Category Archives: Retirement planning

It’s Your Move: The dash(board) to retirement

O'Brien-ShaneDonald Rumsfield, the former U.S. Secretary of Defense, once discussed “known unknowns,” referring to things that we are aware we don’t know. The idea can be applied to retirement plan participants as well. It is evident year after year that plan participants still lack a fundamental understanding of certain aspects of retirement planning, such as how to invest, how much to invest, and how to create a plan for retirement. These aspects remain widely misunderstood.

Enter the It’s Your Move dashboard on Milliman’s newly reimagined website. This dashboard aims to make participants aware of the tools at their disposal that can help them plan for retirement. The dashboard falls in line with other initiatives in the industry, all aimed toward improving employees’ preparations for retirement. I’ve previously discussed how the working population in the United States is massively unprepared for retirement and suggested that “gamification” was a possible solution. The SaveUp app was cited as an example of the effectiveness that gamification can have on retirement planning.

Now there is another newsmaker with a similar name—the Secure, Accessible, Valuable, Efficient Universal Pension Accounts (SAVE UPs) Act—grabbing a few headlines. SAVE UPs is a new piece of legislation that was introduced by Representative Joe Crowley (D-New York). The main objective is to provide all American workers with the opportunity to generate tax-advantaged assets. The legislation intends to help smaller employers subsidize the cost of contributing to IRAs in the form of a tax credit for the value of the contributions to 10 employee accounts. This bill, if enacted, could be following down a very controversial path similar to that of, I shudder to say, Since the full name of this new legislation threatens to exceed the character limit of any tweet commenting on it, I figured it would be easier to discuss on this platform since the overall objective appears to be to help provide opportunities for more people to prepare for retirement. The new Milliman Benefits dashboard was created with the same goals in mind and has a significantly lower chance of becoming part of the script for the next season of House of Cards.

The new It’s Your Move dashboard was designed to make participants aware of the various successful behaviors that will optimize their experience. With tools that help participants maximize company matches, diversify their investments, and utilize automatic increase and rebalance features, it could help to set new standards for best practices and increase participation rate in the plans that we manage.

PlanAhead - It's Your Move 2

Participant feedback has shown that a knowledge gap still exists in regards to retirement planning and investment decisions. A survey in March showed that 71% of participants were very likely or somewhat likely to seek advice from their plan providers and 69% were likely to seek advice from an independent advisor or financial services company. The advice they were seeking is on how to invest their money, what to do with their savings when they leave their employers, and what to do with the money when they retire. This shows that a majority of participants would like assistance in their retirement planning. The It’s Your Move dashboard helps to do just that. This readily accessible checklist of retirement behaviors is making participants aware of the tools available to them in an effort to improve their retirement outcomes. It can help employees feel more confident about retirement and offer some encouragement and useful information along the way.

Pokémon Go to the bank

O'Brien-ShaneIn what has already been deemed the most popular mobile video game of all time by SurveyMonkey, Pokémon Go perfectly illustrates the power of mobile devices in today’s world. The game, released on July 6, has been downloaded over 15 million times and is being used an average of 43 minutes per day on Android devices. In fact the game itself added $8.2 billion to Nintendo’s market value in just five days following its release, so to say that it has gone viral would be a severe understatement. The object of the game is simple: “Catch ‘em all.” The game uses an overlay of Google Maps to track your movement and, as you walk around town, different fictional animals appear on your device. You, the player, try to catch them.

You may be asking yourself, “What does this have to do with the price of tea in China?” Or to be more accurate, “What does this have to do with 401(k) recordkeeping?” Short of creating a similar augmented reality app that requires participants to check their 401(k) balances or enter beneficiaries in order to catch one of the aforementioned creatures, there isn’t an obvious correlation. It all boils down to the underlying principle of gamification, which refers to the ability to use elements of game-playing, including video games, to influence human behavior. The application of this can be seen across many platforms and service providers from fitness trackers to education. In education, certain devices and games can be used to increase engagement in the classroom and help with long-term retention, which is due to the chemical dopamine being released in the students’ brains as they play. Just as gamifying the classroom can have a profound effect on learning, so too can it help employees reach their financial goals.

