Squared Away Blog

Retirees have long been reluctant to spend the money they’ve accumulated in their 401(k) savings plans. But it also used to be common for retirees to have a traditional pension to cover their regular expenses. By the time the baby boomers came along, pensions were available to a dwindling minority of workers, and it isn’t entirely clear how much they’ll tap into their 401(k)s. A new study quantifies the impact of this transformation in the U.S. retirement system, where traditional pensions are now found almost exclusively in the public sector. The conclusion, by the Center for Retirement Research, is that retired boomer households lacking a pension seem more likely to rapidly deplete the 401(k) savings they rely on, “leaving them…

More than one of this blog’s readers said a recent article about 401(k)s was hardly revelatory. But it sure generated a lot of comments. Ed McGrath wrote this about “Retirees with Pensions Slower to Spend 401(k):” “Well thank you for this Caption Obvious.” Perhaps the article struck a nerve because baby boomers are the generation who mostly lost out on pensions. Nearly two-thirds of U.S. workers born in the 1920s through the 1940s – many of them parents of boomers – had pensions. But a measly 6 percent of boomers from the tail end of the wave have them. Millennials and members of Generation Z usually wouldn’t even consider pensions in their retirement plans. But boomers at one time might’v…

Most state and local governments provide their employees with traditional pensions, which are nice to have. But not all pensions are equally generous. The monthly benefits vary from one place to the next, and some governments have cut costs by reducing pensions for their newest hires. Further, one in four public-sector workers aren’t currently covered by Social Security, because their employers never joined the system. A logical back-up plan for these workers would be to contribute money to the supplemental savings plans that most public-sector employers provide. When the workers retire, they can add the money saved in their accounts – a 401(k), 401(a), 457 or 403(b) – to their pension benefits. But researchers at the Center for Retirement Researc…

German legislation that increased the federal pension credits given to mothers has influenced their decisions about working in middle age, years after their children were born but long before retirement age. This finding from a recent study adds to what is currently understood about how changes made to future pensions can affect how much workers choose to work now or when to retire. Previous research tended to gauge the impact of pension reforms on individuals who are closing in on their retirement years. This study focuses squarely on the behavior of mothers who are mostly in their early 50s, when workers are just starting to get serious about their retirement plans. The retirement benefits paid to German workers by t…

The economic turmoil in the early months of the pandemic – a plunging stock market and soaring unemployment – posed a real threat to state and local government pension funds and the workers who rely on them. One group was particularly vulnerable: public-sector workers who aren’t covered by Social Security and lack the backstop of the federal government if their employer pension plans get into trouble. The Center for Retirement Research has some good news for these 5 million noncovered workers living in 20 states. Their pension plans got through the first two years of the pandemic unscathed. In dollar terms, government contributions to these defined benefit pension plans actually increased during COVID. That and a roaring stock market in…

Diane Taylor Betty Taylor is 74 and retired from a job she held for more than a decade filling Spiegel catalog orders and packing them up for shipping – she left in 1984. Diane Taylor, 70, was a packer and then a keypunch operator there between 1982 and 1995. But the sisters, who live together in their late mother’s house on Chicago’s Southwest Side, couldn’t track down anyone who could confirm that their low-paying jobs entitled them to Spiegel pensions. This is more common than one might think. When a single employer or union has continued to maintain its pension plan over several decades, retiring workers know where to go to sign up for their benefits. But the sisters’ pensions…

It’s the employer’s responsibility to find former employees and keep them apprised of any retirement benefits they left behind. But that hasn’t always worked out. Some employers don’t have former workers’ current contact information, and others don’t bother to track them down. Worst-case scenarios are often fallout from a merger: the company being acquired has kept shoddy pension plan records and the acquirer doesn’t update them.  Some companies have even deleted a participant’s name from the records. Tyler Compton, an attorney with the Pension Action Center, which connects workers with lost pensions and 401(k) savings plans, said people frequently contact a former employer because they think they might have a plan. But if the worker is told he’s not in…

Retirement for workers in state, county and municipal government fits a certain picture: a regular monthly pension payment awaits them. But there are important exceptions, which a recent study has filled in. A small minority of public sector workers get some or all of their retirement benefits in the form of a one-time cash payment. Doing so potentially comes at a cost: less financial security in old age. Of particular concern are the 5 million people working in state and local government jobs that are not covered by Social Security. Social Security – like a pension – is a monthly annuity that provides some certainty about retirement income. Still, in the larger scheme of things, the vast majority of stat…

A major government program helps poor and low-income retirees and adults with disabilities defray what can be substantial healthcare expenses that aren’t covered by Medicare. But enrollment is unusually low in some states because of more stringent eligibility standards. The Medicare Savings Programs, which are administered by the states and funded by the federal government, subsidize Medicare’s Part A and Part B premiums and cost-sharing obligations for more than 10 million Medicare beneficiaries. But participation varies widely from state to state, according to a new report by the Kaiser Family Foundation, due to a combination of differences in need and varying eligibility standards. No more than 10 percent of the retirees in Nebraska, New Hampshire, North Dakota, Utah, and Wyoming…

When COVID-19 throws people out of work, their chances of retiring comfortably can deteriorate rapidly. What better time to find a new way to help? A perennial proposal just reintroduced in Congress would do some good: establish an online database of employer retirement plans so workers and retirees can locate old pensions and 401(k) accounts. Workers are increasingly responsible for making sure they have enough money to retire. But moving from job to job is now the norm – the one-employer career is a distant memory – and pensions get left behind and 401(k)s fall by the wayside. People who try to find old plans often can’t locate employers that have changed names, merged, relocated, or terminated a plan. T…

About 5 million employees in state and local government are not currently part of the Social Security system. Federal law tries to protect them by requiring that their traditional government pensions provide the same retirement benefits they would receive if they and their employers were instead contributing to Social Security. But the Center for Retirement Research finds that roughly 17 percent of these workers’ pensions fall short of that modest standard. The reasons involve how long they remain in their government jobs and how their pensions are calculated. Let’s start with the workers who usually do not fall short: career public sector employees. They are protected because their pension annuities are based on their average salaries in the final years…

Early in this new documentary, the director’s message seems to be that retirement finances are messy, elusive, and too complicated for mere mortals to understand. He’s right on all counts. Filmmaker Doug Orchard reminds us in “The Baby Boomer Dilemma: An Exposé on America’s Retirement Experiment” that there are no easy solutions for Social Security, which economists predict will deplete its trust fund reserves around 2034. Closing the shortfall will probably require some combination of benefit cuts and revenue increases. Social Security is “one of the most important problems we face as a nation,” The Wharton School’s Olivia Mitchell says in the documentary. Our other primary program – a 401(k)-style retirement savings plan – seems great when the stock market…