2019년5월1일 미국 하원의 자동차보험요율 관련 소위원회가 열리기전 청문회에서 미국보험협회(Insurance Information Institute)의 수석 보험계리사인 James Lynch(FCAS, MAAA)가 출석해서 자동차보험요율 책정에 관해서 증언했다.

개인에게 적용되는 자동차요율은 사고이력에 근거하지만, 그 이외에도 지역별 요인도 중요하다고 강조했다.
단위면적당 차량의 수가 많을수록 사고율이 높기 때문임을 근거로 제시했다.

한편 Rashida Tlaib의원은 신용등급을 자동차요율에 반영하는 것에 대해 문제제기하였다.

출처 : https://www.casact.org/press/index.cfm?fa=viewArticle&articleID=4400&fbclid=IwAR0UroOzUyg3YwEkgHaUWdOJa6LYWcX62e2p5nXJZnaYmf4Nhxn8sDQRUoI

CAS Fellow Testifies Before House Subcommittee on Insurance Rating Factors

James Lynch, FCAS, MAAA, chief actuary at the Insurance Information Institute, testified last week at a U.S. House of Representatives subcommittee hearing examining the U.S. auto insurance and auto lending industries. In his May 1 testimony before the U.S. House of Representatives Financial Services Committee/Subcommittee on Oversight & Investigations, Lynch explained how insurance companies set rates for auto insurance, including the importance of rating factors in actuarial calculations.

“Insurers use teams of actuaries to figure out how to set rates—how much to charge the average risk; who deserves a discount, and who does not.” Lynch said in his testimony. “They look for characteristics that successfully predict the accident rate. The most famous, perhaps, is driving record. Drivers who have avoided accidents for several years are less likely to be in an accident in the future. But driving record is not the only factor. The strongest by most accounts is location, which tells a lot about the number of vehicles per square mile. The more cars there are in an area, the more likely they are to crash into each other.”

U.S. House Rep. Rashida Tlaib (D-Michigan) has argued against U.S. auto insurer use of non-driving rating factors, such as credit-based insurance scores, to price policies; Rep. Tlaib introduced the Preventing Credit Score Discrimination in Auto Insurance Act (House Resolution 1756) earlier this year.

Lynch told the committee that auto insurer rating variables undergo rigorous actuarial analysis and are also filed in advance with state regulators, along with statistical proof of their effectiveness. Lynch noted that insurance regulators in 47 U.S. states allow auto insurers to use credit-based insurance scores as a rating factor.

연기금이 위험자산 투자비중을 늘렸지만 수익률은 높지않았다.
Fitch Ratings의 분석에 의하면 미국 연기금들은 주식과 대체투자의 비중이 2001년
67%에서 2017년 77%로 증가했지만, 수익률은 2001년부터 2017년까지 기간 평균 6.4%에서 2008년부터 2017년까지 기간 평균 6.1%로 감소했다.
역사적으로 유래를 찾기 어려운 장기간의 저금리상태에서 연기금들이 장기수익률을 지켜내고자 위험자산투자를 마다하지 않았지만 단기 변동성에 노출되는 통에 비용이 증가했고 그 리스크를 고스란히 연기금 주체(주정부 등)이 부담해야만 할 것같다.

출처: https://www.pionline.com/article/20190506/ONLINE/190509918/pension-fund-returns-show-risk-doesnt-always-equal-reward-8211-fitch?fbclid=IwAR3M1JYUM_i9QosoTFUpC40Q43RQkKxyOm-CqhfH_nyit_kppI_8kVfqJEs

일본은 점차 65세 은퇴연령을 70에서 75세로 늦추고 있다.
65세 이상 노령인구가 8백만명이상 되는통에 국민연금의 부담은 점점 늘어나는 측면도 있지만, 전반적인 출산율저하로 생산가능 인구가 줄어드는 상태에서 건강한 노령자가 은퇴하는 것이 좋을게 없기 때문이다.

실제로 Taiyo생명보험과 레스토랑 체인점인 Skylark 지주회사는 직원의 은퇴연령을 65세로 늦췄고 원한다면 70세 까지 일할수 있게했다.

출처 : Pension burden: More Japanese opt to retire late, extend employment 

이전 세대들은 주택관련 부채를 모두 갚고나서 은퇴에 들어선 반면에 최근 세대들을 여전히 빚을 갚지 못한 상태이다.
노벨경제학상 수상자인 시카고대학 세일러(Thaler)교수가 이런 은퇴자들의 은퇴자금운용 관련하여 직면한 문제를 두개로 설명하고 있다.
첫째는 얼마나 효율적으로 은퇴자금을 조성하느냐이고, 둘째는 그렇게 조성한 자금을 어떻게 살아있는 기간동안 유지해 나갈거냐이다.
빈곤하게 백세까지 사는 것을 걱정해야 한다는 것이다.
당연히 보험계리사의 산법에 따른 과학적이고 합리적인 값(actuarially fair)들이 필요하다.

출처 : https://www.cnbc.com/2019/04/23/expert-advocates-using-a-401k-to-get-a-bigger-social-security-check.html?fbclid=IwAR3NZVRxZtufBpH98VVGpd4SLxkvL6A_9_k869XYzdFCqs22U4KjPg0xdb0

Nobel laureate Richard Thaler thinks you should be able to use your 401(k) to get a bigger Social Security check. Other experts aren’t so sure.