Money magazine points out that much of how we handle personal finances is already set up like a game, such as earning credit card points or boosting a credit score. This same principle could be applied to preparing employees for retirement, either by gamifying employee training with augmented reality devices that employ similar technology to that of Pokémon Go, or by leveraging mobile apps that give rewards to participants who use them. I’m not suggesting that if companies simply place fantastic, imaginative creatures into their employee benefits platforms, all of their employees’ financial problems will be solved. Rather, I believe it is a way to shift the paradigm of planning for retirement and increase preparedness across multiple generations. A recent study by Employee Benefit Research Institute, an organization focused on providing research and education on employee benefits programs, found that 54% of workers surveyed reported having less than $25,000 saved or invested for retirement. If there is a way to gamify the recordkeeping and administration of employee benefit plans, shouldn’t we make every effort possible to do so in order to help our employees and our clients’ employees be better prepared? The smartphone and mobile gaming revolution has provided businesses with opportunities to do just that.

Take the mobile app SaveUp, for example, which encourages people to save money and pay down debt. It does this by rewarding each person with credits every time they deposit money into a savings account or make a payment on debt. Those credits can in turn be used to enter raffle-style drawings for different prizes every day. These drawings include a monthly $2 million jackpot and a weekly $500 drawing, among other prizes. According to SaveUp’s CEO, these initiatives have led to over $150 million being deposited into savings accounts or used to pay off debt since the company was founded in 2010. Another similar program, called Save to Win, was launched in credit unions throughout Michigan in 2009 and led to almost $9 million in savings that year alone. These extrinsic reward programs encourage positive financial behaviors and have proven to help people become more fiscally responsible as a result.

Gamification will no doubt continue to be a powerful tool, whether it’s used for stimulating young minds, engaging people in their finances, or helping employees prepare for retirement. If personal finance apps such as these can garner even a fraction of the popularity that Pokémon Go has, it stands to reason that we can make serious headway in paying down the trillions of dollars Americans currently owe in debt and save more toward retirement.

Managed risk equities can reduce retiree loss aversion

Many individuals entering or nearing retirement encounter the risk tolerance paradox. They seek asset growth with an aversion to losses. This conflicting mindset prompts some investors to acquire low-risk assets when markets become volatile, essentially locking in losses while trading market risk for longevity risk.

According to Milliman’s Wade Matterson, “introducing managed risk equities into the portfolio of clients close to (or in) retirement can provide exposure to higher returns while managing the inherent higher risk.” He provides perspective on what investors should consider when using managed risk equities in his article “Solving the risk tolerance paradox for retirees.”

Milliman clients join “Save 10” initiative

Five Milliman clients were awarded “Save 10” recognition by the Financial Services Roundtable (FSR) at a recent event in Hartford, Connecticut. Save 10 is a business-to-business, peer-to-peer initiative encouraging responsible employers to help their employees secure a better retirement by enabling them to save 10% of their income.

“Helping people save for their financial future can be as simple as companies automatically enrolling their employees in workplace savings programs,” said FSR President and CEO Tim Pawlenty. “Save 10 recognizes these kinds of efforts by employers across the nation. We hope that by highlighting these companies’ terrific efforts, more companies will offer similar savings tools to their workers.”

The Milliman clients recognized are Hall’s Fast Motor Freight, Northeast Controls, Pinnacle Foods Group, Steuben Trust Company, and The Eastern Company.

Managing Australians’ longevity and investment risks closer to retirement

Reducing an investor’s exposure to growth assets as retirement is approached is common. However, this strategy may increase the chance that an investor will outlive retirement savings. This is a predicament that many Australians face. In his article “Australia’s retirement challenge,” Milliman consultant Wade Matterson offers some perspective on how strategies employing derivatives can help Australians manage longevity and investment risks.

UK reforms opens a secondhand annuity market

Individuals in the United Kingdom will be allowed to sell their annuities starting in April 2017. A few important questions arise in light of this development: Is a secondhand annuity market sustainable? Who needs to participate in the market to sustain it? Is such a market appealing to consumers? A recent FT Adviser article written by Milliman consultants Colette Dunn and Chris Lewis explores these issue.

Here is an excerpt:

As the Chancellor stated “For the vast majority of people, continuing with their existing annuity will be the right choice.” This is a view that has been strongly reiterated by the Economic Secretary to the Treasury, Harriett Baldwin, and by Minister of State for Pensions, Baroness Altmann.

However, without doubt there will be demand from some consumers. Some will simply be tempted by the short term cash over an income for life. Others may have bought an annuity when they were required to have a £20k income per year to enter flexible drawdown (a rule which no longer applies) and now wish to sell it.

Anyone who plans to sell their annuity, should consider more than just the price. They need to think about the tax implications, the potential loss of means tested benefits and whether it will result in them paying more towards any care costs.

The price is important too! Although we cannot know how the market pricing will develop, we have calculated illustrative cash-in values based on current interest rates, an assumption of current good health and possible transaction charges.

