Behind the Scenes at MOSERS – Part I

MOSERS created a 4-part, “behind the scenes at your retirement system,” series of interactive website pieces, showing the faces of our staff and our members. It is titled “Envisioning Your Future with MOSERS.”

We hope you learn something new in this interactive series about your retirement system, our staff, or about defined benefit retirement plans in general.

Part I of IV

Exceeding Customer Expectations

Friday Top Five Jan 25 2013

The Friday Top Five: A collection of the top five news articles, blog posts, or other retirement related information from the past week.

From Pension Dialog: 2009 All Over Again

There’s a new study from the Pew Center on the States that relies on data from 2007-2010. In this blog post, PD calls them to task for using stale data that, unfortunately, could be used by state and local policy-makers. Since 2009, much has happened improve the state of public pensions. From the post:  “Pew’s interest in fostering understanding of public pensions through research is commendable. We’re not sure, however, that in this case, the research is helpful in either enhancing understanding or informing policymakers.”

From the Social Security Administration: The Origins of the Retirement Age in Social Security

An interesting little archival piece from the Social Security Administration on the history of the retirement age.

From creators.com: The Ten Most Common Misconceptions About Social Security

Tom Margenau sees misconceptions about Social Security every day from writing his blog Social Security and You. Here he outlines 10 of them. See also: The Five Nuttiest Rumors About Social Security

From USA Today: Boomers Reinvent Themselves in Retirement

From the article: “[T]here are now many different kinds of services available to help [retirees] navigate retirement, such as retirement coaches, elder life advisers and certified senior advisers. And there are free websites and books that also provide retirement tools and advice.” There are links to several other retirement-related columns and articles included. There is also a short (2 min.) video about the challenges retirees face with regard to making their money last longer, as we benefit from better education, and longer lives. “It’s a financial marathon, not a sprint.”

From Daily Finance: Are Pension Return Assumptions Too Optimistic?

This references the same Pew Center on the States study – the one that uses outdated data –  that is referenced in the Pension Dialog post (#1 above). The question, are pension return assumptions too optimistic?, is addressed by Joseph Dear, chief investment officer of the California Public Employees’ Retirement System (CalPERS), the nation’s largest pension fund. In a  just over six-minute video, Dear offers a great explanation of how assumed rates of return for public pension systems are associated with risk, liabilities and contribution rates.

The views expressed by the writers of these pieces are entirely their own and do not necessarily reflect the views of MOSERS.

Misinformation Adds to Public Pension Plan Woes

We’re very pleased to share a guest blog post by Keith Brainard of the National Association of State Retirement Administrators, originally published in Pensions & Investments on  January 21, 2013.

If a public or corporate official distributes false financial information that serves as the basis for unwarranted action by others, they are guilty of either fraud or negligence depending on whether it was signed off on knowingly or carelessly. Why then are academics not held to the same level of accountability?

To cite one example, in an op-ed piece in the Dec. 10 Providence Journal, finance professor Joshua Rauh and assistant finance professor Robert Novy-Marx made the following statement:

“In Rhode Island, an anticipated annual return of 8.25% in pension investment has for the past decade come in at about one-third that rate, only 2.4%. This means that while the state’s pension system already takes 10 cents out of every state tax dollar — and yet remains deep in the red — it’s not nearly enough to pay off the promises.”

These academics are well credentialed and are on the staff of highly respected institutions of higher education (the Stanford graduate school of business and the University of Rochester graduate school of business, respectively.) Given their backgrounds and positions, one would assume they are capable of basic research and are making their claims based on solid information.

The natural reaction to the red flag they have raised regarding Rhode Island’s investment returns would be to demand immediate action. There is only one problem: What they reported is false. How do I know that? Information made public by the Rhode Island retirement office regarding its investment return for the past decade, prepared by an independent consultant, shows the Rhode Island pension fund’s annualized return for the 10-year period ended last Sept. 30 was 8.3%, not 2.4%. In addition, since 2010, the Rhode Island retirement plans have used an anticipated annual return of 7.5%, not the 8.25% rate claimed by the professors.

This is not an isolated incident. In an earlier report, Mr. Rauh produced what were called “run-out dates” for public plans, which led readers to believe the dates listed were when the plans were expected to run out of money. The Pew Center for the States reported it that way, and a congressman cited the information on his website as proof positive of the need for the “reform” legislation he was proposing. Naturally, the run-out dates resulted in high degrees of anxiety among both plan participants and the sponsoring agencies, and no small effort was made to clarify and correct the record for policymakers and the media. More than a year after publication of this report, the Government Accountability Office included the following in a footnote in a report of its own:

“However, the (Rauh) study was based on the assumption that benefits earned to date would only be financed out of current plan assets and not from any future contributions. The projected exhaustion dates are thus not realistic estimates of when the funds might actually run out of money.”

