Pension Parameters Financial Services

RETIREMENT’S NEW NORMAL

2012-03-08T14:47:00.002-05:00

“The question isn’t at what age I want to retire, it’s at what income,” said the noted philosopher
(and estimable heavyweight) George Foreman. Good question, but the answer also yields
uncertainty and fear for millions of Americans, most of who, according to an insightful article
on Fidelity.com, “must rely on a combination of Social Security and their retirement savings.
And the responsibility for managing a variety of imponderables—from how long you’ll live to
what the markets and your portfolio will do—falls squarely on you.”

The Fidelity piece is titled “Taking on Retirement’s New Normal,” and it quotes psychologist Laura Carstensen, director of Stanford University’s Center on Longevity, who points out that “In less than a century, we nearly doubled life expectancy. That is a stunning, stunning change. Now that’s good but it’s also challenging because there are no real cultural guideposts—and that creates anxiety.”

The article delves into some of those anxiety-producing retirement hurdles, including a phenomenon that Carstensen calls the “misery myth.” Not planning, she says, “is the single biggest mistake that people make.” Also in the piece: ways to “succeed in the transition from work to retirement,” and a smart four-step plan to prepare for your financial future:

Step 1 develop a picture of your retirement.

Step 2 translate your picture into estimated expenses.

Step 3 understand your sources of retirement income.

Step 4 develop a strategy to generate lifetime income.

All in all, there’s ample reason to stay optimistic—particularly so with the help of sound advice and planning from your financial advisors—as you engage realistically with your retirement needs and goals. Of course, gaining and using knowledge is vital to securing your financial future, and maybe the biggest problem you’ll have with retirement is, as an old quip has it, that you’ll never get a day off.

Pension Parameters Financial Services: helping companies through personal service and one-to-one retirement advising.

AND THE SURVEY SAYS . . .

2012-03-05T14:32:00.001-05:00

What do Baby Boomers want in their retirement years?

They have a fairly specific wish list, according to an extensive survey released last month by the Consumer Federation of the Southeast and reported on Huffington Post, which called it “the group’s first major poll of retirement relocation preferences of the 78-million strong Baby Boom generation in a decade.”

It may not be the stuff of a David Letterman list, but this particular top-10 rundown, culled from the polled responses of more than 1000 Americans (ages 47 to 65), does present an interesting prioritized ranking of what was deemed most important by this study’s seniors in their retirement lives:

No. 1: Top-Quality Health Care.

No. 2: Affordable Housing.

No. 3: Warm Climate.

No. 4: Low Local Taxes.

No. 5: Affordable Recreation.

No. 6: Elder Care Services.

No. 7: Arts and Culture.

No. 8: Community Size.

No. 9: Access to Water.

No. 10: Life-Long Learning.

All the more reason to start building now. It’s never too late- Pension Parameters Financial Services (and the numbers).

To set up an appointment with Pension Parameters, call 212-675-9360 or 732-583-1313.

GIVE YOUR PORTFOLIO A CHECKUP: STEP FOUR

2012-03-01T12:33:00.000-05:00

The concluding excerpts from a four-step 2012 piece in Fidelity Investor’s Publications on “evaluating your investments and performance” comprise a Plan for the Future.

“The ultimate purpose of a portfolio checkup is to bring your investments into line with your evolving goals. That’s why it is critical that you start with a plan that includes clear goals. For example, if you are retired and will be withdrawing assets from your portfolio, check the income your portfolio is likely to produce from bond interest and principal payments, as well as stock dividends and other sources. With that information in hand, you may need to sell securities to meet your cash needs.

“If you are still saving toward your goals, you can make plans about strategic ways to put your money to work. You may want to direct new investments to the most attractive securities or funds in under-represented asset classes. Keep taxes in mind as you make these decisions. For example you might decide to fully fund or contribute to an IRA rather than invest through a taxable account.”

Speaking of taxes, Kevin McCormack, President, Pension Parameters Financial Services, reminds you again that as you prepare to file your 2011 returns, “it’s an ideal time to call your retirement planning advisor to help ensure that your goals are aligned with your comfort level for the balance of this year.”

To set up an appointment with Pension Parameters, call 212-675-9360 or 732-583-1313.

PORTFOLIO CHECKUP: STEP THREE

2012-02-28T09:05:00.001-05:00

Continuing our excerpts from a 2012 piece in Fidelity Investor’s Publications four-step guide to “evaluating your investments and performance.” Step 3 takes up individual holdings.

“While keeping the overall diversification of your portfolio in mind, you can consider making adjustments to individual securities. The answer to the question of what to sell and where to reinvest will be different for each investor. That said, the following principles can help you determine where to make adjustments that fit your personal goals.

“Start with any individual stocks you hold. Check whether the companies have performed up to your expectations, and consider whether your outlook for them remains positive. Also review the stock’s valuation to make sure it is still reasonable.

“If you have individual bonds in your portfolio, you should include a review of your holdings in your checkup. Be sure to review:

· “Credit rating: Check to see if the ratings of your bonds have changed. If analysts have downgraded any of your holdings, it may mean your portfolio has taken on a higher level of risk.

· “Duration: As your bond holdings approach maturity, the duration of your portfolio may change. You should review this in light of your changing investment goals and the interest rate environment, and take it into account if you are reinvesting in bonds.

Next, evaluate the performance of your mutual fund holdings relative to their peers.”

The next post concludes the four-step guide by considering a “Plan for the Future.”

“Don’t forget,” says Kevin McCormack, President, Pension Parameters Financial Services, “as you prepare to file your 2011 tax return, it’s an ideal time to take a moment and call your retirement planning advisor, to help ensure that your goals are aligned with your comfort level for the balance of this year.”

To set up an appointment with Pension Parameters, call 212-675-9360 or 732-583-1313.

PORTFOLIO CHECKUP: STEP TWO

2012-02-23T16:18:00.000-05:00

Financial articles may not be what you would call light reading, but many can be illuminating- especially one that we recently noted from Fidelity Investor’s Publications on “evaluating your investments and performance.” We continue today with Step 2—advice on Asset Allocation. Here are excerpts:

“Once you have a handle on your portfolio’s overall performance, you can assess your asset allocation. As a starting point, check to make sure that the target you have set for your balance of stocks and bonds matches your goals, risk tolerance and time horizon.

“As your life changes, you may want to adjust your strategy and target asset mix. For instance a young person investing for retirement may be willing to take on more risk . . . and as a result could aim to hold a greater proportion in stocks than bonds. On the other hand, an investor nearing retirement may want to protect against near-term volatility by constructing a more balanced portfolio. Similarly, a shift in income due to a job change, a new family situation such as marriage or divorce, or some other life event could require you to revisit your strategy.

“Next, ensure that you are diversified within each asset class.

“Keep in mind the risks associated with different types of holdings and remember that creating a diverse mix isn’t enough. Part of your monitoring process needs to make sure that your investments stay on track.

“When it comes to individual stocks and bonds, you may want to make sure you don’t have too many of your eggs in one basket. . . “

The next post, Step 3, deals with a review of individual holdings.

We welcome a chance to take your temperature on your asset allocation, whether it’s with us, or you are investing elsewhere. Contact Pension Parameters Financial Services, 212- 675-9360 to set up an appointment.

PORTFOLIO CHECKUP: STEP ONE

2012-02-20T13:31:00.002-05:00

Read anything interesting lately?

