Nudging Retirement Savings: A New Approach to Pensions

<h2>Redefining Defined Benefit Pensions<a href="http://www.professorhollybell.com/wp-content/uploads/2012/09/ID-10049304.jpg"><img class="alignright size-medium wp-image-1891" title="ID-10049304" src="http://www.professorhollybell.com/wp-content/uploads/2012/09/ID-10049304-300x243.jpg" alt="pensions"width="300" height="243" /></a></h2> By Holly A. Bell For most people in the private sector,  defined benefit <b>pensions</b> have become a distant memory. Something their grandfather talks about over Thanksgiving dinner while reminiscing about his days at "the plant". These plans, which guaranteed a certain percentage of a worker’s wages or salary in retirement, have been replaced with defined contribution plans like 401(k)s. However, is it possible that a defined benefit hybrid model based on employee contributions might be a better, yet equally sustainable model? There were several reasons traditional defined <i>pensions</i> proved to be unsustainable: Built in cost-of-living increases, benefit rates up to 90 or even 100% of annual earnings, earnings calculations based on the highest five years of earnings, the inclusion of generous health insurance benefits, early retirement ages (and longer life expectancy), inadequate funding or companies raiding pension funds, high return

Tagged , , , , , Read More
Stock Market

Market Volatility

<h2>What's Causing Market Volatility and What Can We Do?</h2> I read an interesting short article this morning on <em>Seeking Alpha</em> in which Todd Campbell discussed the rising stock <b>market volatility</b> that has been happening since the 1970s. The article entitled “Volatility Across the Decades: It’s No Wonder We’re Edgy” (<a href="http://seekingalpha.com/article/647321-volatility-across-the-decades-it-s-no-wonder-we-re-edgy?source=feed">click here to view)</a> included the following graph that demonstrates the volatility he is referring to. He used the deviation of daily returns for each decade to measure volatility. <p style="text-align: center;"><a href="http://www.professorhollybell.com/wp-content/uploads/2012/06/volatility.png"><img class="aligncenter wp-image-1638" title="volatility" src="http://www.professorhollybell.com/wp-content/uploads/2012/06/volatility.png" alt="" width="504" height="301" /></a></p> While this is probably not surprising to anyone who follows the market, it certainly causes concern for those of us who would like to retire in the next 20 years or less. I do have a theory about why this trend is happening, but you’ll have to wait until the fall issue of <em>The Journal of Investing</em> to read about it.

Tagged , , , , , , Read More

Headlines You Might See During An Economic Recovery

<a href="http://www.professorhollybell.com/wp-content/uploads/2012/03/newspapers.jpg"><img class="alignright size-medium wp-image-1231" title="newspapers" src="http://www.professorhollybell.com/wp-content/uploads/2012/03/newspapers-300x225.jpg" alt="recovery"width="300" height="225" /></a>By Holly A. Bell The newspaper headlines seem to be a mix of positive and negative economic indicators lately. On the positive side we’re hearing new jobless claims and unemployment are down, corporate profits are up, and the stock market is at its highest level in years. However, the negative does seem to prevail this week. Headlines have included housing sales losing ground while mortgage interest rates increase, FedEx has warned they are lowering their financial expectations for the near-term due to predictions of slower economic growth, and others have even started to mention stagflation. A <a rel="nofollow" href="http://online.wsj.com/article/SB10001424052702304636404577295421787354492.html?grcc=16da3bc60ef29c4da36bdfbea438d434Z10&mod=WSJ_hps_sections_lifestyle"><em>Wall Street Journal </em>article</a> this week outlined some “silly” economic indicators of improved economic conditions. They include more people going to sit-down restaurants, increased demand for liposuction, and more visits to dry cleaners. While I (and the author of the article I might add) think

Tagged , , , , , , , , , , , Read More