A Retirement Thanksgiving . . . From ‘Retirement’

  Thanksgiving has been called a “uniquely American” holiday — and as we approach the holiday season, it seems appropriate to take a moment to reflect upon, and acknowledge — to give thanks, if you will.

While it’s the celebration following a successful harvest held by the group we now call “Pilgrims” and members of the Wampanoag tribe in 1621 that provides most of the imagery around the holiday, Thanksgiving didn’t become a national observance until much later.

On Oct. 3, 1789, George Washington issued his Thanksgiving proclamation, designating for “the People of the United States a day of public thanks-giving” to be held on “Thursday the 26th day of November,” 1789, marking the first national celebration of the holiday. However, subsequent presidents failed to carry forward this tradition.     

Incredibly, it wasn’t marked as a national observance until 1863 — right in the middle of the Civil War, (also on Oct. 3) and at a time when, arguably, there was little for which to be thankful. Indeed, President Abraham Lincoln, in his proclamation regarding the observance, called on all Americans to ask God to “commend to his tender care all those who have become widows, orphans, mourners or sufferers in the lamentable civil strife” and to “heal the wounds of the nation.”

We could surely stand to have some of that today. 

But for those of you who think the political harshness of today is a new phenomenon, consider that Thanksgiving was not made a legal holiday until 1941 when Congress named the fourth Thursday in November as our national day of thanks…in an answer to public outcry over President Roosevelt's attempt to prolong the Christmas shopping season by moving Thanksgiving from the traditional last Thursday to the third Thursday of November.

My List

With all of the strife and turmoil in our world, there remains much for which we can all be thankful. And in this, my second year of “retirement” — well, the list seems even longer. 

I’m once again thankful that so many employers (still) voluntarily choose to offer a workplace retirement plan — and, particularly in these extraordinary times, that so many have remained committed to that promise. I’m hopeful that the incentives in SECURE and SECURE 2.0 will continue to spur more to provide that opportunity.

I’m thankful that so many workers, given an opportunity to participate in these programs, (still) do. And that, under new provisions in SECURE 2.0, those who gain new access to those programs will be automatically enrolled, if not immediately, then in the weeks ahead.

I’m thankful that the vast majority of workers defaulted into retirement savings programs tend to remain there — and that there are mechanisms (automatic enrollment, contribution acceleration and qualified default investment alternatives) in place to help them save and invest better than they might otherwise.

I’m thankful for new and modestly expanded contribution limits for these programs — and hopeful that that will encourage more workers to take full advantage of those opportunities, even if the increases aren’t as big as last year’s (on the other hand, inflation isn’t as high, either).

I’m thankful for the Roth savings option that provides workers with a choice on how and when they’ll pay taxes on their retirement savings. “Retirement” reminds me that there’s a LOT to be said in favor of tax diversification, particularly the way benefits like Social Security and Medicare are means-tested.

I continue to be thankful that participants, by and large, continue to hang in there with their commitment to retirement savings, despite lingering economic uncertainty, rising inflation, and competing financial priorities, such as rising health care costs and college debt.

I’m thankful for the strong savings and investment behaviors (still) evident among younger workers — and for the innovations in plan design and employer support that foster them. I’m thankful that, as powerful as those mechanisms are in encouraging positive savings behavior, we continue to look for ways to improve and enhance their influence(s).

I’m thankful that our industry continues to explore and develop fresh alternatives to the challenge of decumulation — helping those who have been successful at accumulating retirement savings find prudent ways to effectively draw them down and provide a financially sustainable retirement. Trust me, knowing how much your retirement income will be is an essential element in knowing when you can comfortably retire.

I’m thankful for qualified default investment alternatives that make it easy for participants to benefit from well diversified and regularly rebalanced investment portfolios — and for the thoughtful and ongoing review of those options by prudent plan fiduciaries. I’m hopeful (if somewhat skeptical) that the nuances of those glidepaths have been adequately explained to those who invest in them, and that those nearing retirement will be better served by those devices than many were a couple of decades ago (though looking at the age 65 glidepaths for several leading providers, I’m again skeptical).

I’m thankful that the state-run IRAs for private sector workers are enjoying some success in closing the coverage gap, providing workers who ostensibly lacked access to a workplace retirement plan have that option. I’m even more thankful that the existence of those programs appears to be engendering a greater interest on the part of small business owners to provide access to a “real” retirement plan.