Published Tue, Apr 23 2019 • 11:35 AM EDT Updated Tue, Apr 23 2019 • 11:58 AM EDT

Lorie Konish@LorieKonish

Key Points

• Nobel laureate and behavioral economist Richard Thaler has proposed letting individuals use their 401(k) plans to increase the size of their Social Security checks.
• The result would be the only indexed annuity that’s guaranteed by the federal government, according to Thaler, and would help solve the income dilemmas many of today’s retirees face.
• But experts warn that such a plan would need to be carefully crafted so that it does not increase the financial strain on Social Security.

Nobel laureate Richard Thaler has put forward a new idea to allow individuals to use their 401(k) savings to increase their Social Security benefits.

Thaler, a behavioral economist and professor at the University of Chicago Booth School of Business, discussed the idea at an event hosted by the Brookings Institution, a non-profit public policy organization, last week.

According to Thaler, retirement savers face two problems when it comes to managing their money: how to effectively save for their golden years, and then how to make that pot of money last for the rest of their lives.

“You have to worry about getting unlucky and living to 100,” Thaler said.

U.S. economist Richard Thaler won the 2017 Nobel Economics Prize

Scott Olson | Getty Images

That retirement income problem is amplified by a cultural change for today’s retirees. While previous generations entered retirement with their mortgages paid off, today’s retirees typically have high debts and insufficient savings, Thaler said.

That’s where Thaler said his new idea regarding Social Security benefits would come in.

The plan would let you take a portion of your 401(k) benefits — say, $100,000 or up to $250,000 — and send it to the Social Security Administration.

What you would get in return would be the only indexed annuity that’s guaranteed by the federal government at a fair actuarial value, Thaler said.

“This may seem like a wild and crazy idea, but actually all the math has already been done by the Social Security Administration,” Thaler said.

That is because the system already adjusts your benefits for your age, for each year you work and the income you take in while receiving benefits, he said.

But Social Security experts do not necessarily think the plan is that simple.

Boston University economics professor Laurence Kotlikoff said he thinks Thaler’s plan is “dicey” and worries how it would impact the future of Social Security.

As it stands, Social Security will only be able fund about 80% of promised benefits by 2035, provided Congress does not intervene, it was announced on Monday.

watch now

VIDEO0:5000:50

Social Security projected to be depleted in 2035: Report

Adding such a plan to the system could further strain it, said Kotlikoff, who also provides Social Security and retirement planning tools through his company, Economic Security Planning.

That is because people who know they are healthy and likely to live a long time would be more likely to opt in, which would be more costly.

“In general, the Achilles’ heel of social insurance programs is once you get everyone in on the same boat, you get problems,” Kotlikoff said.

But there is room for a solution, Kotlikoff said. “But it has to be done carefully so Social Security doesn’t lose money,” he said.

By forcing everyone to put $50,000 to $100,000 of their 401(k) funds in a Social Security annuity that’s actuarially fair, that would avoid adverse selection and get everyone in the same pool, Kotlikoff said.

“With that caveat, I do like this plan,” Kotlikoff said. “It has to be compulsory and everybody has to be bought in.”

More from Personal Finance:
A Roth 401(k) offers tax advantages. Here’s how it works
Here’s what attending a top college is really worth
Expected Social Security shortfall won’t stand in way of expansion

Joe Elsasser, president and founder of Covisum, a provider of Social Security claiming software, also said the plan needs to account for longer life spans and adverse selection. Otherwise, “it could easily end up being the thing that accelerates Social Security benefit cuts or political backlash,” Elsasser said.

One important point for individuals to remember: You can already use your retirement funds to increase your Social Security benefits.

“The easy way to ‘buy more’ Social Security today is to use one’s own IRA money to finance your retirement while delaying Social Security benefits,” Elsasser said.

By doing that, you can dramatically boost the size of your benefits.

At full retirement age — 66 or 67 for most, depending on the year of your birth — you can get 100% of your retirement benefit. But by waiting until age 70, you can get a 32% bigger check.

Yet, fewer than 10% of people delay claiming beyond full retirement age, Elsasser said. Most opt to start receiving checks as early as possible — either at 62 or when the earnings test is no longer relevant, he said.

현재 91세이신 마코비치 교수님이 인공지능을 인공바보라고 말씀하시네요

인공지능은 단지 컴퓨터 프로그램이지 신비한 지능을 끌어내는 마법의 특효약이 아니라고 강조하시네요.

출처 : https://www.thinkadvisor.com/2019/04/15/harry-markowitz-talks-mpt-robos-and-where-hes-invested-now/?cmp=share_twitter%3Fcmp_share%3Dshare_facebook&fbclid=IwAR0Zgm9grlnVyKn5l0LWAZUPK3ewG9rlrzjeedT9vzqCfnA3W3IWfb6DPKA

Q&A

Where Harry Markowitz, Father of Modern Portfolio Theory, Is Invested Now

The 91-year-old Nobel winner also told ThinkAdvisor that AI should stand for "artificial idiocy."

By Jane Wollman Rusoff | 4월 15, 2019 at 11:01 오전

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Nobel Memorial Prize winner Harry Markowitz. (Photo via Harry Markowitz)

Nobel Prize winner Harry Markowitz, who conceived Modern Portfolio Theory, is 91 years old, boasts a list of corporate clients as long as your arm and has no intention of keeping his controversial views to himself, as evidenced in an interview with ThinkAdvisor.

For starters, here’s what Professor Markowitz thinks of artificial intelligence, the darling of multiple industries: “Artificial intelligence — quote-unquote — is artificial idiocy,” he argues. “There’s no magic elixir that somehow the Sorcerer’s Apprentice is conjuring up mysterious intelligence. It’s a [computer] program!”

