Friday, October 25, 2013

REPOST: Shifting Our Retirement Savings Into Automatic

How does payroll savings plans can help people save enough money for retirement? Read this New York Times article.

MANY problems are so complex that even if we had the money to fix them, we wouldn’t know how to do it. Fixing inner-city schools, reducing obesity, creating peace in the Middle East are just a few examples.

But some problems are frustrating in another way: we know how to fix them and we can afford to fix them, but we drop the ball. That’s the situation with a crisis facing many Americans: saving enough for retirement.

Image Source:
Here is one measure of the problem: A Boston College economist, Alicia H. Munnell, and her colleagues have estimated that more than half of Americans are saving too little to support an adequate lifestyle if they plan to retire at 65. Why is the situation so serious? One reason is that traditional pension plans — in which employees have almost no decisions to make — are being supplanted by defined-contribution plans like 401(k)’s. In these plans, employees have to decide for themselves how much to save and how to invest their money. For many people, being asked to solve their own retirement savings problems is like being asked to build their own cars.

To fix this, we need to do two things. First, make payroll retirement savings plans available to everyone. Then, add empirically proven design features to them, making it easier for workers to make good choices. In other words, improve the plans’ choice architecture.

Payroll savings plans are vital because they are essentially the only way that middle-class Americans reliably save for retirement. Your grandmother probably knew that the best way to save is to put money aside before you have a chance to spend it. That approach has always worked — and is a core idea embedded in these plans.

In the past, homeowners used another form of forced saving, building home equity by paying off their mortgages. But the ease of refinancing has eroded the norm that people should pay off these loans by the time they reach retirement age. Among households with someone over 60, mortgage debt has grown drastically in recent decades. (Here’s a savings tip: If you are over 45, use today’s low interest rates to refinance with a 15-year mortgage.)

Given the importance of payroll savings, it’s alarming that only about half of the American work force has access to a retirement savings plan in the workplace — and that number falls to 42 percent in the private sector, according to Boston College research.

The Obama administration has proposed a simple solution to this problem: the automatic I.R.A. This plan, originally proposed by scholars at the Brookings Institution, would require any employer that doesn’t offer its own plan to enroll workers automatically into individual retirement accounts, with the option to opt out. The burden on employers would be tiny, and the benefit to workers could be life-changing.

The concept puts to work part of what we behavioral economists, along with industry experts, have learned about effective 401(k) retirement plans over the past couple of decades. The operative word common to many best practices is “automatic.”

When employees are first eligible for a retirement savings plan, they should be enrolled unless they choose to opt out. This solves the procrastination problem that keeps roughly a fifth of workers who are eligible for a plan from joining, even when the employer is matching some of their contributions. Companies that adopt automatic enrollment find that few employees opt out initially, or later.

But we should move beyond automatic enrollment alone. That’s because most companies set a low default savings rate for new enrollees, often at just 3 percent of their income. Of course, employees can choose a different, higher rate, but many just accept the default percentage and stay with it indefinitely.

My colleague Shlomo Benartzi, a business professor at the University of California, Los Angeles, and I devised a successful solution to this problem that we call Save More Tomorrow. Under it, a worker can join a plan in which their savings contributions are increased, say, one to two percentage points a year, each time the employee gets a raise. In the first company that tried this plan, the savings rate more than tripled in three years.

Some companies find that linking savings increases to pay increases puts a burden on their payroll and human resource departments. Such companies can avoid this problem by using a generic version of the plan, called automatic escalation, that steps up savings rates each year until the employee hits a predetermined maximum.

In a recent report in Science magazine, Professor Benartzi and I estimated more than four million people were using some form of automatic escalation, and had collectively increased annual savings in the United States by over $7 billion a year. This is significant progress, but we could do much better.

Many employees don’t know that their workplace has such an option, and finding out how to enroll can be hard. This helps explain why only 11 percent of eligible workers have signed up for it. Promoting automatic escalation and making sign-up easy, or even automatic (with the ability to opt out, of course), could greatly increase enrollment. In our original study, in which a financial adviser was available to explain the plan and, importantly, fill out the appropriate forms, nearly 80 percent of workers who were offered the plan took it.

THE third piece of the automatic plan involves investments. Retirement savers tend to be relatively passive investors, often sticking with whatever asset allocation they selected on the day they joined the plan. But those who do make changes often do so at exactly the wrong time: they buy high and sell low.

