There is a day designated for almost everything that we can imagine, so I shouldn’t have been surprised to read that today is World Math Day. Let’s celebrate! Another fact that I didn’t know is that those living in NJ hate Math??? According to the folks at Brainly, a math tutoring company, NJ ranks just behind Tennessee as the state whose residents hate Math the most. Rounding out the top five states with the most Math haters would be Virginia, Arizona, and Maryland.
Now, we have often railed about the demise of DB plans in favor of DC plans because we are asking a lot of our citizens when it comes to funding, managing, and then disbursing a retirement benefit. We’ve commented that it is a difficult math problem for even those that like Math at places such as MIT. Trying to figure out how much to put aside, if there is anything to put aside from one’s paycheck after all the necessities have been covered, so that an appropriate nest egg may be accumulated is very difficult. In years past, workers were generally confident that they had some control over their careers, but as we have found out, one’s employer may have a very different expectation as you enter the later stages of your working life.
Couple the funding challenge with myriad options for investing your hard-earned contributions and you have a second difficult challenge. Yes, I understand that target-date-funds (TDFs) have made it somewhat easier for the average individual, but these vehicles come in all shapes and sizes, and they aren’t cheap by any stretch of the imagination. I still have a problem understanding how an individual’s allocation has gotten more conservative later in life when most of the assets are plowed into fixed income when the 10-year U.S. Treasury Note has a yield of only 1.74% (as of 10/15) and bonds have enjoyed a 30+ year bull market, but that is what seems to be the general course of action.
Finally, we have the mind-numbing issue of how to spend down your accumulated retirement benefit. Many people are leery of spending it too quickly. But for many others there is the fear of the unknown. How long am I going to live? What will my medical expenses be as I age? Will I (or my spouse) need a residential facility later in life? We know how ridiculously expensive long-term care can be. The traditional DB pension plan protected those fortunate to have one by providing a monthly check that eliminated the need to address many of the uncertainties as we age.
I like Math, but more importantly, I’ve spent 38 years in the investment management industry so the daunting task of managing a DC plan is less stressful for someone like me. Unfortunately, it isn’t for the average worker. Our citizens have enough to worry about. They shouldn’t have to wonder if a proper retirement will ever be in the cards.