Products June 7, 2018

Tax Reform, Fiduciary Rule Impact 403(b) and 457(b) Plans

The National Tax-Deferred Savings Association updates its reference guide ‘The Source’ to reflect last year’s tax reform and the DOL fiduciary rule derailment. 

 

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This week, the National Tax-Deferred Savings Association (NTSA) released an updated edition of its widely used reference guide for advisers working with nonprofit and governmental retirement plans, known as “The Source: 403(b) and 457(b) Plans.”

According to the NTSA, the changes to the guide reflect the impact of tax reform and the fight over the now-defunct Department of Labor (DOL) fiduciary rule. 

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“The Source” is authored by two subject matter experts, Ellie Lowder, a tax-exempt and governmental plan consultant with TSA Training & Consulting Services, and Susan Diehl, president of PenServ Plan Services Inc. and chair of the NTSA Communications Committee.

The newly updated seventh edition features information on the ways that the Tax Cuts and Jobs Act affects 403(b) and 457(b) plans. It also discusses the current status of the DOL fiduciary rule, as well as the recently proposed best interest regulations from the Securities and Exchange Commission (SEC). The Source further includes information on new hardship withdrawal rules, as well as a comprehensive outline of the market.

NTSA Executive Director Brent Neese adds that the reference guide covers “all the technical, compliance, administrative and marketing aspects of 403(b) and 457(b) markets.”

According to the NTSA, also covered are audit tips based on recent Internal Revenue Service (IRS) audits; Employee Retirement Income Security Act (ERISA) 403(b) compliance concerns and testing; guidance on how to maintain a non-ERISA 403(b) plan and how to pair it with other defined contribution (DC) plans; updated versions of numerous checklists and sample forms; rollover/portability charts; insights on how to select a third-party administrator (TPA); and a sample administrative ppendix that can be used to compare vendors and other third parties.

“The Source: 403(b) and 457(b) Plans” is available to NTSA members at a discount. To find out more about purchasing the guide as a nonmember, contact Elizabeth Duda at eduda@usaretirement.org.

Data & Research June 7, 2018

Most Americans Don’t Know How Much They’ll Need, to Retire

Among those who have made an estimate, the median amount is $650,000, Bankrate.com learned in a survey.

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Sixty-one percent of Americans are unaware of how much savings they will need to successfully retire, Bankrate.com learned in a survey. The median amount among those who have assessed how much they will need is $650,000. Nineteen million Americans say they never plan to retire, including 9% of both Millennials (18- through 37-year-olds) and Baby Boomers (54- through 72-year-olds).

Millennials are the most apt to be unsure of how much money they will need, cited by 69%. However, even older Americans are not in much better shape vis-à-vis retirement estimates: 56% of Generation X (38- through 53-year-olds), 58% of Baby Boomers, and 59% of those 73 and older have no clue.

Among people who have put some thought into the required retirement savings, responses are all over the map, with 7% saying between $250,000 and $500,000. Eight percent each say $250,000 or less, $500,000 to $1 million, or more than $1 million.

Gen Xers are twice as likely as any other age group to say they will need over $1 million to retire. Those who are working are three times as apt to say this, compared with those who are not working. Additionally, people who live in the Northeast (12%) and West (11%) are twice as likely to say $1 million or more than residents of the Midwest (5%) and South (6%).

“The key to retirement savings is to actually save for retirement,” says Bankrate.com analyst Taylor Tepper. “Put away at least 10% of your pay, including any employer contributions, into your retirement account—and do it yesterday. There are pretty sophisticated online calculators and tools that can help you estimate how much you’re going to need, and you can always hire a fee-only certified financial planner if you want a little more hand-holding.”

More than half of Americans say they have sought advice on retirement planning. Twenty-six percent consulted a personal financial adviser, and 21% asked a family member or friend. Eleven percent used an online retirement calculator, 10% reached out to a bank or financial institution, 8% relied on expert commentary or articles, and less than 1% used a robo-adviser.

Millennials are the most apt to reach out to a family member or friend (30%), while Boomers are the most apt to work with an adviser (37%). People who are married or living with a partner are twice as likely to consult a personal financial adviser or financial institution than those who are single or living alone.

Asked how much of their retirement would be funded by Social Security, 61% said little to none, 20% said half, and 17% said most of their income would be from Social Security. “Social Security will almost certainly contribute a sizable portion of your retirement income, even for Millennials, despite erroneous declarations that the pension program will soon go bankrupt,” Taylor says.

GfK Custom Research North America conducted the survey among 1,000 adults for Bankrate.com in May. The survey can be viewed here.

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