Boomers and Retirees Want Retirement Planning Do-over

A new Lincoln Retirement Institute survey of Baby Boomers and retirees (age 42+) reveals the majority would like a retirement planning do-over.

When asked what advice they would give to their younger selves, only 16% of those surveyed said they would tell themselves not to change anything they were doing to plan for retirement. More than one in four respondents said they would tell their youthful selves to begin saving for retirement sooner, according to a Lincoln Financial Group press release. Eighteen percent of those surveyed indicated they would counsel themselves to get more financial education.

In addition, 15% said they would advise themselves to pay down debt such as high interest credit cards, and another 12% replied they would instruct themselves to be more aggressive in their investing. The results did not change for respondents in different income brackets, the release said.

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Preparedness

If given the opportunity to instruct a younger version of themselves about which retirement challenges to spend more time preparing for, nearly one-third of respondents said they would do a better job of creating income that would last a lifetime. Another 27% would advise themselves to better prepare to deal with rising health care costs and the possibility of needing long-term care, and 19% said they would instruct themselves to plan to rely more on personal savings instead of Social Security or a pension.

Only 9% said they would tell their younger selves to be better prepared to ride the ups and downs of the market, and 6% indicated they would want to better prepare for the effects of inflation over time.

Of those survey respondents worried about having enough money to finance their retirement years, almost 70% said they would return to work if they ran out of money. A scant 5% said they would look to a financial adviser for counsel at that point, while 12% of survey respondents said they would turn to family members for help. Other options selected included relying on self, downsizing lifestyle, taking out a reverse mortgage on a home, and turning to prayer.

Tipping Points

Significant life events served as the motivation to start retirement planning in earnest, the survey found. Almost one-third of respondents (30%) said the death or serious illness of a loved one made them think more carefully about the importance of saving for the future. Other catalysts included the birth of a child or grandchild (12%), children moving out of the house (15%), changing jobs (11%), and the reality of aging.

Boomer and retiree men were five times more likely than women to consider the importance of retirement savings after changing jobs, and women were twice as likely as men of the same age to think more carefully about saving for their future after the death of a spouse or parent.

More than one-third of survey respondents said their spouse or partner has played the most significant role in helping them prepare for retirement, with boomer and retiree women (40%) were only slightly more likely than men (34%) to say so.

The survey was sponsored by the Lincoln Retirement Institute and conducted by Zogby International via a nationally representative telephone survey of 500 adults, age 42 and older, of all income levels in October 2007.

More about Lincoln Retirement Institute is available at www.LincolnFinancial.com.

EBSA Releases Proposed Revisions to Provider Fee Disclosures

Federal regulators on Wednesday issued the second of a three-part disclosure rule package – proposed mandates for detailed disclosures from service providers to plan fiduciaries.

The announcement from the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) said the disclosures mandated in the latest proposal focus on direct and indirect service provider compensation and a provider’s potential conflicts of interest.

Bradford P. Campbell, assistant Labor Department secretary for EBSA, explained during a Wednesday conference call with reporters that regulators opted to tie the new fiduciary disclosure requirement to the 408(b)(2) provision regarding prohibited plan transactions with parties in interest and that fiduciaries only pay reasonable plan fees.

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He said the new disclosures will be considered when the agency judges whether the fees are reasonable. “We’re helping to define what reasonable means so it’s clear when that duty is being met,” Campbell said during the conference call. “In order for them to carry out their duty under the law, fiduciaries need this information to do their job.”

The EBSA proposal includes mandates that:

  • The terms of a plan’s contract with a provider must require that the provider disclose information regarding all services to be performed and all compensation that will be received either directly from the plan or indirectly from parties other than the plan or plan sponsor. The proposal includes a definition of compensation or fees as well as rules for bundled service providers and for estimating the amount of prospective compensation. Fees can be expressed in dollar terms or through an estimate.
  • Service providers must also disclose information about relationships or interests that may raise conflicts of interest for the provider in performing plan services. Specifically, providers must describe any participation or interest of the service provider in transactions to be entered into by the plan pursuant to the contract, any material relationships with other parties that may create conflicts of interest, any compensation the service provider may receive that it can affect without prior approval by an independent fiduciary, and any policies or procedures in place to address potential conflicts of interest.
  • There will be ongoing disclosure obligations relating to material change in information already disclosed within 30 days of such change, compensation, or other information related to the contract or arrangements that is requested by the responsible plan fiduciary or plan administrator to comply with ERISA’s reporting and disclosure requirements.

Targeted Rulemaking

The new disclosures affect fiduciary service providers; providers of banking, consulting, custodial, insurance, investment advisory or management services; recordkeeping, securities brokerage, or third party administration services; or providers who receive indirect compensation for accounting, actuarial, appraisal, auditing, legal, or valuation services. “That’s where we have seen the type of conduct you have to be concerned about,” Campbell said of the final group.

In an instance where the plan is not aware that a provider is not complying with the law, the department is proposing a class exemption to give the fiduciary protection.

The proposal comes after EBSA’s release of the latest Form 5500 focusing on plan disclosures, and a third regulatory piece governing plan disclosures to participants will follow, Campbell said. The plan-to-participant disclosure piece is expected in the next several months.

Campbell said the DoL decided to break its disclosure mandates into three pieces in recognition that different retirement plan actors have varying information needs. “We’re trying to target these disclosures where they are needed and not unduly burden the fiduciary and the provider when they are not,” he declared.

Responding to a question about a fee disclosure bill by U.S. Representative George Miller (D-California), Campbell contended that EBSA’s three-part rule package “cover(s) the waterfront” of fee issues

He said it would be best for Congress to hold off any action until lawmakers see the end rulemaking product. “In our view, that means letting us complete our work and that Congress keep that in mind when they judge whether further (fee disclosure) action is necessary,’ the DoL official said.

The EBSA proposal is available for public comment starting Thursday and lasting for 60 days. Campbell indicated regulators will take a few months after that to promulgate the final rule and the federal Office of Management and Budget will take a few additional months to process the new regulation before it is released in final form.

Comments on the proposed regulation should be directed to the U.S. Department of Labor, Employee Benefits Security Administration, Room N-5655, 200 Constitution Ave. N.W., Washington, D.C. 20210, Attention: 408(b)(2) Amendment; or electronically to e-ORI@dol.gov or via email at www.regulations.gov.

A DoL fact sheet is available here.

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