Utah-based Milliman clients recognized by “Save 10” initiative

Griffith-RobertMilliman was pleased to collaborate with the Financial Services Roundtable (FSR) to recognize Utah-based employers as part of our ongoing participation in the “Save 10” initiative. The initiative is a business-to-business, peer-to-peer effort encouraging responsible employers to help their employees better prepare for retirement.

The Salt Lake City event to recognize the employers was highlighted by a speech from Orrin Hatch, the senior U.S. senator from Utah. Senator Hatch discussed the importance of retirement savings and the need for strong organizations to provide their employees with the ability to have adequate savings for retirement. The event included a roundtable discussion where Tom Topik, Human Resources (HR) Strategic Business Partner of ARUP Laboratories and a client of Milliman, discussed the importance of retirement savings and the tools available for his employees to take charge of their retirement programs. Tom specifically highlighted the auto enrollment process and the use of Milliman’s InvestMap™ product to help employees properly invest using a custom asset allocation appropriate for their age and risk tolerance.

In addition to ARUP Laboratories, these other Milliman clients were recognized: America First Credit Union, OOCL (USA), and Twinlab Consolidated Corporation. All of these organizations were recognized for their dedication to retirement savings by including auto features in their retirement plans (either auto enrollment, auto escalation, or both) and enabling employees to save at least 10% of their incomes for retirement.

Save 10 Utah - Award Winners
Utah-based employers recognized by the Save 10 initiative.

The Save 10 initiative is a program that encourages retirement savings to remain in the forefront of employers’ and employees’ minds. The initiative also helps incentivize other companies to take a look at their retirement programs to see if they can make them better.

Read more about Save 10 and qualifying criteria at For more on Milliman’s retirement planning tools, click here.

Generation X: Factoring healthcare costs into retirement planning

pink-lesleyThis is the final blog in a three-part series exploring the economic history and future of Generation X. The series focuses on what this generation can do to prepare for retirement. In the first installment, we highlighted some of Generation X’s financial predicaments and, in the second installment, we discussed savings, pensions, and Social Security. The last blog focuses on Generation X and healthcare.

Many of us Generation Xers are not factoring healthcare costs into our retirement planning, which is a mistake. As healthcare expenses continue to rise and as we age, having a plan in place makes sense.

The cost of healthcare in the United States is increasing every year. According to the most recent Milliman Medical Index, in 2015, the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan was $24,671. Healthcare costs for this typical family have more than doubled over the past decade.

To combat rising healthcare costs, there is something Gen Xers can do now—start a health savings account (HSA). An HSA has several tax advantages. The money isn’t taxed on the way in and grows on a tax-deferred basis. Additionally, it can be withdrawn tax-free when used to pay for qualifying medical expenses both at present and in retirement.

What many people—including Gen Xers—don’t realize is that an HSA could be an investment option relating to medical costs in retirement. Medicare doesn’t cover all healthcare costs, like nursing home and assisted living expenses. HSAs could be useful when paying for medical bills and paying for long-term care. But Gen Xers should also consider whether it is better to save money for long-term care in an HSA or buy a long-term policy. Doing the due diligence on the options now can save money down the line.

According to Dawn Helwig, a principal at Milliman, it is smarter to buy a policy sooner rather than later. As she said in a 2014 Wall Street Journal article, “For each year applicants in their 50s delay buying coverage, carriers typically raise premiums by 3% to 4%, simply because they are a year older….” Helwig also noted that those who wait to buy this insurance may encounter higher premiums down the line because carriers are dealing with losses on existing policies. With those losses, they have raised premiums between 4% and 8%.

Another option that we Gen Xers can consider when we reach retirement age is rethinking Medicare plans. Medicare itself has four parts: hospital insurance (Part A), medical insurance (Part B), Medicare Advantage plans (Part C), and prescription drug coverage (Part D). At age 65, most people are automatically enrolled in Medicare. But Medicare doesn’t cover everything, and participants must pay copayments and deductibles.

Those who have Medicare Parts A and B can decide to receive all their healthcare services through a provider organization under Part C, also known as Medicare Advantage. Most Medicare Advantage programs have low monthly premiums, and they cover all of the services offered under original Medicare except hospice. To determine whether Medicare or Medicare Advantage is a better option financially, it is important to compare and contrast the costs associated with each one.

As one Gen Xer says, “My parents got to think about what they wanted to do at 65. I don’t have that option. We are running into something that our parents didn’t have to deal with.”

Clearly, Generation X hasn’t had it easy and faces numerous challenges on the way to retirement. But by doing some research and planning for the long term, we might just be okay.