I’m thankful that figuring out ways to expand access to workplace retirement plans remains, even now, a bipartisan focus — even if the ways to address it aren’t always.

I’m thankful that the ongoing “plot” to kill the 401(k) … despite some new voices … (still) hasn’t.

I’m thankful that those who regulate our industry continue to seek the input of those in the industry — and that so many, particularly those among our membership, take the time and energy to provide that input.

I’m thankful to (still) be part of a team that champions retirement savings — and to be a part of helping improve and enhance that system.

I’m thankful for the involvement, engagement, and commitment of our various member committees that magnify and enhance the quality and impact of our events, education, and advocacy efforts.

I’m also thankful for the development of professional education and credentials that allow the professionals in our industry to expand and advance their knowledge, as well as the services they provide in support of Americans’ retirement.  I’m thankful for the consistent — and enthusiastic — support of our event sponsors and advertisers.

I’m thankful for the warmth, engagement and encouragement with which readers and members, both old and new, continue to embrace the work we do here.

I’m thankful — even in “retirement” — to continue to be able to make a “difference.” I’m thankful for those who seek me out at various events, or via email, to tell me how much they enjoy and appreciate my writing and speaking.

I am, of course, thankful for being able to “retire” — to kick back a bit. While I continue to get good-natured ribbing about how I don’t know how to “retire,” this second year of not working full-time has been a blessing in so many ways. I’m especially grateful to my wife for her encouragement and support throughout nearly four decades (amidst a LOT of sacrifices) and look forward to this next chapter in our lives. I’m thankful for the new home we’ve established as a base from which to enter that next chapter.  

But most of all, I’m once again thankful for the unconditional love and patience of my family, the camaraderie of an expanding circle of dear friends and colleagues, the opportunity to write and share these thoughts — and for the ongoing support and appreciation of readers… like you.

Wishing you and yours a very happy Thanksgiving!

- Nevin E. Adams, JD

The Plot to Kill the 401(k)…Thickens

 Critics of the 401(k) have moved way beyond mere bad-mouthing—and are now openly advocating actions that would undermine support for, and participation in, those programs.

It started with criticism of the 401(k) itself—how it was “never intended” to be a primary source of retirement income—as though that precluded the possibility. There were the insinuations that later became outright claims that—despite evidence to the contrary—401(k) plan benefits were “upside down” and that tax benefits accrued only to the rich. Then reports—based on small samplings of data—that employer matching contributions didn’t really impact/influence contribution levels—and that the match was…“unfair”—or “exploiting naïve myopic workers.”

More recently, there was the pining for the defined benefit plan design, even though it never really provided the level of benefits promised for most—and even though the vast majority of workers in the private sector never even had that as an option—and even though no serious analysis with a full appreciation of the costs (and risks) of businesses taking on those obligations sees that as a reality. 

Yes, for years now the 401(k) has suffered the Shakesperean “slings and arrows of outrageous fortune.” Sometimes the motivations of those throwing stones have been obvious—sometimes not.  Some are surely just academics desperate/eager to be published, others have a strong preference for/commitment to a federal government “solution,” rather than the private sector. Some—surely some—are honestly just motivated to examine and improve on that voluntary system—but limited by access to comprehensive data. 

Of course, one might instead more cynically wonder if there’s a deliberate reliance on distorting measures like averages and means extrapolated from accounts ranging from those at the beginning of their savings career with those nearing retirement—in that, the retirement industry itself has been complicit in its search for clicks and headlines, regardless of the messages those distortions perpetuate. Throughout, there have been criticisms about the lack of coverage and/or participation—but little acknowledgement that the system has long been considered as supplemental to that “big government” solution—Social Security (which, let’s face it, has challenges of its own).

Having laid that groundwork, in recent weeks, those voices have become increasingly bold in their condemnations. There’s no longer any pretense about their plans for the 401(k). Quite frankly, they plan to starve it to death—to redirect those tax deferrals to other projects, and not as deferrals, but as outright taxpayer-funded “grants.” Not so long ago, the notion of taking away the preferences that do, in fact, encourage participation—but more importantly foster sponsorship of these programs—would have been anathema to political prospects. Apparently, those days are now behind us.    

Little wonder that in the latest Retirement Confidence Survey by the Employee Benefit Research Institute (EBRI) and Greenwald Associates, the second-highest concern of survey respondents was that the U.S. government would make “significant changes to the America retirement system.” 