In 1990, Markowitz, then a professor at the City University of New York, received the Nobel Memorial Prize in Economic Sciences for developing MPT. The award was shared with professors Merton Miller and William Sharpe for their work in financial economics. The previous year, Markowitz won the Von Neumann Award from the Operations Research Society of America. Operations research applies mathematical and computer techniques to solving problems of business and government.

Throughout the years, the Chicago native has focused on using such techniques to find answers to practical problems, especially those relating to “business decisions under uncertainty,” as he writes.

In the interview, he discusses MPT, the vagaries of securities investing and why he shifted to virtually all equities when hurricanes hit the U.S. in 2017. He also talks about the virtues of robo-advisors and what human FAs should bear in mind when it comes to MPT’s risk-reward curve.

A research associate at The Rand Corp. in 1952, Markowitz wrote a paper he called “Portfolio Selection,” whose contents would become known as Modern Portfolio Theory. Quant analyst Barr Rosenberg, an early advocate, gave it the MPT name, Markowitz recalls.

His article, published in the Journal of Finance in March 1952, showed diversification — that is, the use of uncorrelated asset classes and other considerations — as a way to invest optimally while reducing risk. In 1959, he expanded the theory into a book, “Portfolio Selection: Efficient Diversification of Investments.”

MPT, anchored in buy-and-hold, would become synonymous with investing efficiency and was widely adopted by the financial services industry.

In 1984, a year after leaving the research staff of IBM, Markowitz founded Harry Markowitz Co., now based in San Diego. His current clients include Hudson Bay Capital, Invesco Group Services, Loring Ward Financial, Personal Capital and Research Affiliates. And he is on the advisory boards of the financial wellness system Acorns, Skyview Investment Advisors and Index Fund Advisors, among others.

Markowitz has held teaching posts at The City University of New York’s Baruch College; Rutgers University; the University of California, Los Angeles; and the Wharton School, among other colleges and universities. Most recently — 2007 until early this year — he was an adjunct professor at the Rady School of Management at UC San Diego.

In the private sector, he was a consultant to General Electric between two stints as research associate at the Rand Corp.

On top of making shrewd stock market investments, Markowitz has built wealth through real estate. Last year, he purchased an Alpine, California, house and the land it’s on, which he uses solely for entertaining. Cost: $1.60 million. He now estimates that package to be worth a total of $4 million to $5 million.

His main residence, bought for under $500,000, has likely now appreciated to $1 million, he says. And a small condo that he accesses mainly for midday napping (“I go to bed at 2 a.m.”) is worth about $360,000. He paid less than $300,000 for it.

Dr. Markowitz is looking ahead to celebrating his 92nd birthday this August. It’s not unreasonable to expect that that will happen at a big party in his Alpine mountain home, which features a $60,000 Steinway concert grand. He calls the picturesque digs his “cabin in the sky.”

ThinkAdvisor recently interviewed the industry pioneer, on the phone from his main San Diego residence. Sipping a Starbucks venti latte, he explained elements of MPT, quoted Shakespeare and noted that it was someone else who named his seminal work Modern Portfolio Theory.

Here are highlights of our conversation:

THINKADVISOR: How would you describe yourself?

HARRY MARKOWITZ: I’m an economist. I’m also an operations research guy. I’m also a computer guy. With my article, “Portfolio Selection,” I created the portfolio theory industry. [The late economist] Merton Miller said my article was the Big Bang [theory] of modern finance.

What are your thoughts about artificial intelligence?

Artificial intelligence — quote-unquote — is artificial idiocy. Suppose you knew somebody who could drive from Point A to Point B without hitting anyone but couldn’t butter a slice of bread. Suppose you knew someone else who could play chess at a champion level but couldn’t drive from Point A to Point B. He would be an idiot savant.

So what are you getting at?

There’s no magic elixir that somehow the Sorcerer’s Apprentice is conjuring up mysterious intelligence. It’s a program! It follows somebody’s rules. Programs are based on theories. And they may have a bug: A very large airplane carrying lots of people encounters a bug in the artificial intelligence being used to help fly the plane — [people] die.

Many fear that AI and robots will take over the world.

If you get malicious programs, you get malicious results.

Do robo-advisors and the principles on which they operate use MPT?

Sure. They’re a way to bring advice to the masses. Robo-advisors can give good advice or bad advice. If the advice is good, great. As an institution, robo-advisors are extremely useful, like hedge funds as an institution are extremely useful.

Please discuss diversification as the heart of Modern Portfolio Theory.

We’re trying to minimize risk for a given return, so we want to diversify. It’s clear that not putting all your eggs in one basket is [what to do]. Even in [the 16th century], Shakespeare knew about diversification: In “The Merchant of Venice,” when [Salarino] asks Antonio if his business is making him glum, he says: “Believe me, no. I thank my fortune for it. My ventures are not in one bottom trusted [not invested in one entity only].”

Why is diversification fundamental?

To get a high return for given risk, you have to diversify. There’s a trade-off between risk and return. Man has faced risk since the days of the saber-toothed tiger. If you don’t face risk, you can’t go out and gather food or shoot tigers and bears. Man was born in a risky world and remains in a risky world. Ten years from now, it will be a risky world as long as you want to earn money and invest money.

Diversification is indeed a strategy with which financial advisors are familiar. What’s key for them to remember?

The biggest [issue] with advisors is to make sure that individual clients are at the right place on the [risk-return trade-off] curve that’s subject to the kinds of restrictions and needs they have.

Some people believe there’s no need to diversify. Your thoughts?

They come to sorrow.

Do you think a U.S. recession will hit soon?

Yes, of course. But the question is: When?

This bull market has been extremely long, though we did have a correction — and then it came back.

