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Google+ Hangout: What is InvestMap™?

October 6th, 2014 No comments

Milliman’s retirement glide path technology, InvestMap™, enables plan sponsors to deploy an age- and risk-based asset allocation strategy for the core funds held within a defined contribution (DC) plan. By creating a custom target date glide path overlay, plan sponsors and participants are able to personalize their investment approaches while taking advantage of automated account management features.

In this Google+ Hangout, Jinnie Olson discusses InvestMap with Brittney Hagenbart.

To learn more about InvestMap read Jinnie’s blog “What is InvestMap?

Milliman infographic: The boomerang generation’s retirement planning

September 30th, 2014 No comments

The Millennial generation has gotten a bad rap concerning their retirement planning habits—or lack thereof. Fortunately, there are several steps Millennials can take to secure a better retirement. The infographic below features 12 tips Millennials should consider when developing their retirement strategies. The tips are taken from Jinnie Olson’s article Retirement planning: 12 practical tips for Millennials. The infographic also highlights some of the generation’s retirement planning behaviors.

Millennials boomerang infographic_Milliman Inc_09-29-14

What steps can Millennials take to enhance their retirement security?

June 25th, 2014 No comments

The millennial generation has developed a reputation for not placing an emphasis on retirement, preferring to live for the moment. In the most recent issue of Benefits Quarterly, Milliman’s Jinnie Olson discusses several actions Millennials should consider to help them accumulate retirement savings. Here is an excerpt:

Taking retirement mobile
Millennials’ lives are fast-paced, hopping from an early morning yoga workout to nine hours of work, straight to a book club meeting, down the street to a softball doubleheader and then on to a late-night fraternity reunion happy hour. Retirement accounts are finally catching up with our mobile world. Recordkeepers and administrators have started to create mobile apps for smartphones and tablets to help keep up with busy lifestyles. For some, choosing to defer or increasing your deferrals is as easy as one quick touch of the screen or scanning a quick response (QR) code. When you have time to play with apps that shoot cartoon birds dressed like Darth Vader across the sky, then the excuse “I just don’t have time to save for retirement” simply won’t fly anymore.

Let your interest compound
You hear over and over again that the longer your contributions are invested in a retirement plan, the more time they’ll have to take advantage of compounding interest. But what does that really mean? Let’s look at three different savings approaches. For purposes of this example, let’s assume I make $30,000 every year until I retire:

• Strategy 1: I decide to save 6% of my compensation, or $1,800, in a jar every year from the ages of 25 to 65.
• Strategy 2: I don’t want all of the space in my basement taken up by jars and instead enroll in my company’s 401(k) plan, contributing 6% from the ages of 25 to 45. I receive 5% interest compounded annually.
• Strategy 3: I want a new car and can’t afford to contribute now. Twenty years later, I turn 45 and realize retirement is right around the corner and decide to contribute 6% until the age of 65. I receive 5% interest compounded annually.

Which strategy will result in higher retirement savings at the age of 65?

My initial investment ($36,000) is the same in each strategy. While Strategy 1 will guarantee my contributions will not suffer any market gains or losses, it may not be the most secure retirement savings strategy. Strategy 2 more than doubles my final account balance when compared with Strategy 3 just by giving my money an extra 20 years in the market to accumulate that compounded interest. (See the figure)

Compounding interest

To read the entire article, click here.

Reproduced from the Second Quarter issue of Benefits Quarterly, published by the International Society of Certified Employee Benefits Specialists.

Give your nest egg some TLC!

May 9th, 2014 No comments

Regli-JinnieAll around us, there are signs that spring is hatching. Snow piles are melting, potholes are mounting, insulated jackets have been shed, green grass is peeking through, and bird nests are popping up in the trees.

It’s important to remember that, just as a mother bird continues to nurture her unhatched eggs, your retirement accounts need a little nurturing until they’ve reached their maturity. Perhaps it’s time for a little retirement account spring cleaning!

According to this New York Times article, statistics show that, on average, people in their 20s will go through seven jobs in their lifetimes. It’s not uncommon to get wrapped up in the new and forget about the old—more specifically, your retirement account—as you move forward to new opportunities.

If you’re not sure how to access old accounts anymore, your prior employer will be able to point you in the right direction. It would be unfortunate to leave a nest egg behind only to have it eaten up by plan fees!

