I had a lovely chat with a woman I connected with on LinkedIn a few days ago. She asked me a simple question: “Where can I find information about pensions so that I’ll know what type to suggest to my clients who need a retirement plan.” I jokingly suggested she could read Internal Revenue Code Section 401(a), adding that I’ll try to email her some good resources. She appreciated the joke and the offer, but also said that she just might read the code anyway.
Most of the professionals I meet have no interest in learning about pensions through the Internal Revenue Code or it’s regulations. I think what most professionals want is an actuary who can recommend and design a plan for their clients based on each particular client’s goals and objectives. But I think most professionals also want at least a basic knowledge of what’s available, and they want to have an idea of when to use each type of plan. Let’s face it, we can all speak intelligently about our own area of expertise. But as professionals, we also want to speak somewhat intelligently about peripheral fields. I can rely on the accountant to recommend forming a C Corp or S corp, the financial professional to advise whether to use a target date or index fund, and the life insurance expert to know the type and amount of insurance to recommend. But it’s still good for me to know the differences and advantages of each.
My next several blog entries (I’m informally calling them my Spring / Summer Series) will be about different types of plans. The purpose is to provide some basic information about each plan: how it works, what are the advantages, and in which situations the plan will work, may work, or won’t work at all. I’m plan to break it down into five sections (six if you count this as a Spring / Summer Series introduction), focusing on traditional profit sharing plans (plain and with Permitted Disparity), hybrid profit sharing plans (including age-based and new comparability), 401(k) plans (traditional and safe harbor, both with Roth options), defined benefit plans, and cash balance plans.
I won’t bombard you with a plan every week, and I may squeeze in some other topics along the way. I’ve got plenty of other things I’d love to discuss. Maybe you’d like to hear about my top ten favorite movies?
When is the right time to start collecting Social Security? Should I take it at 62? Wait until I’m old enough to get full benefits? Push it off to 70? As with most things financial, there’s no definitively correct answer. One retiree may need to collect at 62 to make ends meet, while another may be able to afford waiting until 70 to get the highest benefit. I tend to like the starting early option, whether you need the money or not. When we die, Social Security ends. For example, Bob takes his benefit beginning at age 62, and his twin brother Tom waits until age 70 to collect. Unfortunately, Bob and Tom suffer an untimely, cake-related death on their 70th birthday. Bob has received 96 payments from Social Security. Tom has received none.
But what happens if we live longer than 70 years? What do the numbers say? Let’s assume my Social Security Retirement Age is exactly 66. If I start collecting at age 62, I’ll receive about 25% less than my full benefit. If I wait until age 70, I will receive about 32% more. For simplicity, we’ll say $1,000 per month is my full benefit, $750 is my age 62 benefit, and $1,320 is my age 70 benefit. It’s a big difference, isn’t it?
Maybe, maybe not.
If I take the benefit at age 62 and invest that $750 per month until I turn 66, even at 3% growth I’ll have enough accumulated to take $250 per month for another sixteen years. Add that to my $750 per month from Social Security, and I’ve got my $1,000 benefit until age 82. And if I die before age 82, there’s some cash left for my family.
I plan to keep working, so I won’t be eligible to collect Social Security early. So let’s say I start collecting $1,000 at 66 and invest it each month until I turn 70. I’ll have enough accumulated to make up the $320 difference each month for the next seventeen years. Waiting to age 70 to start collecting means I wouldn’t catch up until age 87.
That’s a long time to wait just to break even.
GASB 75 became effective for fiscal years beginning after June 15, 2017. I know that sounds like a long time ago already, but it’s not. In fact, many of the entities it applies to have not yet finished their first fiscal year after the effective date. Villages whose fiscal year ends on 2/28, for example, are just finishing their first GASB 75 year today.
But there are plenty of municipalities who should be finishing up their actuarial valuations by now. A library or fire district with a 6/30 fiscal year end, for example, is required to have their first GASB 75 valuation done for the year ending 6/30/18. That’s regardless of when the last GASB 45 valuation was completed.
Valuing liabilities for Other (than pension) Post Employment Benefits in a manner similar to those for pension plans makes sense. The potential magnitude of future obligations faced by government entities needs to be measured. That was the purpose of GASB 45. GASB 75 takes it further, with enhanced disclosure of assumptions, explanations of OPEB liability changes from year to year, and other changes that address consistency and transparency among actuarial valuations. GASB 75 valuations are also required more often than under GASB 45, so that changes in liability can be recognized sooner. As an Enrolled Actuary, I see the new standard as an improvement.
If you need a GASB 75 actuarial valuation completed for any of your government entity clients, please contact me.
My wife and I saw Come From Away on Saturday. I was not expecting my response to it.
Sometime between being a young man and (let’s just say) a not-so-young man, I developed what I like to refer to as “allergies.” A sad song, a moving vignette, or a movie pulling just the right strings would have me welling up. “It’s my allergies,” I’d say, fooling exactly no one. And now that I’m a grandfather it’s even worse. So it’s no surprise that I’d well up at an emotional play.
