May 9, 2013
How Good Is Your 401(k)?
When Sanofi froze its defined benefit pension plan last year, the top brass wanted to make sure its 401(k) was seen as a worthy replacement by the company’s 24,000 U.S. employees and retirees.
Sanofi has succeeded, judging by Plan Sponsor magazine’s designation of the U.S. division of the French pharmaceutical giant as 2013 “Plan Sponsor of the Year.”
In corporate America, 401(k) plans are now the norm: in 2012, only 11 of Fortune magazine’s 100 largest companies still offered a traditional defined benefit pension, according to the consulting firm Towers Watson. But Sanofi U.S. had strong motivation for designing a 401(k) that is generous compared with typical 401(k)s.
The company has “highly technical, highly specialized, highly skilled [employees] that we have to recruit for and retain,” said Richard Johnson, senior director of benefits. “We wanted to ensure our employees had adequate retirement income.”
Squared Away recently interviewed Sanofi executives about their plan’s details, shown below, which readers can compare with 401(k) plans in their own workplaces. We hope you’ll post a comment on Facebook and let us know how, or whether, yours stacks up.
Here how Sanofi compares with other 401(k)s:
April 30, 2013
Translating Savings to Retirement Income
Determining how much money one will need in retirement is a mathematically and psychologically daunting task for many Americans. But new research has landed on a deceptively simple strategy for prodding workers to save.
Employees in an experiment at the University of Minnesota saved more for retirement after researchers provided them with a personalized chart with information similar to that shown below. Each employee’s chart translated a $100, $200, or $500 contribution, made every other week, into the amount of income each of these contributions would generate annually once they retired. If they saved more, they could see that it translated to more retirement income.
“We think people may have a hard time making that translation from an accumulation of wealth to an income flow,” said researcher Colleen Flaherty Manchester. “They’re used to the flow because that’s what they get every month or week in their paycheck.”
The income projections, she said, are “completing the circle for them to make it clear.” …Learn More
April 23, 2013
Financial Boot Camp Helps Army Enlisted
A U.S. Army requirement that newly enlisted men and women complete an ambitious personal finance course is having some impressive results.
At a time when financial education is increasingly being criticized as an ineffective way to raise Americans’ low saving rate, an 8-hour course held on 13 Army bases is significantly boosting how much military personnel are saving for their retirement – among both big and small savers. They also trimmed their debts.
The strong results, described in a new study by William Skimmyhorn, an assistant professor at the U.S. Military Academy at West Point, are also sending a ripple through the financial literacy community.
“The reason this study is so interesting is because it’s so unusual,” said Harvard University’s Brigitte Madrian, co-director of the household finance working group for the National Bureau of Economic Research. “There aren’t a lot of other scientific studies one can point to” that show empirically that financial education can improve an individual’s well-being, she said. …Learn More
April 16, 2013
Women “Reactive,” Not Planning Finances
What motivates women to get to work on their personal finances? Change.
Emotions are also important motivators. But “the most compelling factor” spurring most of the women interviewed in a focus group to take action was a significant life change, Utah State University researchers write in the Journal of Financial Counseling and Planning.
“Major life changes like a premature death of a spouse or divorce are often the wake-up call to people to reassess their lives,” said Utah State researcher Jean Lown, who also teaches a workshop, Financial Planning for Women.
This tendency isn’t necessarily a good thing for women. Rather than being “reactive,” she said, women need to learn to plan ahead and prepare for the future.
For Megan Rowley, who conducted the focus group, the women’s stories hit home. While Rowley pursued her master’s and worked full-time at Utah State, her husband left a part-time job to complete his MBA. After they graduated, he found employment at a pipeline company in Salt Lake City, and she became a stay-at-home mother, said Rowley, who wants to become a financial counselor when her three young children are older. …Learn More
March 26, 2013
Long-Term Care Needs Sneak Up On Us
As I sat in an orthopedist’s office last week watching the doctor poke and prod my mother’s legs – an irritated nerve may be causing her severe pain – this thought struck me: long-term care is often an unspoken topic but one of enormous magnitude.
I’ve always taken for granted that my active mother, who plays a killer game of bridge, wouldn’t need much medical attention for another 15 years. I have evidence of this, I’d convince myself: her mother lived to age 92 and some uncles lived even longer. The pain makes it difficult for my mother to walk her dog, though she gamely hobbles through her day and even insists on league bowling on Wednesdays.
It’s so much easier to shove aside worries about long-term care for the elderly – our own or our parents’ – than it is to contemplate the financial and deeply emotional issues required to care for an aging parent. The video below tells a true story about what happens when the requirements of care slam us hard, as they often do.
Violet Garcia is a single mother of Filipino descent living in Kodiak, Alaska, which is situated on an enormous island south of Anchorage. The public school worker cares for her elderly mother, who can’t be left alone. Garcia aspires to send her middle son away to college soon, but that will create a problem on Sundays, when he takes care of his grandmother so his mother can run errands. …
February 12, 2013
Loan Delinquencies, Need for Help Grows
As delinquencies by college graduates have increased, so have their personal financial risks: 15.1 percent of loans originated in late 2010 are now delinquent, up from 12.4 percent of late-2005 loans, according to a January report by FICO, creator of the credit score. More students are also delaying their loan payments.
“This situation is simply unsustainable,” warned Andrew Jennings, head of FICO Labs. “When wage growth is slow and jobs are not as plentiful as they once were, it is impossible for individuals to continue taking out ever-larger student loans without greatly increasing the risk of default.”
American Student Assistance (ASA) is a non-profit that helps college graduates with the complex task of managing their loans. Debt prevention is the best course of action, and an increasingly urgent one for students. For those who are already in debt, click here for how to call an ASA counselor. Click “Learn More” to read a May 2011 article about ASA. …Learn More
February 7, 2013
Why Minorities Need Social Security More
The U.S. population is in the midst of a transition from predominantly white to one in which “minorities” will one day be the majority.
A Social Security Fact Sheet recently published by the Center on Budget and Policy Priorities in Washington throws a fresh perspective on the program, which provides the financial bedrock for most retirees. It shows that the program is even more important to African-Americans and Latinos than it is for white Americans.
Seventy-three years after Ida May Fuller became the first person to receive a Social Security check, on Jan. 31, 1940, Social Security provides more than half of the retirement income received by about two out of three elderly white Americans. But many more – about three out of four – African-American and Latino retirees rely on Social Security for more than half their income.
The obvious reason is that minorities earn lower incomes on average while they are working, according to Kathy Ruffing, a senior fellow at the Center, and that has “hampered their ability to save for retirement.”
Congress intended Social Security to be a progressive program that benefits lower-income individuals more. The Social Security Administration’s (SSA) formula for calculating the monthly check is designed to replace a larger share of the employment income of, say, a maintenance worker who has retired than it does for a retired corporate executive. …Learn More