Magnanimous Government Employee Retirement Systems

The nation's state and local government employee retirement systems totaled $3.2 trillion in holdings and assets in 2008, a loss of $178.8 billion, according to new data released by the U.S. Census Bureau.

Retiree Health Care Costs

Fidelity Investments(®) has announced the results of its annual Retiree Health Care Costs Estimate. The Estimate found that a 65-year-old couple retiring this year will need a quarter of a million dollars ($250,000) to pay for medical expenses throughout retirement, not including nursing-home care.

Payouts from Government Employee Retirement Systems

There are about 7.5 million beneficiaries receiving payouts from state and local retirement systems, another 14.4 million employees who are system members, and 4.2 million former employees and others who have retained retirement credits, according to 2007 census data. Among the two primary types of federal retirement -- the Civil Service Retirement System and the Federal Employees Retirement System -- there were about 1.86 million annuitants, and 610,000 survivor annuitants, as of Oct. 1, 2008, according to the U.S. Office of Personnel Management.

Closing National Guard Loopholes

Iowa Congressman Tom Latham and Oklahoma Congressman Dan Boren have introduced legislation to close National Guard loopholes that make it more difficult for National Guard members who served on active duty deployments to collect retirement pay.

In 2008, legislation authored by Latham was approved to reduce the retirement age of Guard members by 3 months for every 90 days spent on active duty. The legislation aimed to make retirement credit for Guard members more equitable with that of their active duty counterparts, but an unintended technicality in its implementation has caused the Department of Defense to exclude periods of service that would otherwise count toward retirement, unless they fall entirely within one fiscal year, causing some Guard members to lose retirement credit.

Latham, a Republican, and Boren, a Democrat, have introduced bipartisan legislation to correct that technicality. The Reserve Retirement Deployment Credit Correction Act, HR 4947, would ensure that Guard members receive the retirement credit for all time spent on active duty over the course of their career, measured in 90-day spans regardless of where they may fall in a fiscal year. This legislation will ensure that Guard members whose deployments span two fiscal years or occur within a fiscal year but don't total 90 days still receive the retirement credit to which they're entitled.

Uncomfortable

Gallup's 2009 annual Economy and Personal Finance survey showed that most non-retired Americans, (52 percent), doubt they will have enough money to live comfortably once they retire.

A Backsliding Nation

Shedding the financial and retirement concerns that were prominent throughout 2009, Americans are slipping back into their old spending and saving habits. A recent study shows they are saving very little and taking fewer actions to cut spending.

Commissioned by Scottrade, the study finds Americans less concerned this year about the overall state of the financial markets (63 percent were concerned in 2009 vs. 45 percent in 2010).

Nervousness about retirement has also subsided (55 percent were nervous or afraid in 2009 vs. 40 percent in 2010) as the number of Americans concerned about having enough money to retire has returned to early 2008 levels (51 percent in 2010 and 2008, compared to 56 percent in 2009).

Falling Funding Ratios

For fiscal 2008, the funding ratio for state retirement systems fell to 84 percent from 96 percent in the prior year. For 2009, a level of less than 80 percent may be expected.

Canadian Scams 

The Manitoba Securities Commission is warning investors to be on the lookout for defrauders with a retirement savings offer that's too good to be true.

The scammers lure people by placing advertisements in newspapers and online bulletin boards with overtures of easy money and superior returns. The ads claim that investors can redeem a significant portion of their registered retirement savings plans or locked-in retirement accounts without paying taxes. Promoters may then advise investors to move their retirement funds into a self-directed account so they can hide the unlocking transfer from their financial institution or adviser. Then they'll advise the investors where to put their money, such as penny-stock firms or private companies.

The scammers will manipulate the value of these stocks through the dissemination of rumors and false press releases and sell their own shares at a high point. The share price plummets once investors realize it was artificially high after which they are eventually left holding worthless stock certificates.

The Small Business Dilemma

Workers in small firms with fewer than 100 employees are much less likely than larger businesses to have a retirement plan available to them, according to a study released today by the Small Business Administration. A related working paper analyzes the retirement savings behavior of business owners, and finds that retirement account ownership, contribution, and participation rates for all business owners are low; this is especially true of micro-business owners. Both studies use nationally representative data from the Census Bureau's Survey of Income and Program Participation.

Small Business Retirement Plan Availability and Worker Participation, by Kathryn Kobe of Economic Consulting Services, finds that the number of companies offering traditional defined benefit pension plans has been declining steadily, and almost half of the workforce-about 58 million workers - do not have access to any type of retirement plan through their place of work. Moreover, another 20 million workers do not participate in the plans their employers offer. Nearly 72 percent of workers in small companies have no retirement plan available. One reason smaller firms may not offer the benefit is the cost of setting up and running a retirement plan.

In Saving for Retirement: A Look at Small Business Owners, Advocacy Economist Jules Lichtenstein offers further evidence for concern that business owners are not saving enough for retirement. This working paper shows that 38.5 percent of owners of businesses with 10 or more employees participated in a 401(k)/Thrift plan, compared with only 16.1 percent of business owners with fewer than 10 employees. These microbusiness owners represent 91 percent of the owners in the sample. The most significant factors affecting participation in individual retirement accounts (IRAs) and 401(k)/Thrift plans are homeownership and other retirement plan savings.

Canadian Input

Ensuring the ongoing strength of Canada's retirement income system, the Canadian government has announced the launch of online consultations and a series of cross-country roundtable discussions, speaking engagements, and town hall meetings to gather input from their countrymen and -women. The consultations will inform discussions at the next meeting of federal, provincial and territorial Ministers of Finance in May, where the retirement income system will be a key agenda item.

The public town hall meetings will be held in Charlottetown, Prince Edward Island, Quebec City, and Richmond, British Columbia. Roundtable discussions with invited key stakeholders, experts and representatives from provincial and territorial governments will take place in St. John's, Newfoundland and Labrador, Winnipeg, Manitoba, and London, Ontario.