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Blogs
Social Security Tax Reduction - A 401(k) Opportunity
In 2011, but only in 2011, the FICA taxes on our wages have been reduced by 2%. This is a great opportunity to boost retirement savings. I suggest that America's workers save that 2% in their 401(k)s. This could have a significant impact on amounts available for retirement, especially for younger workers who will earn a compounded return on the... Read More >>
"Nudging" In Perspective
As a supporter of nudging 401(k) participants with automatic enrollment I believe that it is important to recognize that nudging only works when the nudge is in the person's best interest and the person being nudged trusts the nudger and agrees with the nudge's direction. For example, nudging does not work in the one-half of defined benefit plans... Read More >>
401(k), Retirement and Real Estate
Someone I know just bought a three bedroom, two bathroom house with four orange trees in the backyard just north of Ft. Myers, Florida for $50,000. The only thing it needs is a new stove. An earlier contract on the house had fallen through because the buyer could not get financing. Cash is king and many soon-to-be retirees have cash either in... Read More >>
Thanksgiving and 401(k)
Thanksgiving Day was first proclaimed a US national holiday in 1863 by President Abraham Lincoln. It dates back to 1621 when English pilgrims celebrated the first Thanksgiving to express gratitude for their first successful harvest on American soil. Canada added a similar holiday in 1957 but only in America do we devote a day to give thanks. Our... Read More >>
No Tax Deferral for 401(k) or Other Employer Sponsored DC plans?
There are significant consequences if the tax preferences for employer sponsored defined contribution plans are eliminated as suggested by the leaders of the President’s Deficit Commission (Simpson/Bowles), and significantly reduced as suggested by the Bipartisan Policy Center’s deficit reduction team (Rivlin/Domenici). This would drastically... Read More >>
401(k) Adequacy and Employer Liability
At a recent conference I was asked If DC plan sponsors should be concerned about being sued if their 401(k) participating employees enter retirement with inadequate resources. It's time to put this question to rest. No, they should not be concerned. First, American workers will typically work for several employers before they retire so future... Read More >>
401(k) and the Election
The Federal framework necessary to allow the employer-sponsored defined contribution system to reach its full potential was implemented with a series of legislative changes that began in the mid-1990s and culminated with the passage of the Pension Protection Act of 2006. Unfortunately, achievement of that potential has been delayed by the... Read More >>
Employers Step It Up For 401(k) Participants
As the following table shows nearly all employers have gone beyond financial education and now help participants with the allocation decision. In 2009 nearly two-thirds offered a target date fund, 60 percent made investment advice available to participants and more than 30 percent offered participants a managed account option. It is remarkable... Read More >>
Baby Boomers, 401(k) and Social Security
One of my strongest 401(k) selling points when I was a plan administrator in 1982 was that employee contributions were not subject to FICA. It also helped that workers had more disposal income from which to save as FICA taxes were lower then. Then 1983 happened. Riding to the rescue of Social Security, political leaders raised FICA tax rates and... Read More >>
401(k) In-Plan Roth Conversions, Too Late for 2010?
On September 27, with passage of the Small Business Jobs Act, plan sponsors were permitted to allow some participants to convert their plan accumulations from tax-deferred to Roth status within their DC plans. PSCA and other organizations worked for this change because of a concern that plan participants, particularly participants over 59 ½ with... Read More >>