I predicted that. It was obvious it was going to happen. When the [2017] hurricanes hit Houston and Florida, I sold my bonds except for some tax-exempt or tax-deferred ones. I [figured] all that damage had to be rebuilt. I went all-equity. It was the “Markowitz Bet.” I [deduced] that the building industry had to rebuild Texas, Florida and then Puerto Rico [after Hurricane Maria].

What stocks did you buy?

I went into three asset classes: big-cap, small-cap and emerging markets. In big-cap, I bought six individual stocks [including] Caterpillar; 3M; and elevator companies, like Otis. I [also] bought [building products maker] U.S. Gypsum.

Did you win your bet?

The equities had a big spike and then came down, but I remained long. I got out of almost all my bonds, even tax-deferred or nontaxable ones because they were paying little. And I’ve been waiting.

For what?

When long-term tax exempt bonds get to 4%, I’m going to rebalance. I’m just letting it ride and ignoring the bond market until interest rates come up to a level that interests me.

How much longer can this bull carry on?

The bull market has lasted an awfully long time. It’s got to come down — someday. Markets go up; markets come down. There’s a natural cycle: People are enthusiastic, and the market goes up, up, up. The dumb money buys on the assumption that it’s going to go up further. Suddenly, people realize it’s overvalued, and it comes down faster than it went up. Then they decide it’s gone too low, and now it’s time to go up again.

What do investors do at that point?

Sell on the assumption that it’s going to go down further — whereas the smart money rebalances. All you have to do is rebalance. You can’t lose.

What do you think of technical analysis?

I don’t pay attention to it.

What are your thoughts about behavioral finance? That discipline, per se, didn’t exist in 1952, when you wrote your paper on Portfolio Selection.

What makes you think it didn’t exist in 1952? I wrote three papers in 1952. One was called “The Utility of Wealth,” which behavioral finance [experts] say was the first behavioral finance article.

When Daniel Kahneman [psychologist and economist author of “Thinking, Fast and Slow”] and Amos Tversky [late psychologist and Kahneman’s collaborator] were experimenting, there were things they couldn’t explain. Then Tversky remembered the then-25-year-old paper I wrote, “The Utility of Wealth.”

What was the crux of it?

I said that if you’re trying to explain actual behavior — not theoretical behavior — the utility [value] is not attached to the level of wealth but to the change in wealth. And there’s an inflection point at a certain place. Kahneman says this was truly a behavioral piece — and it was. So I play both sides.

You’re now completing Volume 3 of a four-volume series, “Risk-Return Analysis” (McGraw-Hill Education- Vol. I, 2013; Vol. II, 2016). What’s your writing routine?

I mostly write my books at Bruegger’s Bagels. I arrive at about 11 a.m., get a large cup of coffee and sit there writing by hand. Then I give it to my secretary, who types it up.

Are you still teaching at UC San Diego?

No, I just retired. When I was lecturing last quarter and signaled to change the slide, I started to fall asleep before [they put it up]. So I thought: That’s it — I’m retiring. I’m a night owl: I go to bed at 2 a.m. and get up at 8. I’ll be 92 on August 24. I like to take naps.

You grew up in Chicago the only child of grocery store owners. Do you think being a singleton had a big impact on your becoming a high achiever?

I was just a nerd.

투자회사가 대학생에게 학자금을 주고 그학생의 미래 수입을 증권으로 취득한다.
그 대학생이 취업한 후 발생하는 급여에서 일정 몫(stake)을 직접 받는데, 그 학생(피투자자)가 실업일때는 못받게된다.

미국 Purdue University에서 학부생을 대상으로 진행되고 있다는데, 보험의 원리가 흠뻑 스며들어가 있다.
결국 실업률이라는 통계가 보험의 사망률을 대신하는 것 같은데, 영어 전공자에게는 취업후 매월 급여의 4.52%를 약10년(116개월) 동안 회수하는 조건으로 1만달러(약1140만원)을 투자한다.
한편, 취업률이 높은 컴공과 전공자에게는 훨씬 좋은 조건인 2.6% 88개월이다.

출처 : https://www.bloomberg.com/news/articles/2019-04-09/college-grads-sell-stakes-in-themselves-to-wall-street?fbclid=IwAR0T2EBUWryqZ4sBhi8BTm-Ce8vwBVOOZK2Sq24F72F-4EOix8jnIH3yHhQ

College Grads Sell Stakes in Themselves to Wall Street

Instead of taking out loans, students can agree to hand over part of their future earnings in return for investment.

By

Claire Boston

2019‎년 ‎4월‎ ‎9‎일‎ ‎오후‎ ‎6‎:‎00

Amy Wroblewski

Photographer: Maura Friedman for Bloomberg Businessweek

To pay for college, Amy Wroblewski sold a piece of her future. Every month, for eight-and-a-half years, she must turn over a set percentage of her salary to investors. Today, about a year after graduation, Wroblewski makes $50,000 a year as a higher education recruiter in Winchester, Va. So the cut comes to $279 a month, less than her car payment.

If the 23-year-old becomes a star in her field, she could pay twice as much. If she loses her job, she won’t have to pay anything, and investors will be out of luck until she finds work.

Wroblewski struck this unusual deal as an undergraduate at public Purdue University in West Lafayette, Ind. To fund part of the cost of her degree in strategy and organizational management, she sidestepped the common source of money, a student loan. Instead, she agreed to hand over part of her future earnings through a new kind of financial instrument called an income-sharing agreement, or ISA. In a sense, financiers are transforming student debtors into stock investments, with much of the same risk and, ideally, return.

