New Report Highlights Funding Strategies

Retirement institute summarizes lesser-known pension funding approaches

New report sheds light on retirement security and financial decision making

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TEXPERS STAFF REPORT

The Consumer Financial Protection Bureau issued a new report, Retirement Security and Financial Decision Making, that finds a growing number of retirees are not experiencing the expected gradual reduction in spending after they retire.

The report, published by the Consumer Financial Protection Bureau, finds that nearly half of Americans who retired between 1992 and 2014 were unable to keep the same spending level for five years following retirement. The Bureau’s findings indicate that certain financial decisions may enhance or diminish retirees’ ability to maintain the same level of spending, according to an email from NIRS announcing the webinar. For example, for homeowners, entering retirement without mortgage debt, for those with a pension, choosing a monthly annuity rather than in a lump-sum payout, are positively associated with retirees’ ability to maintain the same spending level for five years.

The study helps identify ways to protect retirees from overspending their savings in early retirement.

> REPORT:  Access a copy of the research brief.

Key Findings

• The study found that about half of people who retired between 1992 and 2014 had income, savings, and/or non-housing assets to maintain the same spending level for five consecutive years after retiring.  
• Bureau found that the ability to maintain the same spending level in the first five years in retirement was associated with large spending cuts in later years. 

The Consumer Protection Bureau is a federal agency responsible for consumer protection in the financial sector.

NIRS webinar focuses on idiosyncratic risks that drive returns

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By TEXPERS STAFF

Nuveen, an Associate Member of TEXPERS, is taking part in a webinar with our friends at the National Institute on Retirement Security at 3 p.m. ET on Tuesday, July 28.

The webinar, Factors First: A Risk-based Approach to Harnessing Alternative Sources of Income, focuses on how institutional investors such as pension funds can capitalize on the yield of alternatives by focusing on the idiosyncratic risks that drive returns.

There is no charge to register for the informational webinar.

> REGISTER: Click here to sign up for the free webinar.

NIRS' synopsis of the webinar:

During the webinar, you will hear how investors can stitch together multi-asset portfolios in an efficient and coherent fashion. The session also will cover why a risk factor-based approach works well for alternative asset classes; how to capitalize on the yield and diversification benefits of alternatives; and how institutional investors can leverage the factor-based approach for multi-asset portfolio construction.

Speakers include:

• Dan Doonan, Executive Director, National Institute on Retirement Security

• Nathan Shetty, Head of Multi-Asset Portfolio Management, Nuveen

The National Institute on Retirement Security is a nonprofit retirement security research and education organization. To see what other webinars NIRS has to offer, see a list of scheduled sessions and replays of past webinars on the organization's website.

When it comes to retirement, 

public employees are looking for security

It’s St. Valentine’s Day and the Texas Association of Public Employee Retirement Systems asked a few of the nonprofit’s board members to share their love of defined-benefit retirement plans.

Based on their comments, their earnings represent their commitment as police officers and firefighters to their communities. Their retirement benefits are hard-earned after putting in years of often dangerous work and contributing their own funds to their programs. The benefits allow them to have a safety net of income for spouses when Social Security may not provide enough or anything at all when they die.

If your unfamiliar with defined-benefit pensions let’s give you a brief description. Essentially, it is a retirement safety net that firefighters, police officers, educators, and millions of other state and local government workers in Texas earn in exchange for their job dedication – and honestly, often low wages. Providing retirement benefits help state and local governments compete with the private sector in the recruitment and retention of public employees.

Studies have shown that 401(k)s and other defined-contribution plans are not as successful in ensuring public employees have a secure retirement. Those investing into 401(k)s or similarly constructed defined-contribution pension plans on their own also are not investing enough and do not know how to invest their hard-earned money properly. Plus, Social Security either won’t provide enough retirement income or, in many cases, none because some public employees do not qualify for the federal benefit.

Also consider that millions of Texans have not saved enough for retirement. Without enough income, older adults will not be able to afford the resources that enable them to live independently, pay for medical and other health care expenses, and continue to contribute to society. Defined-benefit pension plans provide a consistent and predictable stream of revenue to public employees – the men and women who have dedicated their careers to the public sector (to you).

A defined-benefit plan delivers retirement income with little effort on the part of public employees while providing retirement security. And unlike private-sector workers, public employees share in the cost of their retirement benefits. A public employee’s contributions typically make up a set percentage of their salaries.

How critical is the need to offer public servants a secure retirement? Retirement benefits is an essential job feature, even more so than salary, according to a newnational poll by the nonprofit, nonpartisan National Institute on Retirement Security.

In a published report on its findings, nearly all state and local workers (93 percent) indicated in the survey that pensions incentivize public workers to stay with their jobs. Even more agree that a pension is a useful tool for attracting and retaining employees. NIRS published the results of their polling in a report, State and Local Employees Views on Their Jobs, Pay and Benefits, in November. 

Here is what else the NIRS poll found:

• Cutting benefits could have severe workforce consequences. Seventy-three percent of respondents indicated they would be more likely to leave their jobs if their pensions were cut. 

• Nearly 92 percent of all state and local employees believe that abolishing secure-retirement plans for public employees would weaken a government’s ability to attract and retain qualified workers. A majority also indicates that doing away with pensions would undermine public safety and the U.S. education system. 

• Among Millennials, those who reached young adulthood in the early 21st century and are collectively known as “dissatisfied job hoppers,” 84 percent working in state and local government indicate they are satisfied with their current jobs. Nearly 74 percent claim that a pension benefit is a significant reason they decided to work in the public sector, and 85 percent said they plan to stick with their current employer until they are eligible for retirement or can no longer work. 

That’s enough statistics. Let’s hear from some of TEXPERS’ own board members, who have or still work in public-sector jobs:

"I love my pension because it represents the years I worked as a firefighter for the City of Big Spring, Texas. The City of Big Spring Fire Department first initiated the pension plan back in the late 1930s and early '40s. Through the many years of change, the trustees have made steady improvements to the plan with the help of city leaders. The retirement plan provides security for my family and me."

- Paul Brown, TEXPERS Board President 

Big Spring Firemen's Relief & Retirement Fund 

Here are a few job-specific fact sheets provided by NIRS:

Firefighters (double click images to expand)

 

Police (double click images to expand)

 

Teachers (double click images to expand)

 

State Employees (double click images to expand)

 

The Texas Association of Public Employee Retirement Systems is a statewide nonprofit educational association organized in 1989. Our members are trustees, administrators, professional service providers, employee groups and associations engaged or interested in the management of public employee retirement systems. TEXPERS member systems and employee group members represent 2.3 million active and retired public employees with assets totaling nearly $89 billion. To learn more, visit www.texpers.orgwww.texpers.org.