As we noted previously, an exceedingly helpful 2012 piece in Fidelity Investor’s Publications on “evaluating your investments and performance” does, in a four-step guide, provide valuable insights for those seeking to remain confident in--and perhaps maximize--their portfolios. We’re shining the spotlight this week on Step One of the Four-step strategy (see Blog Post –February 16 for the list).

Step One: Assess overall performance

“When evaluating performance, context is key. You need to know two things—whether your portfolio is on pace to meet your goals, and whether it has performed as well as comparable investments over a reasonable period of time.

“First, check your assumptions about the returns you would need to generate to reach your goals. If your portfolio’s performance has fallen short of your assumptions over a long period of time or if you find you cannot stomach the volatility of your investment mix, you may need to revise your strategy, perhaps by saving more or revisiting your investment allocation.

“You also want to see if your investments have performed as well as they should have. Your first instinct may be to look at the bottom line---we all want to see the value of our investments rise. But what may be more important is that your investments perform in line with your strategy. For instance, an aggressive investor looking for growth should expect to see periods of large gains and losses aligned with the performance of the stock markets, while a more conservative investor would want to see less volatility.”

Whatever investor you are—aggressive or conservative—we’re here at Pension ParametersFinancial Services to prudently guide you.

Until the next post, when we take up asset allocation.

PORTFOLIO CHECKUP

2012-02-16T10:40:00.000-05:00

At Pension Parameters Financial Services, the doctors are always in and an appointment is never a problem.

That is, PPI experts are acutely aware that market conditions, like our health, are constantly subject to change. For that reason, thorough and periodic checkups on your portfolio’s performance—whether or not it’s meeting your needs and retirement expectations—is just the tonic for giving you a healthy confidence in your financial profile.

The points made in an insightful and highly recommended 2012 article in Fidelity Investor’s Publications about staying on top of your portfolio’s goals for today and the future jibes greatly with what Pension Parameters Financial Services, Inc.’s President Kevin F. McCormack calls “our own steady, rigorous—and, most of all, personalized--assessment of investment strategies, allocations and, if necessary, adjustments.” The Fidelity article describes four steps (listed below) in “evaluating your investments and performance,” and succeeding blogs will elaborate on each one. They are:

Step 1: Assess overall performance

Step 2: Evaluate your asset allocation

Step 3: Review individual holdings

Step 4: Plan for the future

HOUSE HELP

2012-02-08T08:01:00.000-05:00

Is there a doctor in the house? Not TV’s Dr. House, but rather someone to treat what ails millions of America’s homeowners.

The American economy may be in the process of recovery, but not so average home prices, which, according to a New York Times story last week, “were back down to levels last seen in mid-2003.” Some help could come in the form of new legislation that President Obama is sending to Congress that could make refinancing easier for millions of Americans seeking to capitalize on low interest rates. The plan, the President said, “would give responsible homeowners a chance to save about $3,000 a year on their mortgages by refinancing at historically low rates. No more red tape. No more runaround from the banks.”

As the Times reported, the “proposal was aimed at two groups of eligible homeowners: about 11 million whose loans are backed by Fannie Mae and Freddie Mac, and about 3.5 million whose loans are privately held. Only homeowners who are current in their loan payments and have a credit score above 580 would be eligible.”

The jury is still out on whether help for depressed home prices may ultimately depend on help inside or outside Washington. Economists see a positive trend in the fact that demand for new housing is now increasing far faster than supply. Being a home, condo or co-op owner is obviously an important part of your financial profile—and perhaps factors into your retirement planning--and the experts at Pension Parameters Financial Services, as always, look at the whole picture in terms of analyzing how market conditions and conditions in all strata of the economy can conceivably impact a portfolio.

Whether you’re a property owner or renter, PPI experts are renowned for helping construct and grow a prudent retirement plan. And, if you like, we’ll go on the road to talk to you about it, traveling to your business or even, yes, your home.

CARDS & CONSEQUENCES

2012-02-03T15:42:00.000-05:00

Credit American television viewers with this: their seeming ability to withstand, without losing their collective minds, what appears to be an numbingly unceasing barrage of TV commercials for 1) Law firms hawking their “IRS experts” as the ones you should hire for negotiations with the government to reduce your tax debt. 2) Celebrity pitchmen for reverse mortgages. First it was the late Peter Graves. Then it was Robert Wagner and former senator (and part-time thespian) Fred Thompson and now we have that gray eminence—can it really be him?--Henry Winkler. Or 3) Credit-card “debt consolidation”companies.

Is there money to be saved using any of the three? Yes, but the obvious catch is, they are all, in one form or another, options that themselves cost the customer money.

As part of the customer rapport at Pension Parameters - our customers speak to us frankly about their entire financial picture – since retirement planning decisions are made when considering ALL factors. It’s been reported that “overall, consumers now carry $2.48 trillion in debt, not counting mortgage debt.” Since we prudently serve the person along with the portfolio, we will always consider anything and everything that contributes to your financial health, with a focus on long-range retirement planning.

DEFLATION BY INFLATION

2012-02-01T20:22:00.002-05:00

You’ll forgive Americans for embracing, when it comes, Daylight Savings Time because, with the effects of inflation, an hour may be one of the few things they can save in the present economic climate.

So exactly how bad are things? Not as bad as you might think if you believe the Consumer Price Index (CPI). But as economist Fritz Meyer says, its accuracy “all depends on what you consume most.” There are rising and lowered percentages attendant to various categories (like, for example, food, housing and clothing), but really now, who pays very much attention to government percentages when they’re at a supermarket check-out or a gas pump?

No matter what the CPI says, it feels like costs are out of control. Especially, Meyer’s analysis finds, the cost of health care, college tuition and legal services, And then there’s energy: gasoline costs alone spiked to almost 20% during the 12 months that ended in November, so if you drive a lot, we feel your pain.

At Pension Parameters Financial Services, statistics are only one instrument in our tool box. We constantly consult all the data, but analyze it in relation to your real-life needs and goals for the present and the future. The economy, for good and bad, is always changing, but at PPI, we’re always aware that you can’t put a price on being confident and secure that the service we provide promises value—not volatility—in your financial planning.

FEATHERING THE NEST

2012-01-27T08:57:00.005-05:00

The question is, how many eggs in the nest make one a viable candidate for strategic financial planning. As pointed out last week in a New York Times

piece, firms large and small have varying philosophies about, and interest in, servicing accounts that are, well, large and small.

Put another way, whether you're a one percenter or a 99 percenter, the retirement issues you have--and the risk/reward ratio that makes the most
sense for you--all require equal amounts of smart, prudent investment advice and, very important, equal amounts of access to advisors who understand
the concerns and goals of all their clients.

"The rich are different," F. Scott Fitzgerald wrote, but they're treated no differently than those with more modest savings at Pension Parameters Financial Services. That's why its longstanding reputation is impeccable and the people it serves

--whatever their means--certainly appreciate the performance of their portfolios,but also the "personal touch" and sound planning that is the hallmark of PPI's reputation. The experts at Pension Parameters Financial Services listen to

who you are, what you want and what you need. Not only for today,

but for all your tomorrows.

Outliving Your Money? Essential

2012-01-23T17:52:00.003-05:00

The Constitution doesn't guarantee happiness, Ben Franklin liked to say, "only the pursuit of it, You have to catch up with it yourself."