In Wall Street terms, Wroblewski, a first-generation college student, is more small-company stock than Microsoft. Her mother works as a waitress; her father, as a quality control inspector in a car dealership’s body shop. With a strong work ethic, Wroblewski always held down at least two part-time jobs in school, working as a Purdue teaching assistant, a Target cashier, and an Amazon seasonal worker. Showing potential for leadership—not to mention earnings—she rose to vice president of Delta Sigma Pi, a business fraternity.

Those qualities impressed a company called Vemo Education, which vets students at Purdue and a handful of other schools on behalf of potential investors. More important, perhaps, Wroblewski believes in herself and her ability to make good on the contract. “Even with all my other loans, I knew I could make it work,” says Wroblewski.

Americans owe $1.5 trillion in higher education debt, a burden that weighs down their dreams and the U.S. economy. The Federal Reserve says millennials are now less likely to buy homes than young people were in 2005, and even senior citizens find themselves still making payments on their student loans. Wall Street sees the crisis as an opportunity. College graduates on average earn $1 million more over their lifetimes. Investors could capture some of that wage premium for themselves..

Total Student Loan Debt Outstanding

Data: Federal Reserve Bank of New York

“I envision a whole new equity market for higher education in the next five years where today there’s only debt,” says Chuck Trafton, who runs hedge fund FlowPoint Capital Partners LP, which has invested in ISAs, including Purdue’s. ISA experts say they have fielded calls from some of the world's largest investment managers that are considering investing in the contracts. And Tony James, executive vice chairman of money manager Blackstone Group LP, formed the Education Finance Institute to help schools study and develop ISAs.

For now, the market for income-sharing agreements can be measured in the tens of millions, a tiny sum compared with the $170 billion in outstanding asset-backed securities created from student loans. Only some schools let outside investment firms buy a stake in students. Others seek out individual donors, mostly wealthy alumni, or use money from their own endowments.

Along with Purdue, which started its program in 2016, some smaller private schools such as Lackawanna College in Scranton, Pa., and Norwich University in Vermont are offering ISAs. The University of Utah recently announced a pilot plan.

ISAs raise all kinds of questions. How many students will lose their jobs and be unable to pay? How much should Wall Street demand as compensation for the risk? Investors typically ask for a smaller slice from students with more lucrative majors. At Purdue, for example, English majors borrowing $10,000 pay 4.52 percent of their future income over nearly 10 years; chemical engineers, 2.57 percent in a bit over seven years.

Major Decision

Estimated payment schedule for a $10,000 income-share agreement made through Purdue University in a student’s senior year, by major

Data: Purdue University, Vemo Education

Purdue set up its program to be competitive with many student loans for the typical borrower. Consider a junior economics major who needs $10,000. Through a private loan, she’d likely pay $146 a month, or $17,576 over the course of 10 years. Through an ISA, a student with a starting salary of $47,000, Purdue’s estimate for its 2020 economics graduates, would pay $15,673, assuming 3.8 percent annual salary increases. That would be a good deal. But, if she found a $60,000-a-year job, she’d have to fork over $20,010.

Financial firms and for-profit colleges have been known to prey on college students’ financial naiveté to sell them high-priced private student loans, rather than steer them toward more favorable government-backed ones. While schools offering ISAs say they will offer them only after government loans with the most favorable terms are exhausted, some students may end up again with regrets.

“There’s a level of enthusiasm that’s overstated,” says Julie Margetta Morgan, a fellow who studies higher education at the Roosevelt Institute, a think tank focused on reducing income inequality. “It’s pretty darn near impossible to say whether an ISA is better or worse for an individual.” Morgan dislikes that ISAs require arbitration, which means students give up their right to sue in court.

The last big ISA experiment—at Yale University in the 1970s—ended up as a cautionary tale. Yale pooled all borrowers, and they owed the school a percentage of their incomes for 35 years, or until everyone paid back what they owed. The idea was that graduates who ended up with high-paying jobs in finance would subsidize those who chose public service.

But many students defaulted, leaving the remaining borrowers on the hook longer than they’d anticipated. Other wealthier students exited the pools via large one-time buyout payments. The remaining students tended to be lower-income. Some stopped paying altogether. Yale ultimately bailed out the borrowers, winding down the whole program in 2001.

Juan Leon, who sells business jets for Dassault Aviation SA, graduated from Yale in 1974 with a degree in urban studies. He borrowed $1,500 through the college’s “Tuition Postponement Option.” By the late 1990s, he’d paid back $8,000. “We didn’t read the fine print,” Leon says. “It was quite, quite onerous.”

Students have more protection under newer plans. Purdue, for example, caps total payments at 2.5 times what a student borrowed, so the most successful don’t feel gouged. And students making less than $20,000 a year won’t be charged at all, as long as they are working full time or seeking work. Those who are working part time or not seeking work will only have their payments deferred, which means that they’ll owe for a longer period of time.

Purdue has arranged more than 700 contracts worth $9.5 million and closed two investment funds totaling $17 million. David Cooper, Purdue’s chief investment officer, helped to develop the program and pitch it to investors after almost a decade of overseeing investments for Indiana’s retirement system. He says the funds are drawing more interest now that the oldest contracts have over 20 months of repayment data. “We feel like we’ve got the pricing for the students at a pretty good spot,” Cooper says. “At the same time, it’s a reasonable return for the investors.”

Purdue’s early funds attracted investments from wealthy individuals, as well as nonprofit Strada Education Network and INvestEd, a nonprofit lender and financial literacy organization in Indiana. Cooper says ISAs may make most sense for socially conscious investors, but he points out that even funds seeking lofty profits might one day be interested if they can juice returns with leverage.

