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The ‘Catch’ in the Saver’s Match

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Of  all the promising provisions in the SECURE 2.0 Act of 2022, one of the most expensive (as the federal government does math, anyway) is likely to be one of the most challenging to implement. It’s not effective till 2027, so there’s still some time to figure it out—but I’m talking about the new Saver’s Match—a significantly retooled and expanded version of the Saver’s Credit (which is more properly referred to, at least by the IRS, as “ Retirement Savings Contributions Credit ”).  As with the precursor Saver’s Credit, the Saver’s Match is focused on increasing the savings of lower-income workers by—in addition to what an employer may match—making a matching contribution from the federal government. The match has a maximum value of $1,000 at a rate of $0.50 per dollar contributed by a worker, up to $2,000 annually.  The Employee Benefit Research Institute (EBRI) has  estimated  (from tabulations of tax filers with W-2 (wage) income) that 69 million had incomes eligible for the Saver’s
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No ‘Magic’ in These 401(k) Retirement Numbers

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   Last week, a new report claimed to find a big jump in a so-called “magic” number for retirement, based on what survey respondents said they thought they’d need. As though they’d know. It garnered quite a bit of  coverage , including an article in  The Wall Street Journal  (and a comment from none other than Teresa Ghilarducci). While the “magic” number of $1.46 million didn’t seem astronomical (Professor Ghilarducci even commented that people often OVER-estimate their needs), that number jumped dramatically from $1.27 million a year ago—something the  authors  attributed to concerns about inflation. There are many problems with reports like this—none of which the breathless reporting of the conclusions acknowledged: (1) It’s an  average —while we get some breakdown on age brackets, we know nothing about their incomes, where they live, their health, etc.  What someone needs (or thinks they need) living in New York City is (or should be) considerably different from the projections of
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A Tough Question

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  I’m rarely at a loss for words, but I was recently asked a question that gave me …pause. It was a simple question really—John Sullivan and I were being interviewed on the  401(k) Specialist podcast —and Brian Anderson asked “which session are you most looking forward to at the NAPA 401(k) Summit?” I was only too happy to defer to John while I gave the question some thought. But in truth, it was a little bit like asking a parent to name their favorite child.  Now, there are some sessions I am more interested in than others—but to pick one?  Well, I just couldn’t do it—and fortunately Brian didn’t try to box me in (I did allude to a specific affinity for the  LIVE Nevin & Fred podcast session , however).   In fact, we do approach our content a bit differently than most, I think. While it’s gotten to be pretty common for events to boast of the pedigree of their steering bodies, many, perhaps most—are essentially no more than figureheads to the actual agenda development. They’re a gr
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Is the 401(k) Really a ‘Horrible’ Retirement Plan?

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  A recent “news” post about a blog post finds some curious “faults” with the 401(k). The news item carried the provocative title “ ‘Rich Dad’ Robert Kiyosaki Reveals Why the 401(k) Is a ‘Horrible’ Retirement Plan .” It originally ran on GoBankingRates.com, but was subsequently picked up in syndication on Yahoo Finance (at least). For the uninitiated, Robert Kiyosaki is one of those “I’ll help you get rich the way I did” types, providing that road map via books (notably “Rich Dad, Poor Dad”) and seminars. He offers comparisons to decisions made by his dad (poor dad) in contrast to those of the father of his best friend (rich dad).  Suffice it to say that his dad worked hard and saved the old-fashioned way—which is NOT his advice to you. That’s included previous pearls of wisdom like “ Why Saving Money is the Wrong Way to Prepare for Retirement .” Apparently rather than saving for retirement, we’re supposed to “look for an investment that will pay for your desired standard of living. Ma
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Do Roth and 401(k) Pre-Tax Holders Really Spend Differently?

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An interesting—and somewhat counterintuitive—report came out last week, one that cast doubt on the “common wisdom” regarding Roth versus traditional pre-tax savings. The assumption underlying the research [i] was that those who had not yet paid taxes on their savings (the traditional pre-tax savings) would be hesitant to tap into those savings and trigger taxes, certainly more so that individuals that had already paid those taxes. Instead, the research suggested that the opposite occurred; that individuals who had saved on a pre-tax basis actually withdrew more/sooner—but with a twist.  This they hailed as good news. They noted that the research suggests investing in a CT (current-taxed, or Roth) plan could help ease concerns about outliving funds—because they spend at a lower rate (though they saw this as a negative for those who saved on a deferred tax (DT) basis).  They even managed to find a silver lining in the “cloud” of faster spending by the pre-tax crowd beca
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The 'Luck' of the Irish

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As St. Patrick’s Day approaches, I’m reminded of a trip my younger brother and I made with my grandparents to the Great Smoky Mountains.  Now, my grandparents had made many trips to that area, but it was a new experience for me and my brother. To this day I remember a hotel that had a pool with a breathtaking view of the mountains, another sitting right on a rushing stream—and some kind of trading post that had a big black bear outside.  Throughout the trip, my brother and I would try to get a sense of where the next day’s adventures would take us as we followed along in one of those big fold out roadmaps. But in response to our repeated inquiries as to our next stop, my grandfather would demur, saying only that he was relying on “the luck of the Irish” to find us a place to stay for the night. To this day, I’ve no idea if he truly was or not (the Irish in my heritage doesn’t come from his side of the family, but from my grandmother)—but we always found a place to stay for the night—an
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A Penchant for Pensions?

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  I’m not sure how old I was when I first saw “Night of the Living Dead”—but I have long been intrigued by stories of a zombie apocalypse—where mindless beings inexplicably rise from the dead, with no memory of their past, just a relentless (and apparently insatiable) hunger for…well, “us.” That is perhaps an unfortunate comparison to  last week’s hearing  by the Senate Health, Education, Labor and Pensions (HELP) Committee, one ostensibly held to focus on how we were going to stave off the retirement “crisis” by…bringing “back” [i]  defined benefit plans. [ii] There were two fundamental premises underlying the hearing; first that there is, in fact, a retirement crisis, and second, that the restoration of defined benefit plan designs would remedy that situation.  There remains in many circles (including last week’s hearing) a pervasive sense that the defined contribution system is inferior to the defined benefit approach—a sense that seems driven not by what the latter actually produce
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