That kind of independent thinking might also apply to the idea that financial happiness is often tied to the pursuit of retirement security and the fact that so many worry about outliving their assets. That may not exactly be news, but it's a concern that the experts at Pension Parameters constantly addresses with its clients.

A new survey shows that nine out of 10 baby boomers say they are more afraid of outliving their money than they are of dying.

Now that's scary! What to do?

Well, for starters, Pension Parameter advisors zealously stay on top of all the latest data

that scrutinizes the most prudent retirement options. For example, respondents to the 2nd annual "Reclaiming the Future" survey by Allianz Life Insurance Co. increasingly

say they want to deal with a financial advisor, and that they prefer products "guaranteed not to lose money," rather than those yielding a higher return. What about

tapping into Social Security benefits at age 62--or waiting? What does the authoritative GAO study on the subject released this past summer tell?

For many, weary from a seemingly endless supply of financial research, reports, reviews, charts and surveys, there's a limit to how much number crunching and information-sifting they can do without their eyes glazing over. Not to worry: Pension Parameter experts

distill all the recent and major findings into its own recommen-

dations.

Outliving one's money is essential. But so, we believe, is providing a strategy, plan and comfort level that assures it's never in doubt.

Pension Parameters Tracks Views on Euro Situation at Thomson Reuters/Lipper Outlook Event;

2011-12-19T12:55:00.003-05:00

We were invited to an illustrious event on December 6, when some of the country’s finest fund managers gave their outlook for 2012 at a Thomson Reuters' Lipper Investment Series Outlook panel. The hot issue of the night was how events in Europe will be affecting global market.

Here are some highlights from Christine Thompson, chief investment officer of Fidelity Investments bond group; Lisa Shalett, chief investment officer at Merrill Lynch Wealth Management; Robert Auwaerter, head of the fixed income group at Vanguard; David Giroux, co-manager of T. Rowe Price's large-cap value strategy; and Colin Moore, chief investment officer of Columbia Management Investment Advisors:

According to Lipper's U.S. fund flows database, which tracks the movement of cash in over 21,000 funds, year-to-date the assets under management in the equity income category are up 26 percent to over $104 billion. The question is whether that strategy is overdone?
"Probably for the first time in 5- years we are actually underweight higher dividend stocks because we think there is a little bit of a bubble in utilities, and telecoms, mid-cap consumer staples, where the market is putting much too high of a value in that dividend," said David Giroux, co-manager of T. Rowe Price's large-cap value strategy.
Robert Auwaerter, head of the fixed income group at Vanguard noted it’s easy to talk about the break-up of the euro, but to avoid damage to economies, he thinks they will do anything to stop it.
Christine Thompson, chief investment officer of Fidelity Investments bond group predicts a two steps forward, one step backward kind of pattern in the market. She based that on human nature. "People (are) looking at the severity of any policy statement that comes out and they view it very skeptically.” This is what leads to some volatility.
Municipal bonds are also an attractive area said Fidelity's Thompson and Vanguard's Auwaerter.
Don't count European assets out just yet, said Colin Moore, chief investment officer of Columbia Management Investment Advisors.

Always a good idea to hear what the experts are saying at year’s end – and throughout the year, which is what we do every day. To keep up with market trends that will help you understand how you are tracking with market trends, Pension Parameters recommends that you check in with the Wall Street Journal or ReutersMoney and of course, right here.

UP AND DOWN THE SAME STAIRCASE

2011-12-05T21:27:00.001-05:00

A few words about volatility, which, like the weather,

everyone in the market seems to talk about--but

who appear resigned to the fact that there's not much

they can do about it. Philip Roth probably put it as

well as anyone: "Fear tends to manifest more quickly

than greed, so volatile markets tends to be on the

downside. In up markets, volatility tends to gradually

decline." And the "fear" that Roth alluded to seems to

have become synonymous with the debt turmoil in

Europe, which has brought fear across the

ocean and onto The Street. So where does that leave

investors?

In this economy and political climate, most are in a watch-and-wait mode, which is par. But when you’re fearful and go with the crowd, you sometimes miss the positive signals. Take housing. Mortgage rates are incredibly low and houses have seldom been so affordable. Plus

consumer spending and industrial production are up.

"I will tell you how to become rich," Warren Buffett said.

"Close the doors. Be fearful when others are greedy. Be

greedy when others are fearful."

At Pension Parameters,where the doors are open (and phones are always answered), the watchword is steadiness, with calm, clearheaded analyses

of economic swings and activities. As such, this economic

climate doesn't appear particularly hospitable to greed or fear.

Gyrations do not shake us up at Pension Parameters; not when our clients continue to be sustained and profit by advice that is calm, measured

and prudent.

Are Your Investments Growing? How are they positioned?

2011-11-30T18:10:00.001-05:00

In our one-size-doesn’t-fit-all philosophy, we work with our clients to make certain that they can sleep at night and understand how their retirement investments are working. It’s important to gauge how aggressive or risk-adverse you are when you take your position in a retirement plan. And that you understand that you have the right and ability to change your position based on your own educated judgment about your performance. We are here to help to understand what is happening and why.

Most people do not understand that a too-conservative investment strategy can be just as dangerous as a too-aggressive one. It exposes your portfolio to the erosive effects of inflation and limits the long-term upside potential that diversified stock investments offer. On the other hand, being too aggressive can mean undue risk in down or volatile markets. What can help is a strategy that seeks to keep the growth potential for your investments without too much risk. We help you achieve that.

The way this is done is by an asset allocation strategy that matches your tolerance for risk and need for return potential. A conservative mix seeks to minimize fluctuations in market values by taking an income-oriented approach with some potential for growth and includes some stocks or stock funds because growth will still be important—particularly during one’s earlier retirement years. With retirement likely to span 30 years or so, you’ll want to find a balance between growth and preservation.

Consider creating a diversified portfolio that includes a mix of stocks, bonds, and short-term investments, according to your risk tolerance, overall financial situation, and investment timetable. Doing so may help you seek the growth you need in a way that lets you sleep at night. Diversification/asset allocation does not ensure a profit or guarantee against a loss.

Pension Parameters not only begins each relationship with a review of possible allocation strategies, but each year we update your allocations by talking with you about past performance; what’s happening in the world right now; and your own life plans.

The Cost of Money: It’s Called Inflation

2011-11-28T16:51:00.001-05:00

Over time, you need more money to buy things that used to cost less. Inflation will reduce your purchasing power over time. Inflation directly relates to your retirement income as prices rise and your money cannot go as far as it does now. Even a relatively low inflation rate will impact a retiree’s purchasing power. For example, with an inflation rate of only 2%, $50,000 today will be worth only approximately $30,000 in 25 years.

The benefit of retirement plans is that they can hold off inflation increases through the effect of compound interest, making another strong case for you to deposit as much money as possible to a retirement plan while you are young. Some retirement income sources, such as Social Security, some pensions, and variable annuities can help you keep pace with inflation automatically through annual cost-of-living adjustments or market-related performance. But others, such as fixed pensions and annuities or fixed-income investments, can’t.

Pension Parameters maintains a strong focus toward beating inflation for its clients through the use of mutual funds and creative plan construction. Talk to us about how mutual funds and other products will help you minimize inflation later in your life, when you will clearly need more than you ever thought possible.

How Much Can You Save in Your Retirement Plan in 2012?

2011-11-18T08:16:00.001-05:00

If you wisely decide to save more for retirement in 2012, federal tax rules are in your favor because the ceiling on employee contributions has risen a bit.

