Data & Research January 23, 2012

Two-Thirds of Gen X Lack Confidence in Retirement

The recent economic recession impacted many Gen Xers’ financial savings, according to a report.
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The study for the Insured Retirement Institute’s (IRI) report, “Retirement Readiness of Generation X: An Overview of the Next Generation of Retirement Investors,” found nearly two-thirds (65%) of the members in Generation X lack confidence that they will have enough money to live comfortably in retirement, to cover medical expenses during retirement and to pay for the cost of their children’s higher education.  

Nearly a quarter (23%) of Gen Xers stopped contributing to their retirement accounts during the recession, 15% made early withdrawals from their 401(k) plans and more than one-fifth (22%) stopped contributing to college savings plans.  

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Only 41% of Gen Xers have tried to figure out how much money they will ultimately need to save, and among those who have saved, half have amassed less than $100,000. Thirty-seven percent of Gen Xers indicated they have consulted a financial adviser. Among single Gen Xers, this decreases to one-fifth.  

Fifty-four percent of female Gen Xers rated themselves as having little to no investment knowledge, compared to 37% of male Gen Xers.  

Of Gen Xers who identified an anticipated retirement age, the average age was 64, indicating a retirement period of more than 20 years.  

IRI commissioned Woelfel Research Inc. to conduct a survey to determine how retirement is viewed by individuals in their 30s and 40s. The research was conducted by telephone interviews with 802 adult Americans ages 30 to 49, from November 10 to 22, 2011.  

The report is here.

 

Compliance January 23, 2012

Groups Ask IRS not to Abandon 403(b) Prototype Program

Industry groups sent a comment letter to the Internal Revenue Service to support the inclusion of 403(b) plans in the prototype program for pre-approved plan documents.
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The National Tax Sheltered Accounts Association (NTSAA) and the American Society of Pension Professionals & Actuaries (ASPPA) say informal comments have been made by IRS officials that budget concerns have resulted in a reexamination of whether to include 403(b) plan documents in the pre-approved plan program. The groups argue a prototype program for 403(b) plans is essential for the proper administration of the tax laws.   

“After the issuance of so much guidance related to the written plan requirements, we believe it would be a mistake to abandon an integral component of 403(b) compliance. We therefore urge the Service to proceed with implementation,” the letter says.  

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NTSAA and ASPPA note that many plan sponsors and their advisers have followed the new 403(b) plan document mandate closely over the last few years and anticipated the 403(b) prototype plans would be available by now. If 403(b) pre-approved plans are ultimately not included in the prototype program, it will put plan sponsors, such as charities and public schools, in a potentially untenable position. They are required to have a compliant written plan under the final regulation. IRS enforcement agents will be actively auditing whether their plan documentation is correct, yet the Service has indicated it may not be willing to provide for a cost-effective, pre-approved 403(b) plan document program, as it does for the private sector.   

“In effect, the failure to add 403(b) plans to the prototype program would put 403(b) plan sponsors — for which the written plan is commonly a new requirement — at a significant disadvantage compared to 401(k) plan sponsors,” according to the letter.  

The groups contend this cost and uncertainty will cause a percentage of current plan sponsors to terminate their programs and discourage other nonprofit employers from adopting new plans.  

The comment letter is at http://www.asppa.org/document-vault/pdfs/GAC/2012/1232012.aspx.

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