October 2016 Update From Our CEO

Big changes are happening with public sector pensions – and hardly anyone is taking notice. The latest shoe to drop in a decades-long shift away from pensions and towards what’s called a defined contribution system comes from the US military. They’re moving away from a traditional pension plan and towards a 401(k)-like plan in the coming months. The tie-in to longevity? With a pension, you don’t have to guess how long you’ll live in order to budget for retirement. In a defined contribution system, you do.

Election 2016: The Transhumanist Party. Say what!?!

Theories on what will make you live a long time abound. Taken to an extreme, the quest for longer lifespans can get pretty zany. If nothing else, this is an interesting read about a third-party presidential candidate, his casket-shaped tour bus, and his quest to live forever. Read more.

Tax Efficiency, Meet Mr. Algorithm

Technology company Betterment announced this week that they are rolling out a new way to automatically increase the tax efficiency of your retirement assets. They estimate it will increase a portfolio’s value by 15% over 30 years. Bloomberg wrote a summary of why the news is significant. Read more.

8 Sources of Retirement Income In A Low-Yield World

My latest post on Forbes compares the major sources of retirement income. With bond yields at historical lows since July, it’s important to take a step back, understand your options, and diversify your portfolio to protect against what the future holds. Read more.

Why Private Pensions Could Be The Future

The people behind the personal finance podcast Stacking Benjamins brought me on for a segment during their September 29 show titled “How to Capture a Raise” where I talk about the new challenges emerging from increasing longevity, low interest rates, and retirement planning that is more self-directed. It starts around 30:46. Listen for free.

Closing Thoughts

Our country’s transition from one retirement system to another continued with some big news this week. Our old system was largely based on pensions and we’ve moved to one based more on 401(k) style plans. Your best chance of still getting a pension is to work in government or the military, but even that’s changing, as the military is close to finalizing a plan to modify its pension system and migrate over to a system that looks more like a 401(k) or IRA.

The news got me thinking about two things.

First, although this will impact literally tens of millions of people over the next decade, it wasn’t front page news — why is that? As a society, we seem to care less about major changes or events that play out over a longer period of time and care more about minor changes that happen instantaneously. This phenomenon has been widely studied by academics and lies at the root of some of our most irrational behavior as humans. Mitigating this is a hard but critical problem if we want better outcomes when it comes to making the hard choices that help us live longer and more prosperous lives.

My second thought — how will this shift in retirement systems end? More and more data points suggest that 401(k) and IRAs don’t have good options once you retire and start spending the money you’ve saved. As a retiree, it can be really hard to optimize your retirement spending plan so that you have a good standard of living but mitigate the risk of running out of money. And today’s plans don’t do much to help.

In my opinion, the question is not if but when we’ll get to an equilibrium between the pension-dominated world of a generation ago and the self-directed retirement system we have today. For the sake of future retirees, let’s hope it happens sooner rather than later.

To Your Continued Longevity,

Matt Carey
Co-Founder & CEO

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