Monthly insights and facts on the capital markets and retirement industry
CLOSING BACK DOOR ON ROTH – As part of the $3.5 trillion budget reconciliation bill, the House Ways and Means Committee is proposing to eliminate conversions of after-tax qualified plan assets and nondeductible IRA dollars to a Roth IRA –for all taxpayers. This provision could be effective as early as 1/1/2022 (source: Build Back Better Act).
CLOSING FRONT DOOR ON ROTH – Another proposal currently being considered would eliminate the ability to convert any retirement assets to a Roth IRA or in-plan Roth account for single taxpayers earning more than $400,000 and married taxpayers earning more than $450,000. If passed, this provision would not be effective until 1/1/2032 (source: Build Back Better Act).
TAPPING OUT AT 62 – Whether it’s part of the Great Resignation or workers are becoming more realistic about retirement age, only 50.1% of workers this year expect they’ll still be working past age 62. That percentage drops to 46.6% for those older than45 (source: New York Federal Reserve).
SIGNS POINT TO SIDECAR SAVINGS – Over ½ (54%) of employees surveyed said their retirement plan savings are the only emergency savings they have. Approximately ¼ (23%) say they are currently offered a payroll deduction emergency savings fund at work and 53% of those offered have used it. Of those who have not been offered this benefit, 68% say they would use it if available (source: Employee Benefit Research Institute (EBRI)).
TO ROLL OR NOT TO ROLL, FEES ARE NOT THE QUESTION – Almost half (46%) of recent retirees rolled their retirement plan savings to an IRA, and 54% stayed in their former employer’s plan. Only 13% said low fees were the most important reason for staying, while 55% said their employer plan’s investment options were the primary reason. Of those who did roll over to an IRA, 25% cited access to professional advice as the most important reason (source: The Pew Research Center).
HOW TO TAME TURNOVER – Employers underestimate the value of benefits to employees. When asked to rank the reasons why they were looking for a new job, employees ranked wages/salaries first, then benefits. When employers were asked why they have turnover, they also ranked wages/salaries as #1, then flexibility, then career advancement, then benefits (source: PwC).
SOME REGRETS – The main regrets retirees have about retirement savings are not saving enough and not starting early enough. But 35% of workers ages 62-66 also regret not having consulted a financial advisor (source: Insured Retirement Institute).
HEALTH/WEALTH COMBO – One study shows that although 56% of 401(k) plan participants reduced their 401(k) contributions in the first year they made an HSA contribution, the decrease was generally not a significant amount. Decreases in 401(k) contributions were more significant for those who contributed $8,501 or more to their 401(k) plans (source: EBRI).
THE YIN AND YANG OF TAXES – The tax benefits associated with retirement savings encourage workers to save but are viewed by Congress as tax “expenditures.” Costing the federal government $153.6 billion in tax revenue for DC plan contributions and earnings and $23.8 billion for IRA contributions and earnings in FY 2020, they are one of the largest categories of revenue losses attributable to provisions in the tax code (source: Joint Committee on Taxation).
WHO’S SERVING THANKSGIVING DINNER? – The first Thanksgiving harvest celebration took place in the fall of 1621. Just 4 women supervised the food preparations for a 3-day feast for 50 colonists and 90 Wampanoag People. But it was common for Pilgrims to have the children serve as the adults sat down to eat (source: National Conference of State Legislatures). QUESTION – Among those age 40 or younger, 73% rely on a Google search to find a financial advisor and 53% use LinkedIn. What do you think are the top 5 reasons investors give for selecting an advisor?