But this was different. Soon after the show started, so did I. I’m not talking about tissue-dabbing tears at the corner of my eyes, I’m talking full on crying. And except for a few moments of levity during the show, I didn’t stop until the end.
Maybe it’s because I’m a New Yorker, and the show has to do with 9/11. In the 80s, when my job was in Manhattan, I used to walk to the Twin Towers at noontime on warm spring days, foregoing lunch for a Chipwich and a chance to stretch my legs. In the 70’s, my father worked in one of the towers. My brother, too, as a summer accounting intern.
Maybe it’s because we all knew someone who lost someone.
And maybe it’s because I want to believe that people are good, that people will show their good side in a crisis. I remember reading about the town of Gander, Newfoundland soon after the attacks. They took in 7,000 people rerouted when the sky over most of North America became a “no-fly” zone. Every plane landing at the airport in their backyard was treated as a possible bomb, but the people opened their arms, their schools, their homes to travelers from all over the world.
“No worries, you would have done the same,” they told their guests, their own generosity fueling their faith in others. They were only partly right, of course; some of their guests would have, others among them wouldn’t have. It’s like that with people.
But damn, I never expected my response. I’m just glad it was only one hundred minutes long, I don’t think I could have taken much more of my allergies acting up like that.
#Come From Away #Gander #Newfoundland #Chipwich #September11
Christmas is over and the new year is here. Most of my family’s decorations have been taken down, with the exception of the outside lights and Nativity, which will stay up through the weekend. The holiday stations on FM and Sirius XM radio have gone back to their regular programs. The good wishes and sincere hopes for a happy new year have all been expressed. It’s time to get back to work, back to school, back to non-holiday life.
This time of year, this post-joyous season, it could be a bit of a let-down, but it doesn’t have to be. In fact, I think it’s kind of a hopeful time for many of us. We’ve resolved to do better somehow, maybe to exercise more or work more efficiently or learn something new. We’re planning to be better parents or children or friends. To be more involved or to give more to those who need it or simply to be better people. Each new year brings with it the opportunity, if not to rewrite our whole story, at least to write a new chapter. And that’s a lot of hopefulness.
There’s another resolution I’d like you to consider: think about a retirement plan. It could be that you’ll benefit from a 401(k) plan, either Roth or traditional. Maybe a defined benefit plan would work well, or a new comparability profit sharing plan. In certain situations, a cash balance plan would be best.
At Cavooris Consulting Group, we design plans that are right for our individual clients. There’s no one-size-fits-all when it comes to retirement plans. Let us take a look at your situation and we’ll give you a proposal to meet your objectives. It’s a new year. Maybe it’s time for a new retirement plan.
#HappyNewYear #WednesdayWisdom #SiriusXM
With Christmas fast approaching, here’s a little something from one of Brooklyn’s favorite Honeymooners, Ralph Kramden.
Have a peaceful and joyous Christmas and holiday season, everyone!
#Merry Christmas #Happy Holidays #Ralph Kramden #The Honeymooners
Every year, at some point between Thanksgiving and Christmas, I watch It’s a Wonderful Life on TV. I make fun of it all the way through, because, let’s face it, there’s lots to make fun of. (I mean, really, if George Bailey wasn’t born, Mary would be a frumpy, old-maid librarian, complete with glasses and hair pinned up in a bun? Forget for a minute that being an unmarried librarian is far from a fate worse than death, isn’t it just as likely she would have married George’s old friend, Sam Wainwright?) But no matter how much I make fun of it, I always tear up when I read Clarence’s message at the end of the movie: No man is a failure who has friends.
Mark Twain, from whom the quote is borrowed, and George Bailey, too, may have been men of many close friends. I am not. I have a small circle of dear friends that I love, a slightly larger circle of people I consider friends because I like them and we shares some commonalities, and an even larger circle of acquaintances who I enjoy seeing now and again about town, maybe even could be friends with under certain circumstances, but in reality we’re just not.
But it’s not about numbers. The mere having of friends, no matter how many, enhances our lives. To have someone to share our good fortunes and our bad with, someone to spend time with, someone to reminisce with as we grow old, that’s what makes this a wonderful life. So go be a friend to someone. Do something nice, something kind, something generous and caring, and let someone know they matter. And also that you matter. As we learn from that other Christmas classic, A Christmas Carol, it’s not too late.
And if those three spirits of Christmas should happen to move you, it’s also not too late to start a pension plan for 2018. I’ll be happy to help.
#Wednesday Wisdom #Christmas #It's a Wonderful Life #A Christmas Carol
I made some fitness goals at the beginning of this year. These were actually the least important of my goals, physical feats that I wanted to accomplish before my 60th birthday, which just happens to be today. No, I’m not looking for any “happy birthday” responses, although if you do sincerely wish for me to have a happy birthday, then I sincerely appreciate that. Just don’t feel obligated to say it on any form of social media.
Far more important were my goals to become a better person, the specifics of which I keep private. These private goals tend to be less concrete, a little more vague. (I wouldn’t, for example, vow to provide meals to an exact number of homeless people, but I might promise myself I’d feed some of our area’s hungry.) And being vague, it’s a little harder to measure success for those goals. Let’s just say I did OK, though I know I could have done better.
