country also has poor life expectancy and lags behind in material well-being measures that impact retirees such as income inequality. Another thing that has harmed the country’s position in the rankings is the lack of access to employer-sponsored retirement benefits plans. About one-third of U.S. workers doesn’t have a retirement plan offered by the employers. Even the U.S. citizens who have access to these plans, only 40 percent people save for retirement and they contribute just 5 percent of their salaries.

The Topmost Nations

The nations that have topped the Retirement Index are countries from Northern and Western Europe. These countries offer a strong social safety net to all its citizens. These countries have been among the top 10 in the past and they are still there. The country topping the list is Norway which is followed by Switzerland and Iceland at number two and three respectively. The fourth position goes to New Zealand and the fifth position is bagged by Sweden.

Women have Bigger Retirement Benefits Challenges: Study

A recent white paper has revealed that women are very poorly prepared for retirement. The reason is the higher number of challenges faced by women. Many women work only part time and some are not even offered a retirement plan. The women who are offered a retirement benefits plan are often saving less money in the plan than they should for a secure retirement.

Why Women Don’t Have Access to a Retirement Benefits Plan

Retirement Benefits

The white paper was released by a leading Washington-D.C.-based popular advocacy organization for America’s financial services industry named Financial Services Roundtable. The white paper revealed that about 27 percent women work part time because they need to take care of the kids or any other family members. Part-time workers are often not offered a retirement benefits plan. Moreover, the earnings of part-time workers are so low that even if they are offered a retirement plan, they can hardly contribute to it.

The Workplace Earning Differences

The white paper has also highlighted the fact that women consist of 47 percent of the labor force in America. Women also have nearly equal education to men. About 29.6 percent women hold a bachelor’s degree and this percentage is 30.4 percent for men. But still, women’s weekly earnings for salaries and full-time wages are just 81 percent of what men make.

The Bad News

About half of the millennials who were surveyed accepted that they don’t even have a retirement investment account while the fact is that the millennials need more money saved towards the retirement as compared to baby boomers as the cost of living and healthcare expenses are constantly rising.

Women Need more Retirement benefits than Men

The white paper also shared the fact that women need more money stashed for the retirement than the men because they have a longer average lifespan. The average lifespan for men is 84 years while its 87 years for women. It is also a strong possibility that women will need to spend more money over time towards their health care.

The Participation

The white paper has also found out that women who are saving towards a retirement benefits plan are not doing enough. About 62 percent of women were offered a 401(k) or a similar plan. Just 76 percent participated in the plans and the rate of saving they chose stands at 7 percent of their salary.

Democrats push for more Retirement Benefits Coverage

Many democrats are asking the Obama government to ensure that more government contractors are covered under the retirement benefits plans. Those workers who do not have employer-sponsored retirement savings plans must be given the opportunity to invest in government-backed plans.

Retirement BenefitsWho Wants More Retirement Benefits Coverage?

About 65 Democrat leaders want more retirement benefits coverage according to a letter sent to the White House. This group is led by Joe Crowley, who serves as the Democratic caucus Vice Chair. This group wants Obama to ensure that all federal contractors enroll employees working for them in the retirement plans of the company.

The Demands

The Democrats want Obama to create a requirement according to which the full and part-time workers who are not covered under 401(k) options should get access to a new government-run retirement savings plan that was started by the administration recently.

The Unsuitable Trend

Crowley recently made a statement in which he said that about half of the American workers don’t have access to a retirement benefits plan through their respective employers. He added that many more people don’t know about these plans or are ineligible for it. This has led to an unsuitable trend, which shows that less than 10 percent of such workers make a steady contribution to a savings account on their own. Crowley wants steps to be taken to reverse this trend.

The Government’s Role

The Democrats want the government to take some vital steps to solve the problem of retirement plans coverage offered to fewer workers. They want Obama to start with his own employees and capitalize on his executive branch power so that other companies could follow his lead.

The Employers’ Role

The Democrats also want the government to make it mandatory for employers to auto-enroll their employees in the new government-run savings plan if they don’t have any retirement benefits of their own. The new government-run savings plan was started by White House recently and it is known as “my Retirement Account.” It is a platform to invest money for the workers who don’t have access to any other retirement savings option.