The IRS has raised the limit on tax-deferred contributions to 401(k) accounts to $17,000 in 2012, up from $16,500 in 2011 --- because of inflation.

The limit on so-called catch-up contributions is not changing. If you reach age 50 or older in 2012 (and if your employer’s plan allows catch-up contributions), you can contribute an extra $5,500- for a total maximum contribution of $22,500 in 2012.

IRA contribution limits are unchanged.

Summed up: 2012 Employer Plan & Contribution Limits are:

· $17,000 for 401(k) and 403(b)

· $22,500 for 401(k) and 403(b) with catch-up contributions

· $5,000 for Traditional and Roth IRA

· $6,000 for Traditional and Roth IRA with catch-up contributions

(Note: Catch-up contributions are allowed for those born on or before December 31, 1962).

SAVE A LITTLE ON YOUR PLAN: SEE A BIG DIFFERENCE

It is estimated that very few people take advantage of the opportunity to save by utilizing the full limitations of their plans. If it’s at all possible, consider how your funds grow over time. Try a few scenarios on our 401(k)Savings Calculator on our website.

If you can save 12-15% of your pay for retirement, including the possible matching contributions that your employer may be offering, it will make a huge impact in the long-term.

While the 12% may sound like “too much to save” right now, why not increase your contributions by one or two percentage points at a time. If you saved 6% of your pay by directing it to your 401(k) last year, raise that to 8% in 2012 and 10% in 2013.

YOU’VE GOT A LOT OF LIVING TO DO; WILL YOU OUTLAST YOUR SAVINGS?

2011-11-16T17:49:00.000-05:00

As medical advances continue, it’s quite likely that today’s healthy 65-year-olds will live well into their 80s or even 90s. This means there’s a real possibility that you may need 30 or more years of retirement income.

Science is wonderful – but you’d better prepare for the best so you have the cash to enjoy your life.
According to a recent Fidelity report, an American man who’s reached age 65 in good health has a 50% chance of living 20 more years to age 85, and a 25% chance of living to 92. For a 65-year-old woman, those odds rise to a 50% chance of living to age 88 and a one in four chance of living to 94. The odds that at least one member of a 65-year-old couple will live to 92 are 50% and there’s a 25% chance at least one of them will reach age 97.

Scary? Without a deliberate plan, you could easily outlive your savings, which means relying on Social Security for your income. At this moment, we don’t even know how that will be affected by Congress. It is estimated that only 30% of Americans today have a pension. And the average Social Security benefit is just over $1,000 a month, so how will you survive financially?

Scientific research and financial planning meet at the promising and unprecedented juncture. While science has made it possible to extend people’s lifetimes, most Americans are not accustomed to focusing on the possibility of such a long life. And with the absence of the community family system that was more common before the 1950’s – when families lived together in one town forever and helped each other, this brings about new urgency to consider financial independence for seniors a priority.

One way some folks are preparing for extended lifetime is to turn some retirement savings into a guaranteed stream of income with a fixed income annuity. Another way is for those who are just starting out to consider the retirement “bucket” that must receive funds that will grow over time as important as buying things now, or saving for your children’s colleges. Contact your Pension Parameters Financial Advisor for details.

Are You Planning for Rising Health Care Costs?

2011-11-15T15:13:00.000-05:00

If you are a Baby Boomer -- i.e. born between 1946 and 1964 – you understand a basic premise: as you age, healthcare concerns increase. We at Pension Parameters Financial Services ask that our clients who are planning retirement always consider key factors in healthcare:

The average lifespan is increasing due to medical inroads.
Medical costs are rising faster than general inflation.
Private employers are offering less coverage to retirees than in the past.
Possible shortfalls may be on the horizon for Medicare and Medicaid coverage (stay tuned on this one).

Several reports in New York alone revealed that many doctors are opting out of Medicare. This limits the type of care and selection that is available to retirees, who are looking at options like walk-in urgent care centers and concierge doctors. Said the New York Times on the topic,” Whatever the choice, boomers stand to lose in this equation.” The headline of the article was “Medicare to Boomers: Drop Dead.”

If that’s not enough to drive someone planning retirement to increase his/her retirement income, what is?

Using basic life expectancy data, Fidelity’s annual Retiree Health Care Costs Estimate document that a 65-year-old couple retiring in 2011 will need more than $235,000 to cover health care costs during their retirement. Since Fidelity started the annual estimate in 2002, estimated costs have increased by 6% a year.

That cost doesn’t include long term care (LTC) expenses, which is needed by 70% or so of seniors in one form or another. The average private-pay cost of a nursing home is about $70,000 per year. Assisted living facilities average $34,000 per year. Hourly home care agency rates average are high as well.

One way that prudent Boomers are planning for this is to earmark a portion of savings for healthcare. Longterm insurance is expensive, though the earlier you purchase it, the lower your premiums. Note to those younger-than-boomer employees: You’re not off the hook. You should be allotting a portion of your income to planning ahead because you have time for it to grow. That way, however the healthcare situation evolves as you edge closer to retirement, you will have the best options available to you, thanks to a well-maintained retirement plan.

Follow 5 Factors to Protect Your Nest Egg

2011-11-10T16:02:00.001-05:00

As politics and the world continue hurling toward the future, the money you made yesterday must be protected. There are a few trends in our current society that we at Pension Parameters like to look at when helping you carve out an ironclad plan to continue growing your nest egg.

1. Age- People tend to live longer. While the original age to collect Social Security has edged past 65, consider that many people live longer than ever before. That even includes men – who live longer. We can thank medical science for this leap forward, and we want to be sure to be able to support ourselves without totally relying on Social Security.

2. Medical Science. Age and medicine go hand in hand, and with new reforms in healthcare, and the wobbly cost of health insurance, you will need to consider that you will be paying more for your medical care than your parents did. We do not know what lies ahead in this area, but we do know that right now we’re all paying higher prices than we did previously. Certainly Medicare offsets some of this cost for those “of age,” but not totally, and long-term care has become a financial crisis for so many American families.

3. Inflation. Economics experts define inflation as the rise in prices (general level) of services and goods in an economy over a certain period of time. In earlier times, the term inflation was used to refer the increases in supply of money, but these days the “inflation” is purely used to refer the increase in levels of prices. One could refer to inflation as the decrease in the value of money (or loss of the purchasing power in some medium of the commodity exchange). We have seen this beginning in recent years – and all signs point to inflation rising. Most accurate measure of the inflation is known as “inflation rate”. Inflation rate is defined as percentage change in the price index over a certain period of time.

4. Investment Power. A hedge against inflation is smart investing. While we’re more conscious of the global economy than in the past, it’s always been there. Your retirement plan advisor’s job is to address how your plan is affected by world economics and what trends can be expected.

5. Savings. While some folks really guard their savings very carefully, many Americans have had a harder time doing so in recent times.

The next few columns will address each of these BIG FIVE FACTORS: Age, Medical Costs, Inflation and the cost of money, the value of good investments, and savings. We think it’s a good idea to “break it down” so you can see just how each factor will contribute to your future –post retirement.

Just as twenty-somethings do not think they will ever turn forty, we know they will. And just like them, many of us cannot imagine life after seventy. Better to plan for a long life and in doing so, protect our retirement assets.

Year-end Planning Insights for Roth IRA Conversions

2011-10-27T13:29:00.000-04:00

To switch your IRA to Roth before the end of this tax year, or not? That is the perennial question.

