Retiring Boomers Find 401(k) Plans Fall Short .

[scagnt83]

One of the biggest contributors to pushing out the more experienced and well paid guys, is that they bring up the cost of HI tremendously for the company.

If you were 40, would you want HI at a company were the average age is 60, or where the average age is 35?

What the older employees cost them in salary is nothing to what they cost them on HI usually.



I was once under a "career" contract with LFG (LFG guys call it the "benefits contract", I was indy, had benefits, and a very low premium mark to hit to keep the contract in force; their average age was around 55; it cost $600 per month for a family plan with them.... and Im a single 27yo with one kid....


The sad part of it is that the 55yo often has no alternative to group coverage b/c of health, so its even worse when they are forced out... us young guys usually are healthy...

 

[VolAgent]

One of the biggest contributors to pushing out the more experienced and well paid guys, is that they bring up the cost of HI tremendously for the company.

If you were 40, would you want HI at a company were the average age is 60, or where the average age is 35?

What the older employees cost them in salary is nothing to what they cost them on HI usually.



I was once under a "career" contract with LFG (LFG guys call it the "benefits contract", I was indy, had benefits, and a very low premium mark to hit to keep the contract in force; their average age was around 55; it cost $600 per month for a family plan with them.... and Im a single 27yo with one kid....


The sad part of it is that the 55yo often has no alternative to group coverage b/c of health, so its even worse when they are forced out... us young guys usually are healthy...

If only their benefits were still that cheap. Those 55 years drove it up to 1100+ a month, more if unsubsidized. LFGs benefits have priced them out of attracting young producers to help with the costs.

 

[scagnt83]

If only their benefits were still that cheap. Those 55 years drove it up to 1100+ a month, more if unsubsidized. LFGs benefits have priced them out of attracting young producers to help with the costs.

Yeah, its completely ridiculous.
It was a nice contract too; 401K match, profit sharing plan, production based stock options; but the haircut only makes sense if you take the HI subsidy into account.... and since I wasnt using it... the retirement benefits just werent enough to justify it.

 

[VolAgent]

Yeah, its completely ridiculous.
It was a nice contract too; 401K match, profit sharing plan, production based stock options; but the haircut only makes sense if you take the HI subsidy into account.... and since I wasnt using it... the retirement benefits just werent enough to justify it.

Really, most mutuals have a better contract. Its nice, but nothing special.

 

[scagnt83]

Really, most mutuals have a better contract. Its nice, but nothing special.

Maybe for the first three years the mutuals are better, but not if you plan to stay in the biz for anytime past that.

Plus my old NYL contract had no matching on 401K, PS only after 2 or 3 years, and then there was a pension (and we all know how reliable those are...)


If you are a low producer the mutuals might be better, but if your doing over 60K in premium their contract seemed to be better... at last when compared to NYL

But indy is the way to go imo.... unless you just need the GI GHI

 

[VolAgent]

Maybe for the first three years the mutuals are better, but not if you plan to stay in the biz for anytime past that.

Plus my old NYL contract had no matching on 401K, PS only after 2 or 3 years, and then there was a pension (and we all know how reliable those are...)


If you are a low producer the mutuals might be better, but if your doing over 60K in premium their contract seemed to be better... at last when compared to NYL

But indy is the way to go imo.... unless you just need the GI GHI

I thought Mass had a better contract. 401k, thrift plan, and what was basically a pension. Also, the bonuses were pretty stout, and a broader portfolio of products, just no indexed.

 

[BNTRS]

We are also neglecting to mention that fact that group insurers like to see shorter years of service (i.e. some turnover) kicking out the people who have been around for a while helps reduce rates as well. Though having a lot of older people is much more disastrous.

 

[VolAgent]

We are also neglecting to mention that fact that group insurers like to see shorter years of service (i.e. some turnover) kicking out the people who have been around for a while helps reduce rates as well. Though having a lot of older people is much more disastrous.

Makes you really question the financial viability of Medicare. Businesses are desparate to dump these people off their group health plans for some substantial savings. Yet the get Medicare for $100 a month, plus another $100 for a Med Supp, maybe another $40 for a part D? In what world does this math work?

 

[xrac]

This is true, there are two sides to the coin. But, there's always taking the early retirement deal and working somewhere else. There's also insurance, where there's no one to push you out.

I know a guy who was the CFO at a manufacturing plant and another guy who was the CPA for a chain of hotels who are both retired and working as delivery drivers for an O'Reilly Auto Parts Store. Another guy who was doing it was a retired school teacher and he was working for the insurance.

 

[Air Jer]

Let's look at the sacred 85% figure, which according to Laurence Kotlikoff has it's origin from Georgia State University and was funded by the insurance industry (that's us) (do we have an unbiased axe to grind?). According to Dr Kotlikoff, "researchers start with pre-retirment income of a variety of households (married, single, different income levels) and then make adjustments until they get to spending before retirement." Don't know about you but I'm not sure my financial situation matches up with this composite.
Well, I have put my kids through college, paid for the orthodontia work, no longer have child rearing expenses, paid off my house, in retirement will no longer contribute massive amounts of my income to retirement plans. My expenses have and will go down dramatically.
Finally, as Dr Kotlikoff points out, these income % calculations assume that retirees use none of the principal of their funds but only utilize the investment income from those financial assets. I don't know about all of you but SPDAs are going to be part of my retirement plan.
I am not going to argue that I am right but I am going to say that assuming the 85% replacement % for absolutely everyone isn't appropriate either..