Here are a few things to keep in mind:

  • It’s helpful to update your contact information if you move, get a new phone number, or change your name. Some of these changes may require that you provide proof of change and it’s easier to stay on top of the changes as you go.
  • Remember to review and update your beneficiaries as you go through life changes to make sure your retirement accounts are inherited by the appropriate parties if an unfortunate incident occurs.
  • Every few years, you may want to re-evaluate your personal investment selection. The fund or portfolio you picked when you started that first job at age 22 may no longer fit your investment strategy.
  • How much do your retirement accounts cost you? Even in employer-sponsored retirement plans, participants often are responsible for paying portions of plan fees. If you have five separate accounts and each of the plans deduct $25 from your accounts each year ($125 in total) it might be wise to consolidate your accounts and only pay one $25 fee.
  • If you have a small balance, typically under $5,000, you may be automatically rolled out of the plan and into an IRA, without your consent. If your account balance is less than $1,000, your account may be automatically paid directly to you, less taxes owed. Make the first move after leaving so that finding your account doesn’t make you feel like you’re chasing your tail.
  • If nothing else, check in on your accounts at least annually. Even if you are no longer working at the company, plan design changes, fund changes, and many other decisions the company makes for its plan still affect your account and could affect your account balance.
  • While it’s still fresh on your mind, consider combining all of your prior qualified accounts into your current plan or IRA. One of the major benefits of qualified 401(k) plans is that they are portable and most retirement plans make rolling balances in or out a fairly easy process.

Just think. You work hard for your money and if you contributed to a retirement plan, that money was withheld from your take-away pay. Consolidation increases the likelihood you’ll be able to devote the attention you need to grow your retirement nest egg.

Milliman’s top 10 publications of 2013

December 26th, 2013 No comments

In 2013, Milliman again published a wide variety of articles and videos, including timely analysis related to issues such as sinkhole peril, improving claims analytics through text mining, predictive modeling and analytics, and Solvency II developments. In addition, we published extensively on ongoing challenges related to managing healthcare costs, healthcare reform, retirement planning, and insurance and risk management issues.

Here are this year’s ten most viewed articles and reports:

10. Fees: What everyone is NOT talking about!
By Douglas A. Conkel

How do plan sponsors ensure that actual fees paid by each participant are fair and reasonable when compared to other participants within the plan?

9. Planning for NAIC ORSA
By Chris Suchar, Joy A. Schwartzman, Matthew G. Killough, Wayne E. Blackburn

Sophisticated risk assessment will be key to complying with U.S. ORSA requirements.

8. Operational risk modelling framework
By Joshua Corrigan, Paola Luraschi

Current methods and emerging practices in operational risk across the world.

7. ACA: An act of unknown consequences for workers compensation
By Derek A. Jones

How will healthcare reform mandates for preexisting condition coverage and broader healthcare access affect workers’ compensation claims and costs?

6. President Obama’s transitional policy for canceled plans
By Hans K. Leida

The November 14, 2013 announcement that health insurance issuers would be permitted to renew certain canceled health insurance policies has raised new questions for the individual and small group marketplaces in 2014.

Read more…

Retirement savings: Don’t confuse past performance and future expectations

November 26th, 2013 No comments

Regli-JinnieThe Wall Street Journal recently published an article (subscription required) that indicated individual investors are returning to investing in stocks, but that this could have negative implications for Ma and Pa’s retirement savings accounts.

Optimistic figures about the stock market, such as a 29.32% increase (as of November 26, 2013) of broad market indexes and potential for the Dow Jones to hit 20,000 this year, have been tossed around like rice at a wedding. While these numbers have encouraged the average investor to return to stock investment it’s important for retirement plan participants to keep a few things in mind.

RearViewMirror

Source: Carl Richards, The Behavior Gap.

While the short-term returns on stocks may have looked incredible on your third-quarter statements, you absolutely cannot invest based solely on short-term returns. Investors in 2008 likely saw the same incredibly high returns right before the market took a downward turn. All too often I overhear people saying, “Wow, did you see returns are up to 20% on Fund XXX, I need to sell out of Fund YYY and buy in.” Because the prices are being driven up, your hard-earned money actually buys fewer shares than if the prices were lower.

I’m not saying that our economy is building up for a fall but it’s important to keep in mind that, even while the market is doing well, you need to protect the nest egg that you’ve worked so hard to build.

Regardless of the market, the key to investing your retirement assets is diversification. Financial advisors tell us that, by spreading the investments in a retirement account across different asset categories, investment risk can be greatly reduced. By investing in a mix of stocks and bonds you are creating your own small “cushion” of protection against losses in case of market fluctuation. It’s important to remember that you’re investing for the long term, and more than likely those incredible returns will only last for a short period of time.

Google+ Hangout: PlanAhead for Retirement®

October 22nd, 2013 No comments

Milliman’s retirement planning tool PlanAhead for Retirement can help defined contribution plan participants better understand how their account balances translate to retirement income. The tool helps individuals learn what they need to do on their own to adequately prepare for retirement.

In this Google+ Hangout, Jinnie Olson demonstrates how PlanAhead functions.

To learn more about PlanAhead, click here.