Posting my fitness goals on Facebook was for me a small act of courage. I knew there was a good chance I wouldn’t make some of them, and it’s a little embarrassing for me to have others know of my failures. But if I was trepidatious, I took comfort in knowing that I really didn’t have to ever post the results of my endeavors, and pretty much no one would even remember I said anything. That’s the beauty of people, we’re all too self-centered to remember what other people said if it’s not about us.
But here I am, 44 weeks after my original post, ready to let everyone know how I did. Not because I think anyone will love or respect me more or less based on my results, but because I like to share. (I did include myself in that self-centered comment above.) Besides, maybe it will inspire just one person to try something, and that’s never a bad thing. So here goes:
Goal 1: To lose weight. I’m not even going to mention the number of pounds I was going to lose. I was fresh off of my 2017 weight loss of 22 lbs, and I was feeling ambitious. But the actual poundage doesn’t matter, what’s important is … I didn’t lose anything! That’s OK, though, because I also didn’t gain anything. I weigh the same now as I did at the beginning of the year, and I’m going to count that as a win.
Goal 2: Do 60 push-ups. I realized early on that if I could do 20 or 30 push-ups, increasing by one every few days wasn’t much of a challenge. So I increased this to three sets of 60 push-ups, which I did back in June.
Goal 3: Run one mile in under 9 minutes, which I accomplished in September when I ran a mile in 8:56. Not being a particularly fast runner at any point of my life, I kind of impressed myself.
Goal 4: Bike 60 miles. Wait, did I say miles? I meant to say kilometers. No, I’m jk. My longest ride this year was just over 38 miles. Not bad, but not quite what I was shooting for.
Goal 5: Run six miles in 60 minutes. This was always a stretch. Two years ago, I had a hard time running a mile. I built that up during 2017, but I was still nowhere near to six ten-minute miles. Just two weeks ago, I hit my best time yet, finishing six miles in 60:56. I’m going to truncate that, call it 60 minutes, and put it in the success column. Or maybe I’ll count it as one year ahead of schedule for running six miles in 61 minutes by my 61st birthday.
Whether I share them or not, I’ll have new goals for next year. I hope you do, too. If you want to tell me about them, I’m happy to listen. I just can’t swear I’ll remember them if they’re not about me.
#Wednesday Wisdom #Goals #Birthday #Happy Birthday
I’m an optimist by nature. Not many know that about me because I also like to complain. For some reason, people believe these are opposite traits. They’re not. I’m an optimist who likes to complain.
Some examples of my optimism:
My wife and I went to Costco last week and bought some treats to give out on Halloween. My wife thought we should only buy one box, but I said we needed three. (Even that, I felt surely, would not be enough.) We settled on a box of thirty-six Linden’s Chocolate Chippers and a box of thirty Hershey’s candy bars. When those were gone, we would have to resort to using our own private stash of 100 calorie packs and maybe some dollar bills for the teenagers who showed up long after dinner.
At 3:00 last Wednesday, I was ready. We had the added excitement this year of our two grandsons staying with us, so I figured I’d go to a few houses with the 2 ½ year old and then rush back to give out our own candy. But even though I was ready at three, we wouldn’t be going until at least four. That gave me an hour to complain about having to wait. Right when we were about to go, two costumed kiddies came to our door.
“I knew it!” I said. “We’re going to run out of treats!” My wife just rolled her eyes.
We did get some more trick-or-treaters. By dinner time, we’d given out about ten bags of cookies and the same amount of candy bars. No teenagers showed up after dinner. No more ghoulies or superheroes or princesses rang our doorbell. In the end, we were left with almost four dozen Halloween treats, plus the bucket of candy our grandson brought home.
“Great,” I thought. “Now I’m going to have to eat all this fattening stuff myself.”
Oh, well, I can always lose that extra weight next year.
#MondayMorning #Halloween #Costco #Hershey's #Linden's
“How old were you when you first became successful?”
This question was posed on Facebook, in a post from a young cousin of mine. It’s a topic I’ve thought about from time to time. I’ve even written about it quite recently. The way the question is worded, it seems to imply that becoming successful is an end goal. That troubles me a little, because declaring yourself a success is a self-written invitation to rest on your laurels. Even worse, declaring yourself a failure is an invitation to give up.
But I suspect that my cousin worded it that way on purpose. His great motivator, he says, is failure. It is from our failures that we learn, and it is from what we learn that we are able to succeed. My cousin moved far away, with his young family, to try to build a better life. (https://foolish-dreams-apparel.myshopify.com/) He works hard at his job, and recently started his own store selling clothes he personally designs. I have no idea whether this will bring him financial success. I also have no doubt that if it doesn’t, he’ll learn from the experience and double his efforts.
When we succeed at tasks, when we achieve our goals, it gives us the confidence to try something else. Our failures, unfortunately, can have the opposite effect. But don’t let them. If you learned to walk, talk, read a book, or ride a bike, you know deep inside that you can succeed even after you’ve failed.
#Monday Motivation #Success Stories #Foolish Dreams Apparel