Charlotte Hebert, 23, who graduated from Purdue in 2017, has mixed feelings about the $27,000 she took out from an ISA to pay for her senior-year costs. A professional writing major, she’s required to shell out 10 percent of her income for the term of the deal. That’s about 2.5 percentage points more than an engineer would pay. The daughter of a teacher and a nurse, she makes about $38,000 a year as a technical writer for an engineering firm in Lafayette, Ind.

She pays investors $312 a month. “I don’t think it’s the perfect solution,” Hebert says. “I am of the opinion that in a society where most of its workers need a college education, nobody should be paying this much to be what is considered a functional member of society.”

2019년2월 미국 재무부가 확정급여형 퇴직연금제도를 도입한 민간기업의 경우 은퇴 근로자에게 퇴직급여를 일시금으로도 지급할 수 있도록 제도를 변경하였다. 따라서 근로자는 일시금으로 받을지 현재처럼 연금으로 나누어받을지 선택할 수 있게 된다. 그간 낮은 적립비율 상태였던 기업들에게는 희소식일 수 있다.

그렇다면 퇴직연금을 일시금으로 받는 것과 연금과 같은 형태로 나눠서 받는 것 중에서 무엇이 은퇴한 근로자들에게 유리할까?

와튼스쿨의 Olivia S. Mitchell 교수가 미 재무부의 퇴직연금 일시금 지급정책에 대한 견해를 팟캐스트에서 생생하게 이야기하고 있다.

결국 금융지식을 갖춘 자들의 경우 일시금으로 받아서 스스로 운용하는 것이 나쁘지는 않다. 그러나 금융지식이 없는 사람들의 경우 상황이 틀리다고 한다.

출처 : https://knowledge.wharton.upenn.edu/article/lump-sum-pension-payments/

Lump-sum Pension Payments: Who Are the Winners and Losers?

Apr 02, 2019

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Wharton's Olivia S. Mitchell and Loyola's Elizabeth Kennedy discuss new Treasury department guidance on lump-sum pension payouts.

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The U.S. Treasury department’s move last month to allow private companies to pay lump-sum pension payments to retirees and beneficiaries, instead of monthly payments, is good news for companies that do not want to be saddled with long-term pension obligations – particularly for private sector employers who have underfunded pension plans.

However, lump-sum pension payments may not work out well for retirees who opt for them. While a debate has ensued on the merits and risks of lump-sum pension payments for employees, there are also wider concerns about the long-term impacts on the entire economy when retirees do not have sufficient financial resources to support themselves. Those concerns are assuming a new importance because of the rapid growth of the so-called gig economy with temporary workers and freelancers who don’t enjoy employer-sponsored retirement benefits.

The Treasury department’s latest move reverses an Obama-era pledge to bar employers from offering lump-sum payments. The fear was that those receiving a lump-sum payment might be shortchanged and also might be tempted to spend the money sooner. Around 26.2 million Americans receive pensions right now, though that number has been declining as businesses favor 401(k) plans instead.

How Companies Gain

Defined-benefit plans are pensions that provide beneficiaries with a monthly benefit check for as long as they live. Defined contribution plans stipulate only the contributions to an employee’s account each year. “The concern with companies offering defined-benefit plans is that they need to manage carefully around future mortality, around investment fluctuations, and so forth,” said Olivia S. Mitchell, executive director of the Pension Research Council at Wharton and director of the Boettner Center on Pensions and Retirement Research. Mitchell is also a professor of insurance and business economics at Wharton.

“Many companies have had a hard time making sure their plans remained fully funded, and probably most corporate defined-benefit plans today are not fully funded,” Mitchell continued. “By offering both workers and retirees a lump sum, corporations could take the defined-benefit obligation off their books.” The move could help companies like General Electric, which has an approximately $30 billion shortfall in its defined-benefit pension plan.

Elizabeth Kennedy, professor of law and social responsibility at the Sellinger School of Business at Loyola University in Maryland saw the Treasury’s move hurting wider sections of society over time. “I see this as a shift not only of risk from the employer to the employees, but also to all of us collectively, as the question arises of what happens when folks don’t manage [their lump-sum pension payments] well — certainly not as well as their employers,” she said. “The rest of the social safety net is even further strained when [retirees’] defined-benefit plan runs out.”

Mitchell and Kennedy shared their insights on lump-sum pension payments, underfunded plans and the hidden costs of the Treasury department’s action on the Knowledge@Wharton radio show on SiriusXM. (Listen to the podcast at the top of this page.)

To Lump Sum or Not?

Lump-sum payments might be the right option in some cases. “What used to be seen as the golden method of caring for people in retirement — namely defined-benefit plans — is long gone,” Mitchell said. “Many financially cogent people might say, “Gee, I work for a company which is only 80% funded. Maybe I should take the lump sum and run, while the getting is good.”

“The whole defined-benefit edifice is in ruins. I don’t see any way to fix it easily.”–Olivia S. Mitchell

Mitchell said she understands why a lump-sum payment is attractive, “not just for people who make mistakes, but for people who are smart about it.” However, lump-sum payments may not be the best option if an individual uses the money as monthly income. She pointed to what she called the “lump-sum illusion.” Somebody who gets a lump sum of say, $100,000, might think they are suddenly rich, but that money doesn’t go very far, she noted. Based on annuity estimates, a $100,000 payment would provide a monthly income of $560 for a 65-year-old male, and $530 for a female, because women live longer than men, she said. Even $500,000 is not a lot of money, she added.