Of course, by the time the GAO report was distributed the damage already had been done and the GAO report garnered almost no public attention. Was the misinformation in the Rauh report on this subject a function of negligence or fraud? I do not know the answer, but it seems reasonable to limit the range of possibilities to those alternatives, and to hold academia to the same standards as a public or corporate official, given the products of their “academic research” are likely to influence the actions of others.

Keith Brainard is the Georgetown, Texas-based research director of the National Association of State Retirement Administrators.

Friday Top Five Jan 18 2013

The Friday Top Five: A collection of the top five news articles, blog posts, or other retirement related information from the past week.

From The Washington Post: 401(k) Breaches Undermining Retirement Security For Millions

In this article from the Washington Post, NIRS Executive Director Diane Oakley is quoted as saying when it comes to retirement security, “we’re going from bad to worse.” More and more Americans are borrowing against their retirement accounts to pay for things now, such as mortgages, credit card debt or other bills.

From the article: “Experts warn that when workers draw on their retirement accounts to pay current bills, they put themselves at greater risk of descending into poverty upon retirement, which would leave them dependent on government programs such as subsidized housing or food stamps. Nearly 6 million senior citizens were living in or near poverty in 2010, according to a Senate committee, a number expected to increase sharply over the coming decade after a long period of decline.”

This link includes an interesting 3+ minute video on the topic.

From NBC Nightly News: Older Americans Dipping Into Retirement Funds to Pay Off Credit Cards

A new study from AARP called the Middle Class Security Project shows that “Americans age 50 and older are carrying an average of $8,278 in credit card debt, thousands more than younger people. In addition, nearly 18 percent of those nearing retirement said they are using their retirement funds to pay down credit card debt.” Watch this NBC Nightly News video.

From USA Today: Retirees Face Their Own ‘Fiscal Cliff’

This column calls for the need to reassess retirement savings plans in the face of potential cuts to Social Security and Medicare. Just a couple of the striking statistics offered in the story: 1) “3 out of 4 Americans near age 65 have less than $30,000 in retirement savings;” and 2) according to Teresa Ghilarducci, an economist at the New School for Social Research and author of “When I’m Sixty-Four: The Plot Against Pensions and the Plan to Save Them, “half of retirees are destined to live near poverty and will have to live on a food budget of about $5 a day.” The article also suggests “reversing America’s big shift from traditional pension to individual retirement accounts.” NIRS Executive Director Diane Oakley is quoted here as well.

From MarketWatch: What’s ahead for Social Security in 2013

Social Security, the nation’s retirement system, provides the majority of income for 65% of elderly beneficiaries, and it keeps about 14 million elderly people out of poverty. It could become a major part of the coming congressional debate over the deficit, though some think lawmakers may leave the debate over Social Security for another day. Also discussed is a potential adoption of a “chained CPI,” which assumes that consumers react to rising prices by shifting their spending; they buy similar goods that are cheaper, and which we referenced in our Dec 28 2012 FTF. Also new from MarketWatch: MarketWatch Retirement.

From the Squared Away Blog: “Damn Right, I’ve Got the Blues”

This post is about new research by Lawrence Berger, an associate professor of social work at the University of Wisconsin-Madison, showing a connection between the amount of an individual’s debt and the level of his or her depressive symptoms. You can watch the hour-long webinar of Berger discussing his research. You can also watch a wicked cool three-minute live clip of Buddy Guy singing the title song!

The views expressed by the writers of these pieces are entirely their own and do not necessarily reflect the views of MOSERS.

Friday Top Five Jan 11 2013

The Friday Top Five: A collection of the top five news articles, blog posts, or other retirement related information from the past week.

From Kiplinger: Social Security Expands Online Services

Social Security beneficiaries and Supplemental Security Income (SSI) recipients can now access their benefit verification letter, payment history, and earnings record instantly using their online account – their “my Social Security” account. Social Security beneficiaries also can change their address and start or change direct deposit information online.

From Pension Dialog: Paying for Retirement

This blog post calls attention to the fact that most state and local employees are required to contribute a certain percentage of their salary toward their pensions to help pay for them, and highlights a recent issue brief from the National Association of State Retirement Administrators (NASRA) that lists the contribution rates of many public plans by state.

From the St. Louis Post-Dispatch: Get Ready For a Leaner Retirement

This story from the Personal Finance section of the SLPD suggests we get prepared now to live leaner during our retirement. Political cliffhangers on Social Security and Medicare may have only just begun.

From the Chicago Tribune: [Illinois’] Pension-Mess Primer: How it Got Here, Why it Now Has State’s Attention and the Tens of Billions it Will Cost

This is a long piece but well worth the read, its length fitting to an issue so long in the making.

From Institutional Investor: Rhode Island Treasurer Defies Conventional Pension Wisdom

In this even longer piece, Imogen Rose-Smith of Institutional Investor discusses how Rhode Island Treasurer Gina Raimondo demonstrates “how tough pension reforms can pay fiscal and political dividends.”

The views expressed by the writers of these pieces are entirely their own and do not necessarily reflect the views of MOSERS.