The Main Goal

The main goal of all these steps required by the democrats is to ensure that all the U.S. citizens have some savings stored up that can serve them and offer them retirement benefits when they are too old to work.

State retirement plans a good bid for future

State run retirement plans have been among the news for quite some time now and the ever increasing excitement pertaining to the efforts made by the states to set up these private employer plans is really something that’s worth being a part of or knowing about, at the least.

State-run retirement plans a go?

PLAN FOR RETIREMENTThese plans are in fact things that the majority of the population could be looking forward to. When you look at it from the general perspective, these retirement plans could go on and aid the millions of workers in the private sector who don’t enjoy financial stability to have something to look forward to after retirement.

Another side of this story is that this could create a mess. A really unavoidable, unwanted mess. The states are although very enthusiastic to make the move but their ability when it comes to running (After effectively creating) an employee benefit plan can be questioned. When you look at it this way, you can also expect every state to go on and develop its own retirement plan, which also can turn out to be a cumbersome situation.

The Pension Rights Center claims that around 25 of the states have been devising some sort of plan for the general population. Most of these plans involve the employers deducting money from the pay checks just like in a 401(k) plan. Minnesota is a name that comes to mind. The Management and Budget Agency of the state is busy trying to propose a private sector retirement plan. They could come up with one as soon as March, as indicated by a spokesperson.

While these plans could go a long way in making lives of the private sector employees better, the concerns regarding the decision of approval are also very important. Let’s hope that whatever transpires benefits the majority.


New Federal Budget Will Be Good For Federal Retirement Savings

retirement obamaPresident Obama has always been one for focusing on federal retirement savings and recent news arriving from the White House indicate that the President will focus on the same matter in the coming budget as well. It’s expected that some new proposals will be put forward that will aid in the expansion of the access to retirement savings accounts provided to the employees. Also, some previous provisions are also expected to be looked at.

President Obama to expand access to federal retirement savings:

It’s common knowledge that the multitude of the American working class doesn’t care about retirement plans. Around 1/3rd of the population haven’t got a savings or pension available for their post-retirement life and let’s just say that this is a stat that we would like changed sooner than later. Thankfully, the President’s proposals, if accepted, would go a long way in enabling millions of people access to retirement savings accounts.

This increase will occur the most from the legislation that requires the employers that currently don’t have any workspace retirement plan to make the enrolments on the behalf of their employees in an IRA. The employers that would do this would be compensated by 3 thousand dollars in their tax credit. This proposal was part of last year’s budget as well but the Congress didn’t approve it.

This step is destined to make the post-retirement lives of millions of Americans a lot better than they would turn out otherwise. It’s worth mentioning that even though the initiative has been taken by the President, the final approval lies in the hands of the Congress and while the excitement went in vain last year, this year it’s hoped that things might just turn out for the good. This particular plan, once approved is probably going to stay for quite some time.

Start Planning your Finances for 2016

The New Year with all its might is finally here. You need to start planning your finances now more than ever. Here are a few tips for you to benefit from:

How to manage your finances in 2016:

A financial plan:

The question “Where did all the money go” is always roaming around in our brains and we can’t ever figure out the answer no matter what. We try hard but we just can’t make all the numbers add up. You can change this though; make 2016 a different year for yourself. Be proactive and try setting our priorities based on where you want to spend this year.

There could be all sorts of options; maybe you want to buy a new car or maybe you just want to get the credit card debt off the table. Try to lay it all out and decide accordingly.


You need to save; if you are edging your retirement, you need to save more. There must be a magic formula out there pertaining to your income, your needs and your future responsibilities that would allow you to know how much you can spend and how much you can save. Figure it out.

Invest with care and comfort:

Don’t go around investing without giving it many second thoughts. If you are going to go with TSP or myRA make sure that you know the intricacies of these plans. Your money needs to only go into places where it will be worth the investment so this wisely and always take your time.

Tax planning:

Taxes are going to go up this year and this shouldn’t be news to you if you work in the government sector. Plan your investments and savings accordingly.


These are only some of the things that you could benefit from, going in to the New Year; the trick is to never make impulsive decisions and always think things through.

