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PBGC Blog: Retirement Matters

Right now, the Powerball jackpot stands at $425 million, but whoever wins it will probably be broke within a few years. That's what happens to 70% of winners, according to the National Endowment for Financial Education.

That made us think about retirement. (We know, we know... what doesn't?)

Lottery winners can choose to take annual payments, pay lower taxes on their newfound windfalls, and have 30 years before worrying about running out of money. But research shows that the vast majority of winners choose to take a windfall lump sum instead.

But those who take the lump sum apparently don't "invest" it so wisely.

So if you're the lucky Powerball winner, unless you plan to keep your job, think twice about how to fund your retirement, and whether to take your winnings all at once. Remember, that gigantic pot of money has to last your whole life, not just a few years.

And even if you don't win the lottery, beware of a lump sum of whatever size. It may look good now, but you take on the risk that you'll outlive it. Most folks do better with guaranteed income.

Like the old saying goes "if you don't use it, you lose it." A study of nearly half a million people in France revealed that people who delay retirement have less risk of developing Alzheimer's disease or other types of dementia.

Read the full Associated Press article on the USAToday website

Close-up photo of calendar

Today, June 18, is National Splurge Day.

There are certain days and times of year that most people look forward to. Perhaps National Splurge Day is one of those days marked on your calendar. However, in calendars that haven't been printed yet, you may look forward to marking the day you can retire.

According to Holiday Insights, here's how to properly join in the National Splurge Day festivities:

Treat yourself excessively, to anything you want. And, to excess if you desire. Isn't that a great thing? Maybe, you're on a diet, and that special dessert is too many calories. Maybe, you want to buy a steak, and the budget is a little tight. Toss out the reservations, and go for it today.

A steak or a dessert is one thing, but don't go crazy. There's one kind of splurge you may really regret — the multi-thousand-dollar retirement binge. Too many people retire and "treat themselves" to a fancy new car or an extravagant vacation that they don't really need, and in the long run can't afford. And even while they're still working, too many people downgrade their future retirement income through "leakage" from their 401(k) plans — loans and cash-outs between jobs.

So, on National Splurge Day, go ahead, treat yourself. But definitely don't cheat yourself or your retirement. 

10 Ways to Pay...

  |   June 10, 2013

In the article, "10 Ways to Pay for Retirement," U.S. News & World Report lists the most common ways to pay for retirement.

  1. Social Security.
  2. A pension.
  3. Retirement accounts.
  4. Home equity.
  5. Stock market investments.
  6. Savings accounts.
  7. Annuities or insurance plans.
  8. Part-time work.
  9. An inheritance.
  10. Rent and royalties.

Pensions are a big part of how people prepare for retirement, along with working longer, saving more, and — as a last resort — tapping home equity. Read the full article.

Keyboard with the word, retirement, as a keySimilar to that of a "payday loan," retirees are being offered pension advances with alarmingly high interest rates — rates often higher than those on credit cards.

While financial products like pension advances, which promise quick cash, may appear enticing, keep in mind that the long-term costs are largely hidden from the borrowers.

In an effort to protect your pensions and retirement security, Senators Tom Harkin (D-IA) and Lamar Alexander (R-TN), Chairman and Ranking Member of the Senate Health, Education, Labor, and Pensions Committee, sent a letter to the National Association of Attorneys General (NAAG) requesting documentation and information that could help the Committee identify Americans who may have been targeted by lenders offering lump-sum payments, with potentially illegally high rates of interest repayment, in exchange for a stake in the borrower's pension benefits.

In the letter, Harkin wrote, "Pensions are the bedrock of economic security in retirement for millions and millions of middle-class families. But now, it appears that there are some financial operations trying to siphon a profit off of people's retirement benefits. These unscrupulous companies are offering to buy pensions for a lump-sum. That may sound like a good idea to someone who is facing financial challenges, but long term, it can actually leave them worse off down the road. I hope this bipartisan investigation will shed light on the scope of this issue and uncover the companies that are taking advantage of our nation's pensioners."

Read the full text of the letter.

Here's more useful information: The U.S. Securities and Exchange Commission Investor Bulletin - Pension or Settlement Income Streams: What You Need to Know Before Buying or Selling Them

The Economic Mobility Project of the Pew Charitable Trusts released a new report titled "Retirement Security Across Generations: Are Americans Prepared for Their Golden Years?," which provides a glimpse into the uncertain situation facing those who are approaching retirement age.

The report explores the retirement security for different age groups and examines how the Great Recession affected the wealth and retirement security of baby boomers as compared to younger and older age groups.

This research reveals that younger age groups face the greatest prospect of downward mobility in their golden years. 

Among the many significant findings in the study is that Americans born after 1955 carry more debt than have previous generations, and that this age group faces a severe decline in living standards upon retirement.

Read the full report