Although the stock market has doubled in the past few years, 401(k) investors have collectively been selling stocks to buy bonds during this period. (Note that in January this year, there was a sharp reversal, with investors pouring money into stocks. This might make some trend watchers nervous about future stock market returns!)

A solution to bad market timing is to offer a default investment vehicle, like a target-date mutual fund, that automatically rebalances an investor’s portfolio, both cyclically as the market rises and falls, and as the client ages, reducing stock holdings as retirement approaches. Of course, it is essential that these target-date funds have reasonable fees.

For evaluations of how corporate plans stack up, consider the ratings offered by services like If you aren’t happy with what you find, complain to your company’s management. And if you are part of management, get busy.

JG Wentworth has purchased more than $2 billion of future payments from thousands of clients. More about the company can be accessed through this Facebook page. 

Thursday, October 10, 2013

Managing money: Start simple, aim big

Many people think that properly managing money is a difficult task. Too difficult, in fact, that many don’t start thinking about their finances and their options until late in life when they can’t take advantage of the power of compounding on the little they can save at the time.

Image Source:

Still, experts maintain that handling personal finances is actually pretty simple. Most of the steps in effectively managing money are actually based on common sense and those who wish to build a sizable amount in savings just need to adopt some good money habits.

Image Source:
There’s a reason people hear the same advice about money management time and again. Easy steps like ensuring that a portion of one’s earnings go into savings, no matter how small, go a long way in building a sizable amount for emergencies or for retirement and must never be neglected. Likewise, paying off debts as soon as possible and finding more ways to increase savings by cutting off unnecessary expenses are good ways to avoid financial problems later on.

Image Source:

Keeping things simple is vital to effectively managing money. Too many people get caught up in complicated investments or too much debt that they fight a losing battle in keeping finances healthy. When things start to feel a bit complicated, it might be time to take a step back and find out what can be done to make one’s finances simpler and more manageable. Amassing wealth should be slow and steady, so any steps taken early on will have a big effect down the line.

For more information on how JG Wentworth helps consumers overcome sudden financial troubles, visit this website.

Saturday, October 5, 2013

Amid economic recovery, many consumers feel less secure financially

Image Source:

While there have been reports from various industries on indicators of economic recovery, consumers are less confident about the outlook and many of them have expressed insecurity about their finances.

It has been five years since the collapse of the Lehman Brothers and it is evident that the nation has recovered from the initial shock of mass bankruptcies and bailouts. Evidence of this can be found in the stock market and in the housing market, both of which have recovered enough to boost household wealth by $16 trillion. While many are still struggling with employment, there have also been reports that the job market is also steadily recovering.

Image Source:

According to a Country Financial survey, half of Americans feel less financially secure currently compared to five years ago. Likewise, half of Americans also feel that the economy is worse now than it was five years ago.

It seems that many households have not yet recovered from painful necessary spending during the recession. Many were forced to take from the savings they worked years to build up. Meanwhile, many Americans also did not have assets that could have benefited from the recovery. For many individuals, a bleak financial outlook continues because of their smaller retirement nest egg. Because they’ve already spent their emergency funds during the recession, it will take time for them to build savings again.

Image Source:

JG Wentworth helps consumers overcome sudden financial problems by offering to buy their annuities and structured settlements. For more information about its services, visit this website.

Friday, September 27, 2013

Money matters: Why saving is better than borrowing

With today’s culture of consumerism and “I want it now” mentality, and the proliferation of easy credit, it is no wonder many people are mired in debt. People want to live comfortably, but it is wrong for them to incur debt just so they could go on that grand vacation or buy their dream car.

Image Source:

 Saving money to do so, however, is a better idea. There is a certain feeling of achievement when one goes on his dream vacation or buys his dream car after years of saving a portion of his salary for it. However, the culture of immediate satisfaction is pushing more and more people to borrow money instead of taking the time and painstakingly saving up for the things they want. In fact, one of the many reasons why the economy is what it is today is that many people had borrowed money to buy things they want with the money they didn’t have.

Image Source:

 While borrowing money from banks or using credit cards isn’t really as bad as most people make it out to be, it is important to remember than unless people pay in full each month, they will be incurring additional charges, which may seem inconsequential at first but eventually add up. Furthermore, using credit cards to pay for purchases can be more expensive than using cash because of interest payments.

