Tag Archives: Ken Mungan

Employers honored with Save 10 award for helping their employees save for retirement

Save 10 awardees at the Seattle event with their Milliman consultants and special guests Milliman Chairman Ken Mungan and Francis Creighton of Financial Services Roundtable. Photo by Ryan Hart

Twelve employers based in the Pacific Northwest were recognized with the Save 10 award during the 45th annual Milliman Employee Benefits Conference held in Seattle on April 6. The Save 10 award honors their work helping their employees save for retirement.

The Save 10 initiative is a movement to reinforce a “Save 10” rule of thumb, recognizing employers who help their employees to save at least 10% of their income toward retirement. Why Save 10? According to Francis Creighton, Executive Vice President of Government Affairs of Financial Services Roundtable, which sponsors the initiative, 10% is easy to remember and reflects the old adage of saving at least 10% of your income for retirement. While this may not be the ideal contribution rate for everyone, getting employees to save for retirement, and providing employers the tools to allow their employees to do so, remains fundamental.

The Save 10 initiative emphasizes the effectiveness of auto features in retirement plans, such as auto enrollment and auto escalation. Research shows that auto features encourage employees to save, even though they may not remember to sign up and start saving from their hire date. The rate of success in saving increases even more for employees with auto escalation of contribution rates.

Milliman is proud to work with companies that want to provide the best benefits for their employees. Milliman works closely with employers to help provide best-in-class retirement plans for their employees that reflect the philosophy and unique identity of each organization.

Employers honored at the April 6 event were: Expeditors International of Washington, Inc., ICOM America, Inc., McKinstry Co., M Financial Group, Nelson Irrigation Corporation, Olympia Federal Savings, PACCAR Inc., Swanson Group, Inc., Usibelli Coal Mine, Inc., Valley Medical Center, Washington Permanente Medical Group, and Zimmer Gunsul Frasca Architects, LLP.

More information about the initiative is available at www.save10.org.

The risk tolerance paradox

The risk tolerance level many investors expect to achieve over the long term rarely equals the same tolerance investors actually experience over shorter periods. This paper by Ken Mungan and Matt Kaufman describes this paradox, explores the main reason it might exist, and introduces a risk management strategy that seeks to solve the problem.

As more “low volatility” and portfolio risk management strategies hit the marketplace, it will be imperative that advisors and investors explore each strategy to uncover how risk is actually being addressed. Identifying those techniques that address both diversifiable and systematic risk is likely to provide better overall results for investors.

A toxic relationship: market declines and capital drawdowns

Ken Mungan’s paper entitled “Creating a Reliable Lifetime Income” is the subject of a new Professional Planner article regarding the toxic relationship between market declines and capital drawdowns.

Here is an excerpt:

“Market declines combined with withdrawals can deplete investors’ portfolios,” Mungan says. Investors face what Milliman calls the “sequence of returns risk” that is, the combination of withdrawals and market declines. [He] describes this combination as “toxic.”

Mungan says a protection strategy is absolutely critical to make sure an investor’s income lasts for as long as possible. In fact, by protecting a portfolio from the “toxic combination” of withdrawals and market falls, an investor’s total return over time can be improved compared to an unprotected portfolio.

Milliman Managed Risk Strategy

A new video showcases how pension plans can protect themselves from downside losses by incorporating the breed of risk management that saved insurers $40 billion during the 2008 economic crisis.

The Milliman Managed Risk Strategy™ aims to stabilize the volatility of an investment portfolio during periods of significant and sustained market decline. Investors now have access to the same risk management techniques Milliman provides to major global financial institutions around the world—techniques that currently help protect more than $500 billion in assets.

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WSJ: Building a cheaper annuity

The Wall Street Journal reports on an emerging approach to annuities that may include lower fees for participants. Here is the quick explanation:

A longstanding beef against variable annuities is their steep cost. A big plus of exchange-traded funds is their ultralow cost.

Finally, momentum is growing to pair the two financial products in innovative ways, a trend consultants say is good for many people who are trying to save for retirement.

The products now emerging have lower fees, though it’s important to understand that the participant still needs to fund the guarantee:

The ValMark-Milliman approach still awaiting SEC approval is innovative in that it moves part of the financial-hedging program from the insurer’s balance sheet into ETF portfolios. By taking that off the insurer’s books, costs can be lowered for consumers, [Milliman principal Ken] Mungan says. That’s because the insurer doesn’t have to raise prices to compensate for the punitive effect on reported earnings per share that sometimes results from holding financial hedges, under generally accepted accounting principles.

“The consumer is paying for the hedge asset no matter what,” Mr. Mungan says. “But here, the consumer buys and owns the hedge asset at a cheaper price” through the ETF portfolio itself.

For more on exchange-traded funds, go here. For more on the potential for retirement security from variable-annuity-like products, go here.

Guaranteed lifetime withdrawal benefits

Penton Insight looks at the resurgent popularity of variable annuities, and in particular the desire for guaranteed lifetime withdrawal benefits. Here is an excerpt:

One of the most popular variable annuity features is the guaranteed lifetime withdrawal benefit. No matter how the underlying investments perform, policyholders typically are guaranteed at least 5 percent of their benefit base in income annually for as long as they live. Eighty-seven percent of those who buy variable annuities elect this rider, LIMRA says. “From my perspective, variable annuity sales are definitely picking up,” says Kenneth P. Mungan, actuary with Milliman, a Chicago-based actuarial firm. “Customers are clearly attracted to the guaranteed living benefits, and I expect that trend to only increase over time.”…

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