Tips for promoting a defined contribution plan to employees

September 19th, 2013 No comments

Employers who actively promote and communicate their retirement plans can demonstrate its importance to employees. In Jinnie Olson’s new article, she provides 10 ideas that plan sponsors may use to help employees get the most from their defined contribution (DC) plans. Here is an excerpt:

Get your employees in the plan.
Allow employees to enter the plan on day one. New employees are excited about the new opportunity so get them enrolled from the very start. Hook them in while it’s fresh on their minds so they will be used to seeing the deduction in pay right from their first check. Delayed entry dates tend to lead to employee inertia.

Consider adding an automatic contribution arrangement.
The most effective way for plan sponsors to encourage participation in their retirement plans is through plan design. An automatic contribution arrangement (ACA), more commonly known as automatic enrollment, is a feature that can be added to existing 401(k), 403(b), 457, SIMPLE IRAs, and SARSEP plans. This arrangement allows the employer to automatically enroll a newly eligible participant unless the participant makes an affirmative election not to participate.

When the arrangement is adopted, the plan sponsor selects a default contribution percentage, which is automatically reduced from employee’s wages upon meeting the eligibility and entry requirements of the plan. Participants may “opt out” of this automatic contribution. Studies show most employees will leave their contribution rate at the plan default or even increase their elections. There are alternative methods of automatic contribution arrangements; refer to your plan consultant for more information.

Offer an employer-matching contribution.
Would you walk past a $100 bill on the sidewalk? Would you turn down a work bonus? Most would answer no to these questions. Retirement in this day and age is largely going to be self-funded; offering an employer-matching contribution is like offering your employees a bonus. If your employees take saving for their retirement seriously and contribute, you’ll add free money to their accounts. As an employee it’s next to impossible to turn that down. A recent Wells Fargo survey indicated that 85% of those with a 401(k) offering a company match contributed enough to receive the maximum match. Matching is an effective way to work hand in hand with employees to fund their retirement. If high turnover/low employee retention has deterred you from implementing a match in the past, why not implement a vesting schedule?

What is InvestMap?

May 1st, 2013 No comments

As we wrap up the first quarter of 2013, we are receiving several inquiries from plan sponsors regarding InvestMapTM, Milliman’s retirement glide path technology.

Let me start with some background. Model portfolios offer risk-based options to participants consisting of asset allocations comprising many of the core funds already in the plan. Target date funds are portfolios designed to achieve returns based on a participant’s target retirement date; those closer to retirement will typically have less exposure to equities and commensurate expectations of lower investment returns, while those further from retirement will be exposed to more risk and a higher potential investment return.

InvestMap is a great solution for participants and employers alike because it brings together the benefits of both target date funds and model portfolios. Conceptually, target date funds are a good idea, but product orientation and lack of customization have underscored their limitations. Specifically, target date funds take somewhat of a “catchall” approach at the plan level.

InvestMap is designed to work at the participant level, incorporating the best aspect of target date funds (the automated glide path for which equity exposure is reduced over a period of several years). However, personal risk attributes of individual participants are incorporated as well. This sophisticated “marriage” between risk-based models and an age-based target date glide path, coupled with an open architecture investment platform, provides the best of both worlds for plan sponsors and participants.

The core funds are still available for participants to select their own asset allocations if they choose not to participate in InvestMap.

Advantages to the plan sponsor:

• InvestMap offers fiduciary protection for the construction of the models
• Can be used as the plan’s qualified default investment alternative (QDIA)
• Investment management fee transparency and no additional costs

Advantages for participants:

• Investment education that is easily understood
• Personalized strategies for each participant’s individual risk tolerance
• Hands-off management from initial enrollment to retirement

Please contact your Milliman representative for more information on how InvestMap could benefit your plan.

Are Millennials lax about their retirement future?

April 24th, 2013 No comments

Unlike many prior generations, Millennials will have to bear the brunt of risk associated with their retirement futures. In this USA Today article, Jinnie Olson discusses the general mindset Millennials have towards retirement savings.

Here is an excerpt:

Even if the smart, tech-savvy generation of Millennials are told about the benefits of the stock market, they still may have no appetite for risk.

…retirement savings does not create much top-of-mind awareness among Gen Y. “With Millennials that I talk to, retirement is so far off that it doesn’t seem to be something that needs to be talked about now,” says Jinnie [Olson], a Millennial who is a client service administrator at Milliman, a consulting and actuarial firm.

…For Millennials life is a balancing act between saving money and paying down debt. [Olson] advises them to contribute whatever they can to their retirement account. “Never think that anything you contribute is too small,” she says. “And if your plan offers a match, remember that not contributing to the plan is like throwing away free money.”

Read Jinnie’s article, “Retirement planning: 12 practical tips for Millennials”, where she offers retirement planning suggestions for twentysomethings.