Expect Your Newly Announced Retirement Plan To Not Deliver

myRAmyRA has been the recipient of many critique and analysis in the past few months after its announcement and there has been a wave of uncertainty generated in the minds of the federal employees so as to whether or not it’s the solution that they were after. The gap in our country’s retirement savings is magnanimous and the new program was destined to make it a lot less but experts think otherwise.

Many of the feds and critics lauded the government’s step to make myRA open to applications and to allow the millions of Americans (without retirement plans) to finally up the ante but now it looks as if myRA isn’t going to do the trick. Here’s why:

The account that gets initiated when you sign up for the program gives away almost the same rate of interest as the G fund of the government that the federal employees should know about. This is not just a statement put forward by anybody; this is what the US treasury has to say. The average of the fund over a ten year tenure was around 3.3 percent. myRA is different in its operations though because contributions go straight to the government’s security funds which have really low rates of return.

Many experts believe that the traditional plans that always existed can help in making hefty contributions but myRA can increase the number significantly. The program was introduced to allow the officers that have no retirement procedures applicable to them and the government can only hope that it is going to allow those imprudent souls to finally take actions. Having said that, we have to conclude that things aren’t as clear as you would ideally want them to be. Let’s hope that things turn out well and people of America find better ways of preparing for their post-retirement life.

IRS Announces Savings Plan Contribution Limits For 2016

The Internal Revenue Service announced that savings plan contribution limits for tax year 2016 will in general stay the same.

There are no cost‑of‑living adjustments (COLA) to be made because the cost-of-living index did not meet the statutory thresholds that trigger their adjustment.

Therefore, the 2016 contribution limit for employees who participate in a retirement savings plan such as a 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan (TSP) remains unchanged at $18,000.

Similarly, the catch-up contribution limit for employees aged 50 and over who participate in these savings plans remains unchanged at $6,000.

The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500. The additional catch-up contribution limit for individuals aged 50 and over remains unchanged at $1,000. The limitation regarding SIMPLE retirement accounts remains unchanged at $12,500.

The annual compensation limitation for eligible participants in certain governmental plans that allow cost‑of‑living adjustments remains unchanged at $395,000.

Some things have changed from 2015 to 2016, though. For example, The AGI (adjusted gross income) limit for the saver’s credit (retirement savings contribution credit) for low- and moderate-income workers has been hiked by $500 to $61,500 for married couples filing jointly; $46,125 for heads of household; and $30,750 for married individuals filing separately and for singles.

Defined Contribution and Benefits Limitations For Qualified Retirement Savings Plans

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement savings plans. Effective January 1, 2016, the limitation on the annual benefit under a defined benefit plan remains unchanged at $210,000. The limitation for defined contribution plans under remains unchanged at $53,000.

Kentucky to Withhold FICA Tax From Retirement Plan Contributions

IRS to Kentucky – Withhold Federal Insurance Contributions Act (FICA) Taxes From Retirement Plan Contributions

insuranceThe IRS has asked the State of Kentucky to start paying Federal Insurance Contributions Act (FICA) withholding taxes from the retirement plan contributions of government employees.

State and local government employees’ pay has always been subject to the 7.65 percent federal insurance withholding for Social Security, and survivor benefits. But Kentucky has traditionally not factored in the portion of the pay that goes towards the employees’ savings plan.

However, the IRS now wants Kentucky to factor it in, and also provide matching employer contributions, either from the state government or the local government if the employee is employed by a local government.

The Social Security tax withholding for employees is 6.2 percent, with a matching 6.2 percent from the employer. The Medicare tax is likewise 1.45 percent for both employees and employers.

So the total adds up to a hefty 15.3 percent, and even the portion of it that goes towards an employee’s savings plan will be a significant amount on an annual basis.

Impact of IRS Ruling on FICA Withholding for Retirement Plan Contributions

The new ruling obviously affects other states too, and will probably trigger a huge amount of change in state and municipal government budgets. Not to mention the tweaks needed for the formulas the states and local governments use for with holdings and deductions from employee wages.

There’s also the fact that it reduces the net pay for employees, while enhancing their contributions to their savings plan and retirement benefits. Employees will no doubt be a wee bit unhappy about the IRS getting its hands on a bigger part of their wages.

But since the government will have to match the contributions, it’s actually a good thing for government employees as far as Social Security and their retirement benefits are concerned, even if they do get less pay at the moment.

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