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ANC Foundation – Presentations on Retirement Research

ANC Foundation – Presentations on Retirement Research. Moderator: Cathie Eitelberg, The Segal Company Presenters: Beth Kushner, City of New York, NY Mary Willett, InFRE Retirement Readiness Project. ANC Foundation Mission.

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ANC Foundation – Presentations on Retirement Research

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  1. ANC Foundation – Presentations on Retirement Research Moderator: Cathie Eitelberg, The Segal Company Presenters: Beth Kushner, City of New York, NY Mary Willett, InFRE Retirement Readiness Project

  2. ANC Foundation Mission To advance knowledge in the field of public sector retirement security. The Foundation supports both individual educational opportunities and research to expand knowledge related to the importance of retirement readiness. To accomplish its mission, the Foundation operates under the following principals: • Retirement Education - The Foundation is to provide higher education students with funding to study financial or retirement planning and to create opportunities for the students to participate in related learning opportunities. • Research and Information Exchange - The Foundation supports research, information sharing and collaborative endeavors that further retirement readiness and expand knowledge of retirement issues and solutions

  3. History of ANC Foundation • Executive Board of NAGDCA established Arthur N. Caple Foundation (ANC Foundation) in 2006 • Website Developed – www.caplefoundation.org • In process of obtaining tax exempt status as a 501(c)(6) • Scholarship program started under NAGDCA in 2005 is now managed as part of the ANC Foundation

  4. ANC Scholarship Program • In 2005 and 2006, one scholarship was awarded to a college student which included $1,000 towards tuition, travel expenses to NAGDCA conference, and expenses covering the InFRE Certified Retirement Counselor (CRC) certification materials and exam • Program expanded in 2007 to include one full scholarship award, 5 travel stipends in the amount of $500 and 20 complimentary NAGDCA conference registrations

  5. ANC Research • Call for research papers conducted in March 2007 on public sector retirement issues • Two papers selected for presentation at NAGDCA conference • Exploring sponsorship of Academy of Financial Research journal focused on retirement issues

  6. Future Directions • Development of Research Innovations • Expanded Fund Raising Efforts • Outreach and Coalition Efforts

  7. Hardship Withdrawals Presented by Beth Kushner, City of New York Authored by Shauna Marcus, NYC Deferred Compensation Plan

  8. 457 Plans Unforeseeable Emergency Due to events beyond the control of the participant or beneficiary 401(k) Plans “Immediate and Heavy Need” Immediate and heavy even if reasonably foreseeable or voluntarily incurred All Hardships are Not Created Equal

  9. A Challenging Task • It is not the presence of a hardship, rather if it cannot be satisfied by other resources that are reasonably available. • You, the administrator, determine what may reasonably be considered a financial need. • You, the administrator, are responsible for providing specific criteria with little guidance from the IRS. • Fortunately, the recently released NAGDCA Brochure entitled “Section 457(b) Plan Administrator’s Guide To Unforeseeable Emergency Withdrawals” by Gay Lynn Bath was designed to help.

  10. 457 vs. 401(k) • Despite the less stringent criteria, public sector 401(k) Plans are not necessarily more likely to receive a hardship withdrawal than their 457 Plan counterparts. • Are public sector employees more inclined to receive a hardship withdrawal than private sector? • No.

  11. Public Sector • Average percentage of the total population for the public sector that received a hardship withdrawal was .15%1.

  12. Private Sector • Average percentage of total population for the private sector that received a hardship withdrawal was 1.00%1.

  13. Loans vs. Hardship Withdrawals • Could adopting the loan provision mean even fewer hardship withdrawals? • When examining four plans that allow loans as well as hardship withdrawals, loans had very little impact on the number of hardship withdrawals issued. • Of course, there is an exception to every rule…

  14. NYC 457 Plan Hardship Withdrawals vs. Loans • Since loans were first introduced to the 457 Plan in 9/2005, Hardship Withdrawals were cut in half. • Loans may diminish hardships withdrawals, but will not eliminate them.