But a lump-sum payment could help many older people who are entering retirement with far more debt than they did in the past, said Mitchell. “Baby boomers are getting into retirement not having paid off their mortgages, and not having paid off their credit cards,” she added, citing research conducted using the Health and Retirement Study (sponsored by the National Institute of Aging and the Social Security Administration), where she is a co-investigator. “A lump sum in such cases could really help older people pay off their debt and move into retirement less exposed to interest rate fluctuations.”

The Impact of the Gig Economy

Kennedy noted that the composition of the workforce has changed in recent years. She referred to the gig economy, the sharing economy and the rise of independent contractors, who tend to work in temporary jobs throughout their careers.

“While the defined contribution plan from a single employer perspective looks perhaps like a thing of the past, the burden is on us collectively to think about the solution for the future,” she said. “How do you have workers who are going to be making perhaps low wages over a course of their lifetime with a variety of employers in any meaningful way accrue meaningful, defined contribution plans that result in something more than just a few hundred dollars a month later on?”

Kennedy said that if many among the 26.2 million people that currently receive monthly pensions are lured by “the dangling of the shiny lump sum,” the so-called “gold standard” of retirement income is diminished even further. She wondered about how that would affect those dependent on employer-sponsored 401(k) plans and Social Security. Workers who have high incomes or are “incredibly savvy” contribute substantially to their 401(k) plans and get matching employer contributions would of course be better off that those who are not, she noted.

Knowledge@Wharton High School

According to Mitchell, the “defined contribution” 401(k) model has been “exceptionally positive” for those who did not have an opportunity to be in defined-benefit plans that required them “to stay for life and never leave your employer.” Although she found defined contribution plans “much more appealing,” she said they fell short in that they did not have a way to protect against “longevity risk at the point of retirement…. So, I favor putting an annuity back into a defined contribution plan, so that people can, in fact, protect against living too long.”

“A lump sum in such cases could really help older people pay off their debt and move into retirement less exposed to interest rate fluctuations.”–Olivia S. Mitchell

An Overhang of Underfunding

Retirees may have dwindling options in securing their future incomes as defined-benefit plans have failed to provide the protections they were designed for. Mitchell noted that the 1974 Employee Retirement Income Security Act sought to ensure that defined-benefit plans are fully funded to make good on the promises offered to retirees.

“Unfortunately, in the establishment of the act and some of the institutions surrounding that, they didn’t quite get it right,” Mitchell said. For example, while it established the Pension Benefit Guaranty Corporation (PBGC) to back up corporate defined-benefit plans if the corporations go bankrupt and there’s not enough money in the plans, “the premiums weren’t set right,” both for single employer plans and multiple-employer, unionized plans, she added. “As a consequence, not only are corporate plans troubled financially now, but the backup entity that’s supposed to be insuring the defined-benefit plans also is in dire straits.”

According to Mitchell, the multiple employer system is within a few years of running insolvent, and the single employer plan will be unable to pay all it should pay by 2025. “So, the whole defined-benefit edifice is in ruins. I don’t see any way to fix it easily.”

To be sure, the offer of lump-sum payouts comes with riders. If a single employer plan is not at least 80% funded, retirees cannot get the full lump-sum payment, and if it is less than 60% funded, they cannot get any lump-sum payment. “Notwithstanding the Treasury department’s willingness to allow more lump sums, it’s going to depend on the funding status of the plan,” Mitchell said. “So, I don’t think people should book the trip to Las Vegas just yet.”

According to Mitchell, a significant number of corporate pension plans are likely to be funded to levels near 60%. Also, over the last 40 years, many corporations have frozen and/or terminated their defined-benefit plans, she said. “The insolvency of the PBGC, I think, is driving many people’s interest in taking that lump sum, and I sympathize with that.”

Data compiled by Bloomberg found that in 2017, 186 of the 200 biggest defined-benefit plans in the S&P 500 based on assets weren’t fully funded to the tune of $382 billion, according to a report by the news agency.

Who Manages Money Better?

Retirees taking lump-sum pension payments instead of annuity payouts could potentially lose between 15% and 20% of what they would have received over a 20- or 30-year period, according to some estimates. They are shortchanged in that way “because of complicated formulas including interest rates and mortality tables,” according to Forbes.

“Who is bearing that cost ultimately? The worker, for sure – but then all the rest of us, for whom, those social benefit programs are means-tested, and taxpayers pay for.”–Elizabeth Kennedy

Generally speaking, corporations have opportunities to manage retirement plans more efficiently than individuals can. “Typically, employers manage retirement plans less expensively — they pay fewer fees, fewer commissions, et cetera,” said Mitchell. “They can buy life annuities or pay life annuities for their workers much cheaper than what the workers could get on their own.”

Those who get a lump-sum payment could maintain tax protection if they roll it over into an individual retirement account (IRA), Mitchell continued. “But then you have to be very careful that the money that you’re investing in that IRA is not frittered away in expenses.”

Those who put their lump-sum monies in an IRA could also use it to buy themselves an annuity, said Mitchell. Here again, she had advice for both men and women, drawing from the fact that women live longer. “If you’re female … and if you’re in a pool with men, you’re going to get a higher benefit than you would if you went out and bought [a pension plan] on your own,” she said. “Conversely, if you’re a man, then you should take out [the pension], buy an annuity on your own, and you’ll get a higher benefit.”

Whither Social Security?

Social Security, too, is facing insolvency, Mitchell noted. “Within about 12 years, benefits will probably have to be cut for everyone by maybe 30%, or else taxes will have to go up 60% to 80%,” she said. “Social Security benefit payments are currently partly subject to income tax. In the future, benefits may become means-tested to help correct the system’s insolvency problems.” Given that, “it’s completely rational for many people in the bottom third of the wage distribution not to save at all,” she said. “If we look at the retirement picture, we have to understand the incentives we are putting in peoples’ way — or the disincentives to save.”