So, what can we do about all this? Here are some suggestions:

Call out those in Congress who want to strip away support for the 401(k). Here I am talking specifically about the sponsors of the latest attempt to undermine the private retirement system—the sponsors of the innocuously labeled “Retirement Savings for Americans Act” (RSAA). More specifically, I’m talking about Sens. John Hickenlooper (D-Colo.) and Thom Tillis (R-N.C.), as well as Reps. Terri Sewell (D-Ala. 7th) and Lloyd Smucker (R-Penn. 11th). Up until now, the sponsors have demurred on how this bill would be paid for—until Sen. Hickenlooper recently acknowledged that he would be willing to reduce the 401(k) incentives and limits to pay for the proposed plan, which would include a 5% federal match. That’s right—a 5% federal match. Those heading to the NAPA DC Fly-In Forum, take note!

Quit sharing and promoting “research” based on distorted or questionable data—and the organizations that produce them. Yes, I know you’re just trying to highlight the need for action, and perhaps to provoke a business opportunity. And yes, I know you don’t always have time to wade through the assumptions and math, not to mention biases in sampling size—or those that are simply surveys of individuals that don’t know any “better.” But if you feel compelled to share it, at least take the time to acknowledge that you haven’t had the chance to validate the results.  And come to https://www.napa-net.com where we try to keep you up to date on such things.

Support the organizations that are supporting and advocating for positive change and enhancements in these programs. If you’re reading this, you’re likely already a supporter of one of those (the National Association of Plan Advisors)—and good for you. You can (and should) also support those efforts by participating in committees, conferences, and education programs. And by sharing the information you find here. You can even start with this one!

Quit apologizing for the 401(k). That’s right. Even the 401(k)’s most vocal champions seem to be inclined to acknowledge “we still have work to do.” I’m not suggesting we ignore realities—but this “voluntary” retirement savings program has in a remarkably short period of time become THE way Americans save, and they have VOLUNTARILY set aside TRILLIONS of dollars for the future. To my eyes, this is a jaw-dropping incredible, amazing success. 

The failure laid at the feet of 401(k)s—if a failure it is—is that people who don’t work, or who don’t work for employers who offer a retirement plan at work, are in worse shape than those who do. Now, I’m not saying that the 401(k) design works for everyone, and it most assuredly won’t work for those who don’t have access to its benefits. That said, 401(k)s are working for far more people and in far more varied circumstances than the fear-mongering headlines give them credit for. It’s one thing, after all, to acquiesce to what has become a journalistic “creed”—that “if it bleeds, it leads”—and something else again to wield the knife. 

Those of us who see the impact it has made, and continues to make, on a daily basis need to be willing to say that. Out loud and proudly.

- Nevin E. Adams, JD

Thanks, Giving

Thanksgiving has been called a “uniquely American” holiday —and so, even in a year in which there has been an unprecedented amount of disruption, stress, discomfort, and loss—there remains so much for which to be thankful. 

I’m thankful that so many employers (still) voluntarily choose to offer a workplace retirement plan—and, particularly in this extraordinary year, that so many have remained committed to that promise.

I’m thankful that the vast majority of workers defaulted into retirement savings programs tend to remain there—and that there are mechanisms (automatic enrollment, contribution acceleration and qualified default investment alternatives) in place to help them save and invest better than they might otherwise.

I continue to be thankful that participants, by and large, continue to hang in there with their commitment to retirement savings, despite lingering economic uncertainty and competing financial priorities, such as rising health care costs and college debt—and the consequences of the pandemic.

I’m thankful for the strong savings and investment behaviors emerging among younger workers—and for the innovations in plan design and employer support that foster them. I’m thankful that, as powerful as those mechanisms are in encouraging positive savings behavior, we continue to look for ways to improve and enhance their influence(s).

I’m thankful for qualified default investment alternatives that make it easy for participants to benefit from well-diversified and regularly rebalanced investment portfolios—and for the thoughtful and ongoing review of those options by prudent plan fiduciaries. I’m hopeful that the nuances of those glidepaths have been adequately explained to those who invest in them, and that those nearing retirement will be better served by those devices than many were a decade ago.

I’m thankful that so many workers, given an opportunity to participate, (still) do. I’m particularly thankful this year that so many were able to do so without taking advantage of the expanded access to those accounts via the provisions of the CARES Act.