Since Roth IRAs offer a rare opportunity to generate tax-free retirement income-along with greater distribution flexibility than provided by traditional IRAs that merely defer tax, traditional IRAs generally can be converted to the Roth variety. We like what our friend Bob D. Scharin, Esq., a senior tax analyst for Thomson Reuters, who appeared at our event last spring, had to say about this opportunity: "Many pros and cons of doing so are perennial, but a special rule that delayed the tax on 2010 conversions adds new-for-2011 planning considerations," says Scharin.

We thought our customers should hear the thinking behind WHY?

Rule of Roths.

The advantage of contributions to Roth IRAs are not deductible. But distributions-including investment earnings-are tax-free if distributed when the taxpayer is at least age 591/2 and after a five-calendar-year waiting period. In addition, the distributions are not subject to the age 70 1/2 minimum required distribution rules. If funds are converted from a traditional IRA to a Roth IRA, the part of the converted amount allocable to pre-tax contributions and earnings is taxable for the year of conversion. If you think your tax rate will increase in future years, making a Roth IRA conversion in 2011 this year could be a wise tax move. You will pay tax on the conversion at 2011 tax rates and reap tax-free income down the road when your income would otherwise be more heavily taxed. But a taxpayer in this situation should consider limiting the conversion amount to avoid being pushed into a higher income tax bracket in 2011.

Says Kevin McCormack, Pension Parameters, “2010 was a great year to convert to Roth IRAs. You may recall that we were encouraging individuals to make Roth IRA conversions last year because of valuable incentives. One was that income limitation on conversions was eliminated, so that our customers with modified adjusted gross incomes above $100,000 could make a Roth IRA conversions for the first time. The tax law also allowed the income from 2010 conversions to be deferred to 2011 and 2012. " Says Scharin, “That was great last year, but for this year the tax comes due on one-half of the deferred amount.”

A taxpayer who is thinking about making a Roth IRA conversion before year-end should consider how piling the conversion income for 2011 on top of the deferred income from a 2010 conversion will affect his or her 2011 tax bill. It may easily push you into a higher tax bracket. Be sure to consult with your tax advisor to make certain the tax paid on conversion doesn’t exceed your tax savings. Do not hesitate exploring the Roth IRA option for 2011 by giving Kevin McCormack at Pension Parameters a call at (732) 583-1313, Pension Parameters Financial Services Inc.

“Most Americans Haven’t Planned for Retirement and Other Areas of Concern”

2011-10-20T09:42:00.000-04:00

Says Recent Disturbing Article in Wall Street Journal:

According to a recent article in the Wall Street Journal by Mary Pilon, “the troubling picture of the state of financial capability in the United States” comes from a new working paper published by the National Bureau of Economic Research, authored by Professor Annamaria Lusardi of the George Washington School of Business. “Americans’ Financial Capability” surveyed nearly 1,500 Americans in the summer 2009 and found that not only is the household financial hole deep, but people might not be able to dig themselves out of it as easily as they thought.”

Even though a lot of this data was available from the Treasury in 2009, Pilon names new key findings from the study such as:

–When given a basic list of questions on economics and finance in everyday life, less than 10% of respondents are able to answer all questions correctly.

–Half of survey respondents said they had trouble keeping up with monthly expenses such as bills. Only half of those surveyed said they had rainy day funds set aside that would cover them for three months in the event of a severe loss of income, such as a layoff or illness.

–In spite of the demise of pension plans “the majority of Americans have not done any retirement planning,” Prof Lusardi writes. Only 42% of those surveyed said they have tried to figure out how much to save for retirement. Among those who are 45 to 59 years old, 51% said they had yet to calculate how much they’ll need. Only half (51%) of those surveyed said they had a retirement account through an employer. About a quarter (28%) said they had another retirement account.

–And they aren’t really sure what’s in those accounts. When asked how much of their portfolios were invested in stocks or mutual funds that contained stocks, 17% didn’t know the answer to the question. When respondents were asked whether their retirement savings were invested primarily in a target-date fund, 37% said they didn’t know the answer.

–In the last year, about one in ten (9%) of respondents who have a retirement account such as a 401(k) or IRA said they tapped their retirement savings. Most of those withdrawals were seen among those earning between $25,000 and $75,000 a year.

–Efforts to make people essentially their own money managers may also be futile. Only 21% to 25% of respondents said they have used information sent to them from Social Security. “It’s hard to equip people with information,” Prof. Lusardi says.

“One of the benefits of working with a financial advisor like Pension Parameters is that we help people make their own decisions that are comfortable – and keep the information transparent and accessible to them at all times.”

“The clients at Pension Parameters are very well informed, and if they want to be more informed with detail, they can retrieve information AND explanation from a live person whom they know at any time,” says Kevin McCormack, President.

“Given the lack of planning that is basically hitting Baby Boomers ‘where they eat,” we welcome inquiries for an appointment to plan for businesses to help them and their employees be among the informed and protected, in the best way possible.”

Based on this Wall Street Journal article, which is pretty disturbing, we urge those folks with questions to give us a call at Phone: (212) 675-9360 or (732) 583-1313.

Middle Income Baby Boomers Wish They Had Budgeted More for Retirement

2011-10-20T09:40:00.000-04:00

Three out of four middle-income Baby Boomers say their financial “situation” --not their age, is now the key trigger for deciding when to retire, said a recent article in Accounting Today.
The findings came from a study: Middle-Income Boomers, Financial Security and the New Retirement study, conducted by the Bankers Life and Casualty Company Center for a Secure Retirement. The study looked at 500 middle-income Americans between ages 47 and 65 with income between $25,000 and $75,000. One-third of those studied expect to retire after the traditional retirement age of 65 and 31 percent are uncertain at what age they will be able to retire.

A majority of middle-income Boomers feel that they are behind where they had expected to be at this point in their lives in terms of saving for retirement. Two in three (67 percent) thought that they would be in a better financial position for retirement than they are now.

The study reports more than half (52 percent) are not confident that they have saved enough to live comfortably in retirement, 38 percent are only somewhat confident and only one in ten (10 percent) are confident that they will have enough money to live comfortably in retirement.
“This is why it’s ever important for companies to have retirement vehicles for their employees – and there are so many types now that can really benefit a small-to-mid-sized business tax-wise,” says Kevin McCormack, President, Pension Parameters Financial Services. ”It’s also a message to the generations behind the Boomers to set aside retirement money. As long as they are saving and investing some amount they will have the opportunity to increase their retirement income. Certainly contributing something, rather than nothing, is the key to making it happen.”

RX FOR BETTER RETIREMENT PLANS: DOCTOR PENSION GIVES CHECKLIST FOR PROFESSIONAL PRACTICES

2011-09-14T11:33:00.001-04:00

“YOU ARE OVERDUE FOR A RETIREMENT PLANNING CHECK-UP if you meet any THREE (3) of these TEN (10) criteria:

You are concerned about today’s volatile market- yet you don’t feel that you understand the choices that are available to you.

You initiated your pension plan over ten years ago.

You were referred by an accounting or legal professional, yet you have not consulted as to whether your performance could have been better or whether the plan should have changed.

You have added staff, lost staff, or had other growth or shrinkage issues in your business.

You do not have a personal relationship with your account manager.

You work with a large money management company and your account manager changes all the time, but things seem to just be going “according to the way the market is going” and you think there may be no proactive moves you can make.