According to Kennedy, society at large may end up bearing the costs when corporate pension plans fail to deliver sustainable long-term benefits for their employees. “When we’re replacing a system because [large] institutions are unable to invest in ways that yield real, tangible benefits for their workers long-term, it’s hard for me to imagine that that is not replicated when many, if not most, individuals are now in that same position of managing their retirement,” she said.

“Who is bearing that cost ultimately?” Kennedy asked. “The worker, for sure — but then all the rest of us, for whom, those social benefit programs are means-tested, and taxpayers pay for. Are we just shifting the costs of mismanagement from the individuals who originally held the money to those of us who are taxpayers, who will pay for the health insurance, the care, the housing costs and all of that for folks who can no longer afford it themselves?”

Mitigating Financial Stress

Employers are sensitive to the financial difficulties of their employees, and for good reason, because financially healthy employees are more productive. “Some employers are starting to pay much more attention to what they’re calling ‘financial wellness,’” said Mitchell.

“The reason that they are working to try to help people manage their debt better, save better and budget better is that they find that it reduces employee stress,” Mitchell explained. “For example, if you’re having the credit card company or the debt collector calling you at work several times a day, that’s obviously going to make you a less productive worker.”

Some firms, especially those in the financial services sector, are integrating financial wellness features into their employee benefit packages, such as subsidies for gym memberships or fees for health wellness programs, she added. Added Kennedy: “Employers want to see their workers in many instances either succeed long-term, or at least remain with them, because the cost of turnover is so great. They want to be able to make informed decisions about workplace policy that hopefully are consistent over time.”

“If we look at the retirement picture, we have to understand the incentives we are putting in peoples’ way — or the disincentives to save.”–Olivia S. Mitchell

In order to facilitate companies and employees in those efforts, she called for the federal government and Congress to weigh the long-term implications of the latest move to allow lump-sum pension payments.

The Public Pension Fund Mess

Although the Treasury department notice covers only private sector pension funds, the problem of underfunding plagues public sector pension funds as well. According to estimates by The Pew Charitable Trusts, state pension funds would have had a total pension liability of $4.4 trillion in 2017, and a funding gap of $1.7 trillion.

However, favorable investment returns in fiscal 2017 and 2018 are expected to lead to a decline in pension liabilities for the next two fiscal years, according to a report in August 2018 by Moody’s Investor Services.

“Every year that goes by leads to more red ink and more concern because the state and local plans across the country have clearly not done what they should have done to contribute the right amounts, to invest their assets in their pension plans carefully and thoughtfully,” Mitchell told Knowledge@Wharton for a report on that issue.

Even as state and local government pension funds are in trouble, Mitchell did not expect them to move towards lump-sum payments. They have attempted to mitigate that financial stress in other ways. “Over the 20 years, many states have realized their defined-benefit plans are in deep trouble, and so they’ve put in place a hybrid system,” Mitchell said. That hybrid is a mix of a defined-benefit plan and a defined contribution plan, she explained. “That’s a nice mix, so that people do get the benefits of both.”

Policy Challenges

The funding crisis in pension plans will affect not just baby boomers, but also the workers who served baby boomers, such as domestic workers including nannies, housekeepers and elder-care providers, said Kennedy. She noted that home health aides and hospice care workers are part of a fast-growing segment, but independent contractors among them have few options in planning for post-retirement income. “For them, the struggle is how to save when your income is so low, in the absence of any employer contribution,” she said.

“That has impacts going up the chain to these same retirees and baby boomers who now will also have less money themselves, individually, to pay for this kind of care,” said Kennedy. She saw that crisis developing at “the intersection between retirement, savings, solvency, and the ability to meet the basic human needs of the baby boomer generation.”

Kennedy said policy makers have to focus also on workers who are “vulnerable as low-wage workers in nontraditional workplaces” in their calculations on the long-term risks they would face.

근로자 4명중 3명은 은퇴후에 자산관리를 어떻게 해야할지 잘 모르고 있습니다.

미국 통계입니다.

출처 : https://www.nirsonline.org/reports/retirement-insecurity-2019-americans-views-of-the-retirement-crisis/

Retirement Insecurity 2019: Americans’ Views of the Retirement Crisis

• Diane Oakley
• Kelly Kenneally

Reports Mar 2019 March 2019

New public opinion research finds that Americans are united in their concern about retirement. In overwhelming numbers, Americans say the nation faces a retirement crisis, with Democrats at 80 percent, Republicans at 75 percent, and Independents at 75 percent.

These findings are contained in a new research, Retirement Insecurity 2019: Americans’ Views of the Retirement Crisis, published by the National Institute on Retirement and based on research conducted by Greenwald & Associates.

The key research findings are as follows:

1. In overwhelming numbers, Americans are worried about their ability to attain and sustain financial security in retirement.
2. Even as the nation remains deeply politically polarized, Americans are united in their sentiment about retirement issues.
3. Americans see government playing an important role in helping workers prepare for retirement, but lawmakers in Washington, D.C. just don’t get it. And the new tax law has not helped.
4. In contrast to the sentiment about Washington, D.C., efforts by state lawmakers to expand access to retirement accounts for all workers is widely supported by Americans.
5. Americans are highly positive on the role of pensions in providing retirement security and see these retirement plans as better than 401(k) plans.
6. There is strong support for pension plans for state and local workers, and Americans see these retirement plans as a tool to recruit and retain public workers.
7. Millennials are the most concerned about financial security in retirement, and are more willing than other generations to save more.

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