Lawrence Eisenberg’s Post

I don't think it will ever happen, but this article by Ed Prince is worth reading! Here are the key points: ➡ Tax deferral on 401(k)s and IRAs cost $185 Billion (0.9% of GDP) in 2020. A simulation by the Urban-Brooking Tax Policy Center suggests that 59% of the tax expenditures for retirement savings flow to the top quintile. ➡ Raising the Social Security age will hurt lower-income individuals. I agree 100%; a lot of people are forced into retirement, and with the lower-income earners working more physically demanding jobs, they are at a much higher risk than higher-wage earners. However, the counterargument has merit. With longevity increasing, so should Social Security's Full Retirement Age. ➡ Tax breaks fail to boost retirement savings. They cite a Danish study because U.S. data on the subject is scarce. If you want to read the full report, check out the Center for Retirement Research at Boston College. The report is called "The Case for Using Subsidies for Retirement Plans to Fix Social Security" by Alicia H. Munnell and Andrew Brigg. #retirement #401k #ira #financialplanning #retirementincome #socialsecurity

Not only should a strategy be employed to lessen your MAGI to temper the tax torpedo but also to avoid paying higher Medicare premiums. Many of us have failed to plan for our retirement only looking at monthly retirement benefit and ignoring tax consequences. Although a double exemption for being 65 and older helps it is not a panacea for solving your future tax issues. An issue that has recently come into focus within inflation is the increasing cost of utilities in home ownership and the exponential cost of homeowner's insurance and car insurance. Advising retired people to only have one car is not sound financial planning advice. Downsizing is not sound financial planning advice if you want to always live in your home. The US government is not responsible for your retirement planning however the government must proactive in maintaining the Social Security program and increasing monthly benefits with greater contributions. Above all, the word "entitlement" must be eliminated especially when you contribute into a government pension. Now that we are cognizant of the fact that Social Security was only intended to replace about 40% of your monthly paycheck let us calculate what programs to implement and execute to insure American citizens retire in dignity. The fact is that if this is not performed in advance then the government will have to do it afterwards at an increased cost.

🚨 Pension News: Governor Pritzker Unveils New Budget...with pension funding updates... "Pritzker’s budget team is also aiming to hasten the state’s pension funding ramp with an eye toward landing another credit upgrade from Wall Street ratings agencies. Since 1994, the state has been on a slog toward filling the gap in the grossly underfunded system to 90% by 2045. Pritzker’s team is adjusting that goal to reach 100% funding by 2048 — closer to pension goals set by many other states. Pritzker will need legislative approval for the pension proposal." https://loom.ly/SIqc0F4

One of Illinois's biggest challenge for long term economic growth and prosperity are the state's large pension obligations. Anything that increases this challenge instead of structurally addressing it is a serious threat to the future to all of us living here. That is why it's so important to solve the legal challenges around Tier 2 of our pension system in a way that satisfies the legal requirements to be compliant but minimizes any increased financial obligations for the state, and therefore for all of us tax payers. Today's Chicago Tribune OpEd by Derek R. B. Douglas from the Civic Committee of the Commercial Club of Chicago, Joe Ferguson from the Civic Federation, and David Greising from the Better Government Association makes a persuasive argument to fix the Tier 2 safe-harbor problem while ensuring the state’s pension plans remain compliant with federal regulations. The state already faces $142 billion in unfunded pension liabilities which makes the recommended approach by these three organization and supported by Governor JB Pritzker even more important. Changing the Tier 2 pay cap to match the Social Security wage base for the three largest state pension plans would add about $12 billion to the state’s 2045 pension liability and require about $7 billion in additional state pension contributions through 2045. But this measure to be legally compliant will be considerably less than alternative proposals under consideration by the legislature -including bringing Tier 2 benefits entirely up to the level of Tier 1 — at a cost to taxpayers that the OpEd estimates at $82 billion through 2045. Let's be financially smart and responsible instead of creating unacceptable burdens for future generations and their opportunity for economic well-being.