You are generally taking a passive position in your retirement planning, despite personal changes that should be addressed in your own family life.

You just don’t want someone trying to sell you a plan – you are sick of salespeople --and just want to discuss without expectations. You want to learn without being sent slick brochures, and you don’t understand why companies think that you will understand them.

You don’t know what questions to ask.

You don’t think you can ever afford to retire so what’s the difference.

IF YOU MEET 3 OF THESE CRITERIA, Pension Parameters Financial Services will talk with you about your concerns for your professional practice as soon as possible.

“So many aspects of your business change through the years, and professional service companies are providing more services with less return in this economy in general,” says Kevin McCormack, President, Pension Parameters, “The fact is that most professional companies establish plans from referrals from their CPAs or lawyers. However, those professionals are not responsible for monitoring and managing your asset allocation strategy…your financial advisor is.”

He continues, “You need a checks and balances system in place to make certain that you are doing everything possible to maximize your dollars at this time, utilizing the level of risk that you can tolerate.”

All you need is to make a little bit of time. Contact Pension Parameters to set up a quick meeting time:

(732) 583-1313 or (212) 675-9360.

PENSION DOCTOR EVALUATES HIS PATIENTS’ RETIREMENT PLANS; HAVE YOU EVALUATED YOUR OWN?

2011-08-25T15:13:00.003-04:00

STILL HAVE A SEP? DRINK A LOT OF WATER AND CALL US IN THE MORNING

It’s easy to see why SEPS were attractive at one time – before so many retirement planning vehicles had been developed – and because they were free. They were simple. You didn’t need a lawyer or run into funny words like “fiduciary.”

The scenario in our last blog shows the numbers and the numbers never lie, just like the numbers on your blood count don’t lie either. Helping you choose the right plan and organizing all of your paperwork (which we do for you) will reap a better outcome – rather than taking an easy route that will not provide you with maximum benefits in the long-run.

As for those confusing words like fiduciary – that’s what we’re here for – to explain them to you. Our efforts in your planning are 100% transparent and have always been at Pension Parameters. That’s why we’ve been in business for more than 30 years. Wouldn’t you rather have a retirement planning advisory that shows you all of your options in the beginning, reveals all associated fees, and helps you see a scenario of how it will all look, given market conditions, in a few years than not attend to your ultimate financial health?

And what about the market? Given current economic conditions, no time like the present truly applies. While many business owners believe that a fluctuating market will lead to more gloom and doom, the law of averages at funds with experienced managers and a long track record of personalized service shows the opposite.

This is why you must choose a pension management company that personalizes its business carefully. Our advisors routinely take the temperature of how much risk any client is willing to endure during any given year. Conservative clients are invested in very low risk funds. And whether conservative or aggressive by nature, small business of all types stand to benefit from opportunities in this bear market, which will, no matter what translate to significant tax saving opportunities.

Six reasons for you or your client to start their plan right now:

You need to build your own nest egg…when you have a small business; ultimately you’re the one at the helm who is taking care of yourself and your employees.
In many cases, small business owners do not realize just how much their incomes will shrink when they retire and begin collecting Social Security, which can start at age 62. A retirement plan, will, of course, bolster and supplement this income so that business owners will have the satisfaction of creating extra income for those years.
Speaking of Social Security, there is nothing ABSOLUTE right now, given the new discussions that have arisen in Washington. You may not collect at age 65; perhaps you will begin collecting at 67. Are you certain you will be able to work until then? The nest egg takes on new importance.
Because of the stock market today, small business owners have the chance to “buy low, sell high!” This year offers numerous unique opportunities for fund growth and long-term asset building.
Some people say compound interest is one of the wonders of the world. Compounding $1 today could mean $100 in years to come.
Dollar Cost Averaging is a strategy in which an investor places a fixed dollar amount into a given investment on a regular basis. An investor's returns will be determined more by the overall trend in a given stock as opposed to the investor's specific purchase price. It helps investors reduce their cost basis on securities that decline in value.

Today, whether you are a sole proprietor or a small professional practice you will need to decide which type of plan works best for you. A sole proprietor might consider adopting a 401(k) plan which will allow tax deferred savings up to $16,500 annually. If you will reach age 50 by year-end, an additional $5,500 for catch-up contributions may be contributed.

For the owner/employer, adopting a New Comparability Plan may be more advantageous than a 401(k) plan. New Comparability is a profit-sharing plan design that seeks to maximize the amount contributed to a select group (typically the owner and other key employees) while minimizing the total cost of employee contributions. In 2010, adopting a New Comparability Plan would permit an owner/employer to contribute up to $49,000.

PROFIT-SHARING WITH NEW COMPARIBILITY PLANS; PENSION DOCTOR SAYS “HEALTHIER FOR PROFESSIONAL PRACTICES”

2011-08-22T15:54:00.001-04:00

If you run a small practice of any kind, IS YOUR RETIREMENT DOCTOR IN? Are you taking care of your fiscal self?

Your first test is: have you looked into Profit-Sharing with New Comparability Plans?

We talked about our friend the doctor who funded his and his staff’s retirement plans using a SEP in our last blog post – and contrasted what he had in his pocket at the end of a hypothetical five-year period. With the SEP, he had approximately $215,000. With the Profit-Sharing with New Comparability Plans he had almost $290,000. Consider- with compound interest, what this looks like in ten years.

Why is the New Comparability more attractive?

When an employer’s salary and age is much different than an employee’s, it always pays to consider a Profit-Sharing Plan with New Comparability. Many of our small professional practices are glad they converted their existing SEP plans to Profit-Sharing with New Comparability. Although both plans provide similar tax benefits, the contribution cost and long-term savings vary significantly.

Let us make it a lot easier to digest by going through YOUR practice’s scenario. Call Pension Parameters @ 732-583-1313 and ask for Kevin McCormack.

THERE’S MORE TO RETIREMENT PLANNING FOR SMALL PRACTICES THAN SEPS!

2011-08-17T12:23:00.001-04:00

For a time, it was a fashion for small businesses to be advised to use Simplified Employee Pension (SEPS) as an individual retirement account instrument for the purposes of saving for retirement and for the tax benefits. Any employee or employer qualifies—no matter how small the business, and the cost of starting a SEP is virtually nil. It’s easy to see why it sounds attractive to a small business.

But since the popularity of SEPS became automatic for some businesses, the retirement planning industry was busy creating new and more creative options that help an independent practitioner with a small staff make out much better in the longrun financially.

Because of the new opportunities, you can pay a big price for not staying up-to-speed on retirement planning instruments, particularly 401(k)s, and a specific type: Profit Sharing with New Comparibility plans. That ends up being the hidden cost of having a SEP. Wait till you see the numbers!

What are the downsides to a SEP? Example: You have a medical practice and you’re starting small: you (the doc) plus someone in the office and a nurse. Your gross salary is $300K; your receptionist is $30K, and your nurse is $45K.

Spin it into what happens in five years. If you have a SEP, you will be paying in 15% of the salary for all employees (including yourself). At the end of five years, your receptionist will have accrued $26,400; your nurse with $39,600, and you will have $215,600 (at an estimated 8% interest rate).

Does this sound good? Not really when you match it against a Profit-Sharing with New Comparability Plan.

In fact, if you had had that Profit-Sharing plan, assuming that you contribute the maximum contribution to the plan for your own salary of $49,000 per year, while your employees will get 5% of pay, in five years you would now have $287,300 in your account.

