Data & Research September 26, 2012

Research Cautions Against Retiring During Good Economy

Many Americans choose to retire when the economic markets are peaking, an action that can cause problems for their long-term financial stability, a researcher found.
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In the study, which was published in the Journal of Personal Finance and funded by a grant from Prudential Insurance Company of America, Rui Yao, an assistant professor of personal financial planning in the College of Human Environmental Sciences at the University of Missouri, found that the probability that retirement-eligible Americans chose to retire increased as the number of consecutive up-market years increased. Each one percentage increase in market returns increased the probability of retirement by more than 2%.  

Yao also found that working Americans with a retired spouse were more likely to retire than all other household types, including those with a working spouse and those without a spouse. Yao says this trend could also create potential financial problems.  

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“Potential retirees often will first meet their targeted retirement savings goals during an up market and will be tempted to retire at that point,” Yao said. “The problem with this strategy is that the economy runs in cycles, meaning that after a peak, the market will take a downturn. People who have retired shortly before an economic downturn run a serious risk of losing a significant portion of their retirement savings, which will shorten the longevity of their retirement income. This could result in many retirees outliving their retirement savings and facing financial hardships toward the end of their lives.”  

Yao added that it makes sense that many married couples would want to retire around the same time. “However, if both spouses decide to retire close to the end of an up market, the household would have little to no cushion should their retirement portfolios be affected by an economic downturn,” he said.

Yao believes these findings show the need for retirement planners, employers, and financial educators and practitioners to help pre-retirees better understand the challenges they face in order to reduce the likelihood of financial problems after retirement.  

The study examined data from the Health and Retirement Study—a national biannual survey conducted by the University of Michigan. The study reviewed the financial and retirement statuses of more than 4,000 households with retirement-age Americans from 1992 to 2008.

 

Products September 26, 2012

Trinity Pension Consultants Launches CB Navigator App

Third-party administrator Trinity Pension Consultants released the Cash Balance (CB) Navigator mobile application, enabling advisers to generate a client’s maximum annual contribution amount.
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By inputting a client’s age and income using the free app’s drop-down menu, advisers can provide an estimated maximum annual contribution amount for the first year of a cash balance plan. Advisers can select from ages 35 to 70 in one-year increments, and choose the compensation from $50,000 to $250,000 in $10,000 increments.

Financial advisers can then request a full illustration from Trinity Pension Consultants—an email will be sent directly to a Trinity representative, who will contact the adviser for more information.

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“Cash balance plans are one of the fastest-growing sectors of the retirement plan market,” said Kevin Bergdorf, Trinity principal. “Financial advisers and other retirement planning professionals require the tools necessary to stay ahead of the curve.”

The app can be downloaded for both the Android and iPhone by searching for CB Navigator in the Google Play Store or the Apple App Store.

For more information, visit www.trinitypension.com.

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