Generation X: Savings, pensions, and Social Security

pink-lesleyThis is the second blog in a three-part series exploring the economic history and future of Generation X. The series also focuses on what this generation can do to prepare for retirement. In the first installment, we highlighted some of Generation X’s financial predicaments.

Generation X faces major retirement challenges.

Besides the issues of job security and stagnant wages, there is the topic of cold hard cash—saving enough, having enough, allocating enough.

Some Gen Xers know that they started saving too late and wouldn’t be able to make up the difference. Others were worried because they’d been saving since they got their first jobs—20+ years ago—and felt that that money still wouldn’t be enough when they reach retirement age. And others just couldn’t save. As one fellow Gen Xer put it, “My wife and I don’t make enough together to save for retirement and the kids.” And let’s not fool ourselves—“retirement age” no longer has a firm definition.

We Gen Xers aren’t alone. According to the 2015 Retirement Confidence Survey published by the Employee Benefit Research Institute, “Almost two-thirds of workers (64 percent) say they feel they are behind schedule when it comes to planning and saving for retirement.” This survey also notes that cost of living and day-to-day expenses top the list of reasons why workers don’t save (or don’t save enough) for retirement.

Pensions, often referred to as defined benefit (DB) plans, used to be a mainstay. But they are not as common as they once were, and this, too, is affecting Generation X. In fact, according to Jennifer Leigh Parker on, Generation X is the first generation to see its pension leg replaced by 401(k) savings plans, which were increasingly adopted during the 1980s. The 401(k) plans are portable but aren’t designed as a monthly “pension paycheck.” The owner of the account balance has to take significant action to understand and convert any or all of it to that pension paycheck. Gen Xers , in general, will find that its collective savings plan account balances are woefully deficient and for many, sitting in a tax-deferred account. And the Internal Revenue Service (IRS) can’t wait for us to start cashing them out.

Additionally, we Gen Xers, who have been paying Social Security payroll tax for years, may not receive full benefits upon reaching retirement age.

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Generation X and retirement: The background

pink-lesleyIn this three-part series, we explore Generation X’s economic history and discuss what this generation can do to prepare for retirement.

While the so-called “me me me generation” of Millennials has received most of the financial spotlight of late, this blog focuses on my demographic brothers and sisters, those of us from the Reality Bites and Pearl Jam era. We are Generation X, and we face major retirement challenges. Reality does, it seem, bite for us. But there is some hope.

There are about 46 million of us born between the mid-1960s to the late 1970s. It’s been noted here and here that Gen X was hit especially hard during the 2008-2009 financial market collapse. According to the Pew Charitable Trusts, Generation X lost almost half of its wealth during the economic downturn.

Forbes wrote in 2013 that “…a recent census report found that people between 35 and 44 saw a 59% decline in median household net worth between 2005 and 2010, the largest drop of all age groups.”

The repercussions from that recession will reverberate for years. As Ivory Johnson wrote in 2014 on, “Members of Generation X face the daunting task of planning for a retirement that will likely include no pension, a potential Social Security haircut, stagnant wages and high education costs for them and their children.”

We in Generation X continue to contend with stagnant wages and job insecurity.

According to a recent report from the Economic Policy Institute, real hourly wages fell or stagnated across the wage spectrum between 2013 and 2014 even for those with a bachelor’s or advanced degree. The report says, “Comparing 2014 with 2007 (which was the last period of reasonable labor market health before the Great Recession), hourly wages for the vast majority of Americans have been flat or falling.”

Besides stagnant wages, we are also facing unique issues in the workplace, which come from being wedged between the two largest generations in history. With Gen Yers nipping at our heels and Baby Boomers blocking the path to advancement, Gen X is in an uncomfortable position. In a 2010 Washington Post piece, Joe Frontiera and Dan Leidl wrote, “As both groups [Baby Boomer and Millennials] jockey for position, Gen Xers are left to alternately fend off overeager newbies and patiently wait to earn a rare opening at the top.” Frontiera and Leidl also note that many Gen Xers have been in the same position for a long time and are “butting up against the Gray Ceiling, a stagnating phenomenon…”.

And those Baby Boomers (born between 1946 and 1964) don’t appear to be going anywhere. Gallup notes that Baby Boomers are staying in the workforce longer: “As the largest generation born in U.S. history, Baby Boomers’ sheer numbers coupled with their reluctance to retire will likely ensure that their influence endures in the workplace in the coming years. The generation still constitutes about one-third (31%) of the workforce…”.

In this blog series, we take a look at the financial challenges that Generation X has been dealing with recently and how this generation can plan for the future. We also talked to several fortysomethings about their retirement concerns and what can be done to address them (quotes are sourced from conversations in 2015).