As workers enter the retirement ‘red zone,’ they should opt for less investment risk https://ift.tt/QMEvS14 Just like a football team entering the red zone — the area of the field inside the opponent’s 20-yard line — should be extra cautious to avoid wasting a scoring chance, Americans who are nearing retirement should dial back aggressive investment strategies. That’s the advice of Kevin Wade, a financial planner with Centennial Advisors LLC, in a column published Monday by personal finance website Kiplinger. Wade writes that younger workers can place their money in riskier investment vehicles, such as equities, without worrying about large declines in the stock market. “That’s because they’ve got 40 years or so until retirement and don’t have to fret about major market swings as would a person in their 50s or 60s,“ he said. Once a person gets within 10 to 15 years of retirement, however, they should scale back the level of risk they’re willing to tolerate from their investments. Wade uses the analogy of a football team being protective of possession near the end zone because they’re “in a good position to score and don’t want to waste the opportunity with a costly mistake.“  “No one wants to be five or six years from retirement and suddenly lose 30% to 50% of their portfolio because they didn’t adjust their plan properly,“ he wrote. This could be particularly true at a time when fewer U.S. workers have access to a pension plan. A report from the Congressional Research Service found that the number of Americans with a pension declined from 27.1 million in 1975 to 12.6 million in 2019. Meanwhile, workers with a defined contribution plan, such as a 401(k) or 403(b) account, rose from 11.2 million to 85.5 million during these years. Additionally, more Americans are worried about the level of Social Security benefits they’ll receive in retirement. A recent Gallup poll found that 80% of respondents under the age of 62, and 86% of respondents in their 40s, feared that Social Security will not exist by the time they’re eligible for benefits. Federal lawmakers are attempting to address Social Security fears with legislation that would expand the monthly benefit by changing the way that cost-of-living increases are calculated. A Senate version of the bill, known as the Boosting Benefits and COLAs for Seniors Act, has yet to make it out of committee. Wade advises that people nearing retirement should focus on a diversification strategy centered around safer investments — including annuities, bonds and certificates of deposit. He also believes that a shift in mindset for older workers is necessary even when the stock market is performing well. “Let’s say you’re coming off of a year where you might have made a 12% to 18% gain in your portfolio,“ he wrote “The last thing you want to consider is scaling back your risk. But you don’t want to get in a situation where you’re constantly chasing returns as you approach and enter your retireme...

Don’t be like Rudy: Why Pensions Matter for Public Employees You may have heard that former NYC Mayor Rudy Giuliani is facing bankruptcy after losing a defamation lawsuit and failing to pay his legal bills. But did you know that he also missed out on a pension that could have helped him in his financial troubles? Unlike most public employees, Giuliani never applied for a pension after leaving office in 2001. He could have received about $26,000 a year for the last 17 years, but he didn’t bother to apply. Now, he says he regrets it, but it may be too late. Pensions are a vital source of retirement income for public employees, especially those who do not contribute to Social Security. They provide a secure and stable income that can help you weather any economic storm. They also reward your years of service and dedication to the public good. Don’t make the same mistake as Rudy. If you are a public employee, make sure you understand your pension benefits and how to claim them. And if you are not, support the efforts of public employees to protect their pensions from cuts and raids. Pensions are not a luxury; they are a necessity. #ProtectPensions #Pensions #SecureRetirement #Retirement #PensionFunds #Governance #FiduciaryDuty https://zurl.co/Mdc5

Over the weekend, we asked our Boring Money readers to give us a snapshot 'gut reaction' of how they felt as investors and pension savers, in light of the upcoming General Election. Over 300 shared detailed comments with us, mostly unprompted/freeform comments. Readers voiced mostly pension worries (lifetime allowance) and a few knee-jerk reactions, lots of tax concerns, interesting plans to invest more globally (& in passives), along with some reports of planning to sell up buy-to-let property. The majority of investors report that they will take no immediate action & are in ‘wait and see’ mode, although 16% are planning to change their pension contributions in the next 6 weeks, given the possibility of Labour forming a new Government.  Of these, most (7%) plan to pay in more. 5% say they will stop contributions. 1. Maximizing Use of Tax-Advantaged Accounts: A significant number of respondents mentioned attempting to maximize their ISA allowances and pension contributions, shielding as much of their savings and investments as possible from potential tax increases. 2. Concern Over Potential Tax Changes: There is a widespread concern about potential changes to capital gains tax (CGT), pension tax relief, inheritance tax and the reintroduction of the lifetime allowance (LTA). 3. Diversifying Investments Globally: Many expressed plans to diversify their investments more globally, reducing exposure to UK-specific risks. Interestingly some reported they would move to more passive investments in response. 4. Sector-Specific Concerns: Some respondents are specifically concerned about investments in utility companies (water and energy) and are considering divesting from these sectors due to fears of nationalization or regulatory changes. 5. Consideration of selling rental properties: A number of respondents mentioned they were now actively considering selling their buy-to-let properties, citing concerns about potential changes in regulations which could impact profitability and increase management burdens. In summary, while the majority say they will maintain the status quo and wait for more information, the underlying sentiment amongst individual investors is one of wariness and preparation for potential negative impacts on personal finances. The mood music is gloomy, largely as a result of anticipated changes to tax and pensions, with a secondary concern about the UK stock market and rental properties. 30% of investors think that their personal finances will get worse over the next 6 months, and just 9% think they will get better. Pensions are the main concern as the shadow of the Lifetime Allowance hangs over some of those approaching retirement. Obviously this isn't a large quant study but the verbatims are a very interesting read and paint a quick picture of how investors are thinking and reacting in these early stages of campaigning. #generalelection #thevoiceofthecustomer #lifetimeallowance #cgt #labour #conservative #pension #isa