  15. Hardships and the Economy In the NYC Deferred Compensation Plans, One of the Major Reasons for Hardship Withdrawals is Eviction/Foreclosure. • Are there Economic Forces at Work? • Could the Economy as a Whole be a Reason?

  16. From the Stock Market Perspective • Past performance is not an indicator of future results, but does it lead to hardship withdrawals? • Not a strong correlation

  17. Cost of Living for the New York Tri-State Area Perspective • Is the Cost of Living a more likely indicator? • Although it has a slightly stronger correlation, still not strong enough to influence the pattern of hardship withdrawals.

  18. The Future of Hardships The Pension Protection Act of 2006 has extended the provision to include the needs of non-spousal, non-dependent beneficiaries as well. Whether this may lead to a slight increase in the number of hardship withdrawals taken, only time will tell. Accidents happen, and even the best-laid plans are subject to the unknown. True to its purpose, the hardship withdrawal provision makes allowances for that.

  19. Sources • [1] Statistics provided by FASCore, LLC. The data provided did not include Plan names or participant specific information with regard to hardships or loans. • [2] Data provided by Milliman USA.

  20. A New Model for Retirement Education and Counseling Mary Willett, CRATM, CRC® Willett Consulting

  21. Retirement is no longer “Retirement” • More active lifestyle, often includes work • Increased life expectancies mean $$ must last longer • Retirement cost-of-living difficult to predict • New uncertainties about retirement income • Benefits being reduced or eliminated • Potential changes to Social Security • Market volatility

  22. Problem: Retirement Readiness Perceptions and Attitudes Reality of Actions

  23. Problem: Retirement Education • Message too narrowly focused • Content not always designed for audience • Cost can limit delivery methods

  24. Retirement Readiness Project • Profile of retirement readiness • Qualitative measurement • Effective education tools and programs

  25. Three Dimensions of Readiness Happy and Engaged • Happy and engaged • Healthy • Financially secure Healthy Financially Secure

  26. Survey of American Workers • Validated profile of readiness • Covered all three dimensions • Identified correlations

  27. Happiness & Engagement • Activities and challenges • Meaning and fulfillment • Social networks • Retirement location • Plans with spouse/partner

  28. Profile of Happiness

  29. Health in Retirement • Current health, family history • Steps to preserve health • Knowledge of health factors • Understanding life expectancy

  30. Profile of Health

  31. Wealth Accumulation & Planning • Retirement benefits • Personal savings and investments • Debt management • Income need in retirement • Retirement risks and contingency planning • Investments • Home equity • Sources of retirement income

  32. Profile of Wealth Accumulation & Planning

  33. Profile of Total Retirement Well-Being

  34. Correlations Between Dimensions Have plans for retirement activities Know how much money is needed Have plans for retirement challenges Have accumulated $50,000 in financial assets Given thought to where they would like to live in retirement Know how much needs to be saved Discussed plans with spouse/partner Have at least $100,000 in income & $150,000 in financial assets Expect to be healthy for as long as they live

  35. New Model forRetirement Education & Counseling • Simpler, Automated Plan Design • Expanded Education Message • Relevant and Effective Education Programs • Productive and Cost Effective Delivery Methods for Education and Counseling

  36. Simpler Plan Designs • Automated everything • Enrollment • Deferral increases • Rebalancing • Simplified check-the-box option

  37. Expanded Education Message • Three dimensions of retirement well-being • Happiness and engagement • Health • Wealth accumulation & financial planning Happy and Engaged Healthy Financially Secure

  38. Relevant & Effective Education • Based on adult learning techniques • Assess workforce needs • Develop action plan • Establish key learning points and expectations • Incorporate into all educational mediums • Evaluate and measure effectiveness

  39. Productive & Cost Effective Delivery • Varied to meet needs of audience • Personalized services • Call center transformation • Small group counseling sessions

  40. Final Thoughts • Finding solutions is a priority • Goal is to generate discussion • Ultimate goal: • Improve retirement readiness of today’s workers and future retirees

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