Data & Research October 29, 2014

TIAA-CREF Underscores Importance of Advice

A new TIAA-CREF survey shows that 63% of women who have received professional financial advice say they feel confident about their personal retirement readiness.
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The annual Advice Matters Survey reveals that while women continue to report lower rates of confidence in their retirement readiness compared with men (56% vs. 63%), receiving financial advice can help eliminate the gender gap. In addition to feeling more confident, 81% of women who receive financial advice say they feel informed about retirement planning and retirement savings, compared with 63% who have not received advice.

After receiving financial advice, women are inclined to then take action, TIAA-CREF says. The survey reveals 87% of women take positive steps after receiving advice, such as adjusting their asset allocation or increasing savings rates. Sixty-four percent made a change in their spending habits, 57% increased the amount they save each month, 53% established a plan for managing debt, and 51% set up an emergency fund.

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The analysis reports 33% of women are interested in receiving financial advice—a significant increase from 24% only a year ago. However, advice can come from a variety of resources and many women are still struggling to find the right one. Sixty-six percent of women said they find it hard to know what sources to trust, up from 48% in 2013. Thirty-nine percent report that it is hard to find the time to look for financial advice, up from 30% in 2013. Thirty-four percent say it is difficult to know where to start looking, up from 23% in 2013.

Kathie Andrade, executive vice president and head of individual advisory services at TIAA-CREF, believes that professional and personalized financial advice is available to women, but they often get sidetracked by several barriers. “We have found that there are ways to break through these obstacles and help women access relevant advice in ways that are convenient to them,” Andrade says.

Sixty-one percent of women say they rely on financial services providers for advice, and 41% turn to financial services providers’ websites or online tools. Each of these figures has increased each year since 2012. In addition, 57% of women would like access to tools and calculators that break down complex advice principles, while 54% are interested in participating in on-demand webinars. Fifty-two percent are interested in participating in live seminars that cover personally relevant financial topics.

TIAA-CREF launched its Woman2Woman Financial Living online community to support the growing group of women who use financial services providers’ website or online tools. The site provides a series of workshops and webinars where users can request in-person meetings with a financial adviser to discuss their retirement goals and objectives.

“Nearly half (49%) of the women surveyed say the ability to interact with someone online with basic personal financial questions would be helpful,” Andrade says. “It’s encouraging to see women really embrace the counsel they receive and use it to their advantage. And with women typically saving less for retirement than men, any strides toward improving financial well-being and retirement security should be applauded—and then used as a stepping stone toward the next financial goal.”

TIAA-CREF has made an executive summary available for the Advice Matters Survey.

Data & Research October 29, 2014

Society of Actuaries Approves Updated Mortality Numbers

With the final approval of its first new mortality tables since 2000, the Society of Actuaries (SOA) has officially revised its benchmark for calculating the financial liabilities of U.S. pension plans.
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Yesterday, the society issued two reports, RP-2014 Mortality Tables and MP-2014 Mortality Improvement Scale, which effectively approve the mortality rates first unveiled in a February exposure draft of the tables. The new numbers reflect increased longevity, as measured by an intense five-year study, and will be sent to all practicing U.S. actuaries, who then decide how to implement them into real-world pension plans.

“The purpose of the new reports is to provide reliable data that actuaries can use to assist plan sponsors and policymakers in assessing the financial implications of longer lives,” Dale Hall, managing director of research for the SOA, tells PLANADVISER. He adds that the process of implementing the new tables takes time. In fact, according to Hall, the society’s mortality tables are just part of what actuaries consider when evaluating a plan. They also look at specific mortality studies they performed on their own plans.

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“Then they’ll layer in things such as health and wellness programs at the employer that may have an impact on future mortality. It’s usually the combination of these three factors that actually go into the final table used at a real-world pension plan,” he said.

Good news of added longevity aside, some sponsors of defined benefit (DB) plans—which rely on mortality tables to assess their pension liabilities and liquidity needs—worry about the revised numbers, which may cause increased liability and lowered funded status for their plan (see “Mortality Tables Impact Depends on DB Plan Demographics”). Hall says the SOA itself predicts between 4% and 8% liability growth for a typical pension plan upon adoption of the new tables.

The mortality figures on the new tables come from a peer-reviewed study of real retirement plan mortality experiences of participants in U.S. defined benefit plans—representing 10 million life years and over 220,000 deaths. In short, both men and women show approximately two years’ additional lifespan over SOA’s earlier tables.

Men aged 65 this year, for example, are expected to live to 86.6, compared with 84.6 in 2000; women currently 65 saw longevity increase 2.4 years from age 86.4 in 2000 to age 88.8 in 2014. Such changes translate to a possible increase in private pension plan liability, the SOA acknowledges, pointing out that some plans will feel the impact more than others, based on their demographic profile and design.

“We put this information out so that practicing actuaries can work with plan sponsors and auditors to make informed decisions as to what the final tables should look like for evaluating the specific plans,” he said, observing that the standards of practice for selecting a mortality table for valuing a qualified retirement plan are established by federal law. “The tables give a new place for actuaries to look at current, up-to-date information to assess the effectiveness of their own processes.”

The study itself was begun in late 2009 when the SOA’s Retirement Plans Experience Committee (RPEC) began collecting data from various sources, sifting through the materials to create the draft published early this year. Following this, both the updated mortality tables and improvement scale underwent a four-month comment and review period. Resulting constructive feedback was added to the final reports.

“Over the course of the summer and early fall we brought on several independent review teams to closely review the work our committee had done, looking for any problems,” Hall said. “We walked through the independent reviews and audits, got approval from the board of directors, and through that whole process we came to the conclusion that, yes, these are the accurate tables.”

Critics such as Michael Moran, senior pension strategist at Goldman Sachs Asset Management in New York City, have complained that the study lacked breadth, yet Hall stands by the SOA’s findings. “The analysis uses more than 10 million life years of plan experience and over 220,000 deaths. So bottom line is that we certainly walked through a lot of review on a lot of data. We’re completely confident in the results of our effort,” he said.

The SOA, a professional association of U.S. actuaries, provides research that furthers actuarial science and that is used in developing pension funding requirements.

Full versions of the 2014 Mortality Tables (RP-2014) and 2014 Mortality Improvement Scale (MP-2014) are available here.

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