I’m thankful that those on Capitol Hill were able to (mostly) set aside partisan differences long enough to pass the CARES act, including those expanded access provisions and the Payroll Protection Program, which likely helped many avoid having to tap into their retirement savings.

I’m thankful for the hard work of so many recordkeepers, TPAs, accountants, advisors and attorneys who—under strained and stressful conditions of their own—worked through and helped their plan sponsor clients and participants work through—the provisions and practical implications of the CARES Act (and just mere weeks after having done so for the SECURE Act).  

I’m thankful that figuring out ways to expand access to workplace retirement plans remains, even now, a bipartisan focus—even if the ways to address it aren’t always.

I’m thankful that the ongoing “plot” to kill the 401(k)… (still) hasn’t. Yet.

I’m thankful for the opportunity to acknowledge so many outstanding professionals in our industry through our Top Women Advisors, Top Young Retirement Plan Advisors (“Aces”), Top DC Wholesaler (Advisor Allies), and Top DC Advisor Team lists. I am thankful for the blue-ribbon panels of judges that volunteer their time, perspective and expertise to those evaluations.

I’m thankful that those who regulate our industry continue to seek the input of those in the industry—and that so many, particularly those among our membership, take the time and energy to provide that input.

I’m thankful to be part of a team that champions retirement savings—and to be a part of helping improve and enhance that system.

I’m thankful for all of you who have supported—and I hope benefited from—our various conferences, education programs and communications throughout the year—particularly in a year like this, when it has been so difficult to undertake, and participate in, those activities. I’m hopeful that at some point in the near future we’ll be able to do so… together.

I’m thankful for the involvement, engagement, and commitment of our various member committees that magnify and enhance the quality and impact of our events, education, and advocacy efforts.

I’m thankful for the constant—and enthusiastic—support of our event sponsors and advertisers—again, particularly in a year when so many adjustments have had to be made.

I’m thankful for the warmth, engagement and encouragement with which readers and members, both old and new, continue to embrace the work we do here.

I’m thankful for the team here at NAPA, ASPPA, NTSA, ASEA, PSCA (and the American Retirement Association, generally, as well as all the sister associations), and for the strength, commitment and diversity of the membership. I’m thankful to be part of a growing organization in an important industry at a critical time. I’m thankful to be able, in some small way, to make a difference.

But most of all, I’m once again thankful for the unconditional love and patience of my family, the camaraderie of an expanding circle of dear friends and colleagues, the opportunity to write and share these thoughts—and for the ongoing support and appreciation of readers… like you.

Wishing you and yours a very happy Thanksgiving!

- Nevin E. Adams, JD

A ‘Retirement Ready’ Thanksgiving List

Thanksgiving has been called a “uniquely American” holiday, and though that is perhaps something of an overstatement, it is unquestionably a special holiday, and one on which it seems appropriate to reflect on all for which we should be thankful.

Here’s my 2016 list:

I’m thankful that participants, by and large, continue to hang in there with their commitment to retirement savings, despite lingering economic uncertainty and competing financial priorities, such as rising health care costs and college debt.

I’m thankful that so many employers voluntarily choose to offer a workplace retirement plan — and that so many workers, when given an opportunity to participate, do.

I’m thankful that figuring out ways to expand that access remains, even now, a bipartisan concern – even if the ways to address it aren’t always.

I’m thankful that so many employers choose to match contributions or to make profit-sharing contributions (or both), for without those matching dollars, many workers would likely not participate or contribute at their current levels — and they would surely have far less set aside for retirement.

I’m thankful that the vast majority of workers defaulted into retirement savings programs tend to remain there — and that there are mechanisms (automatic enrollment, contribution acceleration and qualified default investment alternatives) in place to help them save and invest better than they might otherwise.

I’m thankful that more plan sponsors are extending those mechanisms to their existing workers as well as new hires.

I’m thankful for qualified default investment alternatives that make it easy for participants to create well-diversified and regularly rebalanced investment portfolios — and for the thoughtful and on-going review of those options by prudent plan fiduciaries.

I’m thankful that, as powerful as those mechanisms are in encouraging positive savings behavior, we continue to look for ways to improve and enhance their influence(s).

I’m thankful that a growing number of policy makers are willing to admit that the “deferred” nature of 401(k) tax preferences are, in fact, different from the permanent forbearance of other tax “preferences” — even if governmental accountants and certain academics remain oblivious.

I’m thankful that the “plot” to kill the 401(k)… (still) hasn’t. Yet.