Image Source:

As with everything else in life, patience is a virtue. People must avoid spending impulsively and instead prioritize their needs and save their money for important purchases.

JG Wentworth helps those who are in need of lump sums of cash by purchasing future payments. For more information about its services, visit this website.

Monday, September 23, 2013

Structured settlement brokers: Roles and responsibilities

Image Source:

While you are in the process of deciding whether to sell your structured settlement or not, you might also want to consider hiring a professional to help you get through this in the easiest way possible. Among such professionals are structured settlement brokers.

There are significant advantages to hiring brokers. For one, they can help you navigate through the formalities and the settlement process. Two, they can be adept at negotiating a settlement plan and selling your structured settlement at the best possible deal. Lastly, brokers can be flexible enough to work for both parties to iron out an agreement.

Image Source:

This article from Yahoo! Voices identifies more roles that brokers should assume to arrive at an appropriate settlement. Some of them are as follows:

• Working with lawyers regarding the various annuity plans available for you and assisting you with the sale of future annuity payments

• Providing details of the settlement offers

• Evaluating detailed information about the claimant, including employment status, health condition, credit history, and predicted healthcare expenses

With these important roles, it is crucial that brokers comply with certain qualifications to meet government requirements. The United States Department of Justice has some rules and regulations for annuity brokers in providing structured settlement broker services.

Typically, clients acquire more cash from their settlements when they hire reliable brokers. Therefore, it wouldn’t hurt if you hire one.

Image Source:

JG Wentworth is the nation’s largest purchaser of structured settlements and annuity fees. Get more resources on related topics by logging on to this website.

Friday, September 20, 2013

A guide to selling structured settlement for cash

Given the current economic climate, the number of people seeking cash for structured settlement payments has increased.  More and more people are searching for trusted structured settlement firms to sell their payments to.  However, many of those who are in great need of immediate cash are still in the dark as to how this process works.        

Image Source:

The first thing to do is to contact a reputable company offering this service.  People may also seek help from a lawyer who is highly trained to guide individuals through the pre-selling, selling, and post-selling processes and provide tools for negotiating an agreement.    

Simon Volkov of Yahoo! explains further some guidelines on what the process of structured settlement selling entails. 

Image Source:

To have a safe transaction, it is wise to sell only a portion of the structured settlement since investors buy annuity payments lower than their market value.  Experts do not recommend selling the entire structured settlement unless there is a compelling reason to do so. 

For the sake of the sellers, it is best to assign rights to future payments over to the buyer.  This is because assigning rights allows the life insurance company handling the agreement to remit appropriate payments to the buyer.  But when the transaction expires, payments automatically go back to the sellers.        

Image Source:

Before the agreement is put in order, legal papers will have to be worked out for the court to study.  Before giving the go signal, the court will then decide whether an individual’s best interest is served upon selling the structured settlement.  If it is, then the agreement is a go.      

You can find JGWentworth’s reviews on other related by accessing this site.

Tuesday, September 17, 2013

Living cheap: Getting things for less

Sticking to a budget is never easy, especially when you’re supporting a family. However, contrary to popular belief, it is very much possible to cover all the necessities without wiping out your savings.

Can’t afford your rent? Move to another neighborhood.

While many people dream of living in a neighborhood like Manhattan’s Upper East Side, it can be very expensive to do so. Look for homes in neighborhoods where cost of living is low without sacrificing safety and accessibility.

Image Source:

Need a car? Try buying a second-hand car instead.

Although most people dream of buying a brand new car, buying second-hand isn’t such a bad idea, as long as you bring a capable mechanic with you to check if the car you’re getting is in good running condition. Brand-new cars, after all, lose some of their value as soon as they leave the dealer’s lot.

Can’t afford a college education? Consider enrolling in a community college.

Tuition fees in a community college are cheaper than those in a university, and since classes at community colleges are smaller than those in big private universities, professors are more hands-on with their students, which can lead to a better learning experience.

Image Source:

Need to buy groceries? Use coupons.

Reality TV show Extreme Couponing proves that with the right planning and preparation, buying groceries on the cheap is very much possible. Couponing is a great way to save money on groceries. In fact, many of the show’s participants even get their groceries for free because of couponing.

Living on the cheap is possible, provided that you are willing to make some lifestyle changes and to strictly follow your family’s budget.

Image Source:

JG Wentworth continues to help people achieve their financial goals by buying off their annuities and structured settlements. Visit this website to learn more.