So if you run a small practice of any kind, IS THE RETIREMENT DOCTOR IN?

You know that you must manage your practice with the best supplies, software and practices possible – but are you taking care of your fiscal self?

Stay tuned for our next blog about Profit-Sharing Plans with New Comparability.

PENSION PARAMETERS COMMENTS ON RECENT ACTIVITY

2011-08-11T12:17:00.001-04:00

It’s understandable that investors may feel that they want to do “something” with regard to their portfolios because of market volatility.

For most investors who already have a portfolio that is well diversified among asset classes and within them—and have enough liquidity to meet short-term needs, the answer may be

to just sit tight. The ride may be bumpy over the next few weeks or longer. But

there often is greater danger in dodging in and out of the market than sticking

with a solid, long-term plan. History has shown that near-term market declines,

although unnerving at the time, are often followed by rebounds. Investors

should give their investment plans time to work for them- over the entire market

cycle.

“Historically, the timing of this market correction is not very typical, ” says Kevin McCormack of Pension Parameters. “The fact that it tied in with the S & P ‘credit downgrade' is unfortunate. It’s important to note that we don’t rely on ratings agencies when making investment decisions for our mutual funds. The fund managers and credit research analysts we rely on perform their own proprietary research and analysis on every security purchased.”

According to McCormack, many of our customers are invested in funds from Fidelity, which believes that it is critical for policy makers to develop a long‐term credible plan for fiscal sustainability and to provide the markets with concrete direction over time. Having said that, if market moves pushed investors’ portfolios far from their target asset allocations, it may be time to consider rebalancing.

If investors are concerned about market volatility, now may be a good time to revisit their investment objectives, while taking into consideration their tolerance for risk and time horizons.

You may want to:

Consider your mix of Treasuries or other government bonds. If you are considering diversifying your bond holdings, think about investment grade bonds from corporations, many of which may be flush with cash now. If Treasury bond prices move lower, corporate bond prices could follow. However, they may decline less. Also think globally, as there are many interesting opportunities in foreign investment grade and high yield corporate or sovereign debt to consider. But be aware that high yield credit and foreign securities can carry significant risk.
Check your liquidity. As always you want to have enough cash on hand, so you don’t need to tap your investment portfolio if the markets hit a rough patch. Having an adequate emergency fund is important. And if you are retired, you may want to check your income plan to help ensure that you don’t have to tap your portfolio too heavily in a market downturn.

Contact Kevin McCormack at 732-583-1313 to set up an appointment to look at the opportunities that are available to you – and whether or not you should be considering rebalancing.

GETTING THROUGH THIS TRANSITIONAL PHASE IN RETIREMENT PLANNING

2011-06-13T13:58:00.001-04:00

We hate to sound too promotional but if ever there was a time to work with a retirement benefits company like Pension Parameters, it’s now. Why? Because the need for personal service is becoming more and more important as the country goes through transitions in types of plan popularity, shifts in the number of retirees coming of age, and the inevitability of government regulation changes. With all of these changes you can expect to become overwhelmed by new retirement savings vehicles from big players in the field.

At Pension Parameters Financial Services, we are most concerned about building our customers’ portfolio values based on their individual needs, which we always like to review on a one-to-one basis. Our process is always underlined with “answer questions; supply options. “

A recent Reuters article offered this conversation, which we wanted our readers to see.’ “What's the purpose of saving for retirement? Is it security or wealth building?" asks Steven Kreisberg, director of collective bargaining for the American Federation of State, County and Municipal Employees. "We've always viewed our pensions as old age insurance; it's not supposed to be a wealth producing vehicle for handing down wealth from one generation to another."

But workers holding sizable assets in their retirement accounts may not agree.

Kreisberg favors the traditional defined pension plans which paid workers a regular amount monthly for as long as they lived. Now financial services companies are introducing new products aimed at making defined contribution plans behave more like those pensions, at least during the withdrawal years.”

Mutual fund powerhouses including Fidelity Investments and Vanguard investments have created automatic payout mutual funds especially designed for rollover money.

And insurance companies are pitching immediate annuities at employers, in the hopes employers might offer them to retiring workers within their 401(k) accounts.”’

During this transitional phase, you can expect to see certain things occur:

The Obama Administration has expressed interest in the idea of offering employers some kind of 'safe harbor' for agreeing to keep retirees' money in their 401(k) accounts. Though many experts predict a federal program governing 401 (k) withdrawals is far in the distant future.
A recent survey showed most workers wanted to retain control over their retirement money, but older workers are more willing to use more from each paycheck for a guaranteed lifetime benefit. Starting in 2012, Labor Department rules will require the clear disclosure of all 401(k) fees.

“As these issues begin unfolding and new trends start developing, we’ll keep our customers completely updated about all new options and how new rules affect them,” says Kevin McCormack, President, Pension Parameters Financial Services.

“It’s a good time for organizations that are on auto-pilot with their retirement fund companies to consider working with a smaller, more personal organization that has access to the most lucrative funds in the business,” he says. “As our clients attest in their case studies, they are glad to have made the switch to Pension Parameters quite often because when they’ve assumed that they were automatically being updated in a comprehensive way in the past, unless they had an advisor who was watching them closely- and talking to them- they have missed opportunities.”

“It’s an ideal time to reassess where you and your employees stand and we will always assess the needs of your company and provide you with the best and most creative options so you won’t have regret later.”

ARE RETIREMENT SAVINGS FOR RETIREMENT OR BUILDING WEALTH?

2011-06-07T11:43:00.000-04:00

WATCH FOR THE DEVELOPMENT OF NEW PLANS TO PROTECT SENIOR BOOMERS

According to Kevin McCormack, President, Pension Parameters Retirement Planning, retirement funds have traditionally been targeted to—that’s right—retirement. That is why there are tax benefits in accruing retirement savings in various plans. As the number of Baby Boomers are coming “of retirement age” there are some new possibilities that all companies and individuals should watch for in the coming years, including:

· Retirement planning traditionally has focused on "a number." What will individuals need to retire securely? “Many people say they must keep working past the traditional age of 65 because of the rising cost of living,” says McCormack. “The number becomes more difficult to project, depending on the circumstances of each individual.”

· Said a recent Reuters article, $25 trillion is the real number to watch-- from the big picture view. “That is a rough (and conservative) approximation of the amount of wealth controlled by the baby-boom generation, based on Federal Reserve Board data.”

· It’s been estimated that in the next five years, some $2 trillion will roll over into personal individual retirement accounts. “Many in our business worry that workers will use that money on early retirement expenses, or just trying to survive in an uncertain economy,” says McCormack. “It’s a concern because those workers will have no back-up in later years.”

· This has brought up the question: What's the purpose of saving for retirement? Is it security or wealth building? “Depending on each family’s circumstances, those assets, while meant for retirement, may be used early or saved to hand down to future generations,” says McCormack.

McCormack notes that this is why some are beginning to favor the traditional defined pension plans which pay workers a regular amount monthly for as long as they live. Numerous companies are introducing new products aimed at making defined contribution plans behave more like those pensions, at least during the later withdrawal years. A later post will address issues future retirees may face, based on that Big Picture number.

“We’ll see many new plans evolving to meet the challenges of these issues in the coming years – and sooner,” predicts McCormack. “It’s clear that protecting retirees is causing a sea change in thinking.”