I’m thankful that those who regulate our industry continue to seek the input of those in the industry — and that so many, particularly those among our membership, take the time and energy to provide that input.

I’m thankful for objective research that validates the positive impact that committed planning and preparation for retirement makes. I’m thankful for the ability to take to task here research that doesn’t live up to those objective standards – and for those who take the time to share those findings.

I’m thankful for all of you who have supported – and I hope benefited from – our various conferences, education programs and communications throughout the year.

I’m thankful for the constant – and enthusiastic – support of our Firm Partners and advertisers.

I’m thankful for the warmth with which readers and members, both old and new, continue to embrace the work we do here.

I’m thankful for the team here at NAPA (and the American Retirement Association, generally, as well as all the sister associations), and for the strength, commitment and diversity of the membership. I’m thankful to be part of a growing organization in an important industry at a critical time. I’m thankful to be able, in some small way, to make a difference.

But most of all, I’m once again thankful for the unconditional love and patience of my family, the camaraderie of dear friends and colleagues, the opportunity to write and share these thoughts — and for the ongoing support and appreciation of readers like you.

Here’s wishing you and yours a very happy Thanksgiving!

- Nevin E. Adams, JD

The "Plot" Thickens

In recent weeks, I have been distressed to see a pair of reports by what are sometimes affectionately referred to as 401(k) “haters” — but that’s not what I find most troubling.

One, by the Economic Policy Institute, is innocuously titled, “The State of American Retirement,” but it might be more honestly subtitled, “How 401(k)s have failed most American workers.” The other is a formalized (and slightly updated) version of Teresa Ghilarducci’s Guaranteed Retirement Account (GRA) proposal titled, “A Comprehensive Plan to Confront the Retirement Crisis.” Both reports tread familiar, and misguided, ground.

Misguided and misleading as these kinds of reports are, they’re not new or even original. I’d almost be inclined to simply ignore them. That is, until I see headlines like, “The Plan That Could Render Your 401(k) Obsolete,” or “These Depressing Charts Show the Different Ways 401(k)s Fall Short,” reported with a straight face by the personal finance press. The latter, which just appeared in The Washington Post, leads off with the assertion, “We already know that the 401(k) has not been a great solution for improving Americans’ retirement security.” Oh, do we?

Here’s some data that (somehow) is overlooked by these reports: According to the nonpartisan Employee Benefit Research Institute (EBRI), in 2013, 82% of 401(k) participants (for whom this information was available) made less than $100,000 per year, and 51% of 401(k) participants made less than $50,000. Even more importantly, moderate income workers participate when they have the option: More than 70% of workers earning between $30,000 and $50,000 save in their 401(k). Oh, and the notion that “less than half of American workers have access to a retirement plan”? Well, the fact is that 8 out of 10 full-time workers are eligible for some kind of workplace retirement plan, the most common of which is a 401(k)-style plan. The 50% statistic cited repeatedly by academics and the media includes seasonal and part-time workers — granted, they have a retirement to worry about, but their issues in the here and now are economic, not a fault of ERISA or the 401(k), which have long had specific coverage thresholds.

It is, as a colleague of mine said recently, blaming the well for the drought.

The failure laid at the feet of 401(k)s — if a failure it is — is that people who don’t work, or who don’t work for employers who offer a retirement plan at work, are in worse shape than those who do. Now, I’m not saying that the 401(k) design works for everyone, and it most assuredly won’t work for those who don’t have access to its benefits. That said, 401(k)s are working for far more people and in far more varied circumstances than the fear-mongering headlines give them credit for. It’s one thing, after all, to acquiesce to what has become a journalistic “creed” — that “if it bleeds, it leads” – and something else again to wield the knife.

It’s past time to call out these reports — and the reporting on them — for what they really are: part of a long-standing and deliberately intentioned “plot” to kill the 401(k) — first by undermining its value, discounting and demeaning the modest tax deferrals that encourage American savers to put aside their natural preferences for spending, then discrediting as “rich” those who do take advantage of the option and make thoughtful preparations for retirement, and then, as advisors well know, disparaging those who work with retirement savers to make good long-term decisions.

It’s been said that, “A lie unchallenged becomes the truth.” If those of us who know better don’t start speaking up — and speaking out — you can bet that the drumbeat of coverage about the failure of the 401(k) will one day become a self-fulfilling prophecy. For some, that day has already arrived.

- Nevin E. Adams, JD