An interesting ~debate in this Pensions & Investments* article by Margarida Correia covering some recent research** by Andrew Biggs and Alicia H. Munnell released through the Center for Retirement Research at Boston College. In the interests of full disclosure, I had a LinkedIn post*** on their paper a ~week ago. To provide some nuance on my quote/s in the P&I article… there is clear evidence that the benefits of the current DC savings structure accrue more to wealthier Americans. There is also clearly a gap in the current state of Social Security retirement benefits. I feel like both points should be fairly obvious. I am generally opposed to any kind of ~policy change that could potentially negatively affect retirement savings among Americans, though. Since limiting contributions or accumulations in tax-favored plans (as proposed) would mostly affect wealthier Americans, as in the article, I would rather the ~tax be applied ~equally to all wealthy Americans, not just those wealthy Americans who are saving for retirement (why just penalize savers?). One ~contentious issue here is the impact the proposed tax incentives may have on savings behaviors. While evidence here is mixed, I just can’t see the incentives having no effect overall (could be small… but in my opinion, not zero). While I am sample of one, and obviously not representative, the tax benefits associated with DC plans definitely affect my decision making and should for anyone else getting similar tax advice, in theory. Higher level, I think we definitely need to address the overall funding for the Social Security program. I also think it’s likely wealthier Americans will disproportionately pay for this (see the “You Earned It, You Keep It Act”). I just don’t want to focus the penalty entirely on the (wealthier) folks who are saving for retirement! * New PI piece: https://lnkd.in/gwEFZPng **Original Issue Brief: https://lnkd.in/eP3gXHsE *** Original post: https://lnkd.in/gXQMtg8k

In the last couple of days, I have examined two of the three key findings of the 1965 Report of the President’s Cabinet Committee on Private Pension Plan Regulation, i.e., vesting and funding. Today, I take up the regulation of pension investments. Before and during the Committee’s deliberations, trustees of pension trusts had few constraints relating to their choice of investments. It was anticipated that the Committee would recommend some restrictions, however, based on a then nascent trend of pension trustees to seek out more speculative investments in an effort to increase yield. When the Committee was doing its work, pension funds were generally invested to ensure the safety of principle and the liquidity of funds. Government bonds were the principal investment in most plans, and unions tended to invest even more conservatively than corporations. (There was at least one, glaring exception. The Teamsters pension invested in some large Las Vegas gambling hotels and golf courses. What could possibly go wrong?) The Committee was presented with no evidence to support the claim that greater losses would result from higher risk investments, however. It did not therefore suggest any substantive changes to existing law. Notably, the Committee’s finding that higher risk investments would not cause greater losses would not survive scrutiny under modern portfolio theory. While modern portfolio theory first emerged in the 1930s, it was not until the 1990s that Dr. Harry Markowitz shared the Nobel Prize in Economics for his work on the subject. Today, modern portfolio theory is near universally accepted. The Committee did propose some modest legislative changes to require as a condition of tax qualification that a plan may not invest more than ten percent of its funds in the stock of the employing company. It also proposed amending the Welfare Plans Disclosure Act to require additional information related to a plan's investment activities.

Don’t be like Rudy: Why Pensions Matter for Public Employees You may have heard that former NYC Mayor Rudy Giuliani is facing bankruptcy after losing a defamation lawsuit and failing to pay his legal bills. But did you know that he also missed out on a pension that could have helped him in his financial troubles? Unlike most public employees, Giuliani never applied for a pension after leaving office in 2001. He could have received about $26,000 a year for the last 17 years, but he didn’t bother to apply. Now, he says he regrets it, but it may be too late. Pensions are a vital source of retirement income for public employees, especially those who do not contribute to Social Security. They provide a secure and stable income that can help you weather any economic storm. They also reward your years of service and dedication to the public good. Don’t make the same mistake as Rudy. If you are a public employee, make sure you understand your pension benefits and how to claim them. And if you are not, support the efforts of public employees to protect their pensions from cuts and raids. Pensions are not a luxury; they are a necessity. #ProtectPensions #Pensions #SecureRetirement #Retirement #PensionFunds #Governance #FiduciaryDuty https://zurl.co/Mdc5