Supreme Court Reverses Earlier ruling in class action suit brought by Cigna Employees

2011-05-23T17:20:00.001-04:00

A victory for retirement plan sponsors.

As CFO Magazine reported recently, the Supreme Court reversed 2 lower court rulings in a class action suit involving Cigna when it switched from a traditional defined benefit retirement plan to a cash balance plan in 1998.

”Cigna employees had argued that the new summary plan description (SPD) misled them into thinking they would be getting the full value of the first plan plus new benefits accruing from the date of the change. But, as stated in the detailed plan document, and as is common practice with such plan changes, each worker's cash-balance account had a starting balance that was less than the value of his or her defined-benefit account,” says CFO.com.

Please note that you can find on our website (www.PensionParameters.com) a new brochure explaining Cash Balance Plans and why they are beneficial to small-to-mid-sized businesses as an adjunct to other plans. “We can’t emphasize enough the importance of explaining how changing from one type of plan to another affects the bottom line of a plan and affects employees,” says Kevin F. McCormack, President, Pension Parameters Financial Services, Inc.

“Working with a financial advisor that keeps both the employer and its employees fully in the loop by fully explaining how the transition from one kind of plan to another can fully prevent this kind of expensive litigation and HR trouble for companies,” he says.

"Basically the Supreme Court rejected the notion that there is a 'one-size-fits-all approach to claims based on faulty communications, such that all participants automatically recover additional benefits that were never intended under the terms of the plan,” said a spokesperson.

“Our basic style of doing business is that one style of plan will never fit all companies, which is why we are known for our personal service and the time we take to explain all steps carefully,” says McCormack.

With Any Change of Family Status, Review Your 401(k) Beneficiary Provisions with Your Advisor

2011-05-18T12:52:00.000-04:00

Claiming a Beneficiary is Not Enough- You Have To Take An Extra Step

A recent case that has been widely reported (Cajun Industries LLC v. Robert Kidder) shows how important it is to “go by the rules” set forth by ERISA in 401(k) plans. Not only does this case show that the rules of 401(k) plans are specific, but that naming a beneficiary on a 401(k) plan other than a spouse will not necessarily be upheld in court, despite the owner’s best intentions.

This is evidenced by the death of Leonard Kidder who was an employee of Cajun Industries and a participant in the company’s 401(k) plan. Mr. Kidder originally named his wife Betty Kidder as the sole beneficiary of his plan, and after her death, he updated his beneficiary form naming his three children as beneficiaries (with the best of intentions).

Subsequently, he remarried Beth Benet Kidder, and then he died just six weeks after the marriage. Enter: the lawsuit. The Kidder children claimed that they were entitled to the funds, but the new Mrs. Kidder, even though she was married for only six weeks, argued that she was entitled to those funds.

Who won? Mrs. Kidder. Why? Because in order to legally name his children as beneficiaries after his new marriage, Mr. Kidder needed to take an extra step; that is, obtaining a spousal consent from the new Mrs. to waive her rights to the funds. That step would allow the children to remain the beneficiaries without any question, yet most people are unaware of the requirement.

For retirement plans, the beneficiary form is usually the most important document, and it comes with the power to override prenuptual agreements and even instructions in a will But when it comes to ERISA plans like 401(k) plans, all bets are off. Unfortunately for the Kidder children, even though ERISA allows plans to waive spousal consent when a participant is married for less than one year, it’s not “required,” so the law ruled in favor of the new Mrs.

Lesson Learned: Anytime that you make a change in your family status through divorce, remarriage, birth of a new child, always contact your retirement planning advisor to ascertain if you need specific protections. There are so many exceptions and fine points that can undo even your best intentions.

HOW WILL YOU GROW YOUR MONEY OVER TIME IN A SAVINGS ACCOUNT?

2011-03-29T16:21:00.001-04:00

The short answer: you won't.

Even after a long decade of stock loss has changed to a more upbeat market,

there is still about $2.7-trillion sitting in money-market funds.

After two financial crises took place in the past ten years,

many people, who know the wisdom of saving for retirement or for that

rainy day, got scared. Who could blame them with all that loss?

The problem with not investing at all is that you will

not have sufficient money to achieve your financial goals. Unfortunately

(if you look at interest rates in money market and savings accounts),

you may acknowledge that they are low, but you will not fully realize that you cannot

build real savings without being in the market.

So how can you tolerate risk? You have to find your comfort level, and as

a company that works one-to-one with every one of its customers, Pension Parameters

Financial Services always weighs the risk tolerance levels of the individual.

You MUST be able to sleep at night,but you may not sleep at night

if you looked at your reluctance to invest through another lens.

Take your risk-balance temperature.

We can help you do this in a conversation, and before we have that conversation,

here's a hypothetical example that could have easily taken place by an investor

working with a diversified portfolio. Saving 10% of the average wage, in equal monthly

installments, that investor would have put away only $89,746 since 1970

(national average wage for 2009 was $40,712). By taking that money and placing it in

five-year fixed-term (relatively low-risk) investments, the investor would have

been able to almost triple that amount. And if invested in a diversified portfolio, the

investor’s savings would have grown to $619,205.

Was there risk involved in this scenario? Yes, but even if you can tolerate a very low level of risk, we can find a "sleep-at-night" investment strategy that will bring you much more value than

the money market.

Past performance is no guarantee of future results. Holding a portfolio of securities

for the long term does not ensure a profitable outcome and investing in

securities always involves a degree of risk of loss. We often counsel our clients to

diversify their investments based on their "sleep-at-night" risk tolerance.

That usually includes a mix of a number of possible types of investments including large funds; small

funds; international funds; long term government bonds that are guaranteed by the full faith and credit

of the United States government as to the timely payment of principal and interest, and cash. Stocks or bonds?

Our financial analysts keep their eyes on this every day; stocks have been more volatile than bonds, and that can change.

International investments usually carry with them special risks such as fluctuations in currency, foreign

taxation, economic and political risks, and differences in accounting and financial standards.

We keep our eye on that every day. We let our customers know when changes in the market occur.

PENSION PARAMETERS RESPONDS...LET THE BUYER BEWARE

2011-01-28T16:16:00.002-05:00

In a recent Employee Benefit News article by Jerry Kalish entitled Getting Plan, Payroll into alignment he suggested that employers would benefit from greater efficiencies if they consolidate payroll and 401k administrative services.

LET THE BUYER BEWARE: This may not be what it appears to be

Although we admit that at first blush this strategy seems to make sense, we took a closer look at the concept of consolidating payroll and 401k administration. Our conclusion: It’s “The Emperor’s New Clothes”, i.e. a popular and strong sales pitch that seems to make sense but doesn’t.

In today’s market, many will pitch that a company housing both payroll and 401k administration under one roof, will ultimately result in a streamlined process and numerous related cost savings. This is the buyer beware part.

As an independent plan administrator and investment advisor, we see major disadvantages associated with this practice that will likely add cost to a company’s bottom line.

Based on our review and experience, the 401k administration half of this product offering tends to be inflexible and a straight “vanilla” package. There is no deviation or variation permitted. If a company wants to add a new comparability feature to their 401(k) plan to maximize contributions rates for its highly paid population, for example, it would not be permitted. Plus, the investment fund choices are fixed and may be limited. Most importantly, the funds typically offered are front load or deferred load funds with high expense ratios.

These are fees that are never highlighted or brought to the attention of the “new customer.” Hence, let the buyer beware.

Kevin McCormack , President, Pension Parameters, Inc.