Subscribe Now!
Free Daily News, Jobs, Webcasts, Discussions
Display and Distribute
Your Job Openings
ARPA News
ARPA Webcasts

Featured Jobs

Principal Legal Content Specialist - Benefits

Bloomberg Industry Group
(Telecommute / Arlington VA)

Bloomberg Industry Group logo

401(k) Retirement Plan Administrator

Heritage Pension Advisors, Inc.
(Telecommute / Commack NY)

Heritage Pension Advisors, Inc. logo

Senior Compliance Analyst

Ubiquity Retirement + Savings
(Telecommute / San Francisco CA / AZ / CO / FL / IL / KY / LA / MA / NC / NJ / NV / NY / OH / OR / RI / SC / TN / TX / WA)

Ubiquity Retirement + Savings logo

401(k) Retirement Plan Administrator

BDS Consulting Group
(Worcester MA)

401(k) Plan Administrator

Pension Investors Corp
(Telecommute / Hollywood FL)

Pension Investors Corp logo

Benefits Associate

Littler Mendelson, P.C.
(Philadelphia PA / Los Angeles CA / Kansas City MO / AK / AL / AR / AZ / CT / DC / DE / FL / GA / HI / IA / ID / IL / IN / KS / KY / LA / MA / MD / ME / MI / MN / MS / MT / NC / ND / NE / NH / NJ / NM / NV / NY / OH / OK / OR / RI / SC / SD / TN / TX / UT / VA / VT / WA / WI / WV / WY)

Littler Mendelson, P.C. logo

Defined Benefit Plan Administrator

Pension Investors Corp of Orlando Inc
(Telecommute / Altamonte Springs FL)

Pension Investors Corp of Orlando Inc logo

Client Services Manager

Pinnacle, An NPPG Company
(Delray Beach FL)

Free Daily News and Jobs

“BenefitsLink continues to be the most valuable resource we have at the firm.”

-- An attorney subscriber

Mobile App image LinkedIn icon
Twitter icon
Facebook icon
LIA $FACTS$ for October 1998
View other months

Retirement Plan Design Decisions


?Savings Rates - Does Saving More Produce More?

The rates of saving of Americans have been criticized, especially when compared to the very high rates reported for Japan. We thought we would look at what needs to be saved to retire. First, we believe the way pay is delivered in Japan makes it easier for Japanese to save; we all tend to live on our monthly pay while bonuses, after special expenses, get saved. Bonuses are unusual for rank and file employees in the U.S.

So, now that we have made excuses for Americans, what do the reduced rates mean. Can Americans save enough money to retire?

The following table shows, as a percentage of retiring pay, the advantage to Americans of the higher rates of return available in America. Background assumptions are that Japanese retire at 60, while Americans retire at 65 - a 5 year advantage in savings as well as a lower cost for life annuities. The annuity is a life annuity payable immediately at retirement. Americans have a 3% real rate of return on their assets, while Japanese get 0.5%. The numbers are even further apart these days, but this is a good starting point . The life annuities are based on somewhat appropriate mortality tables reflecting the mortality characteristics of workers in each country. Differences produced by other appropriate tables would not be significant.

59901.8%
58532.6%
57410.9%
56351.0%
55316.0%
54293.3%
53277.8%
52266.7%
51258.6%
50252.6%
49248.1%
48244.8%
47242.5%
46240.8%
45239.7%
44239.1%
43238.9%
42239.1%
41239.6%
40240.3%
39241.3%
38242.5%
37243.9%
36245.4%
35247.1%
34249.0%
33251.0%
32253.1%
31255.4%
30257.8%
29260.3%
28262.9%
27265.6%
26268.4%
25271.3%
24274.4%
23277.5%
22280.7%
21284.1%
20287.5%

What does this table mean? A 20-year-old American saving slightly more that one third of a similarly placed Japanese 20-year-old would retire with the same lifetime annuity.

Similarly, a 40-year-old American who saves periodically the same amount as a similarly placed 40- year-old Japanese would retire with a lifetime annuity almost 2 and one half times as large.

So, the bottom-line is the greater real rates of return available in the U.S. permit lower rates of savings to achieve the same levels of retirement annuities. Of course, this means workers can spend more in the meantime which means that the real rates advantage in the States is probably sustainable.

This also supports the contention that society's ability to save for retirement is directly related to social wealth during the period when funds are accumulating.


Copyright 1998 Lohmann International Associates

You have been reading the online edition of LIA $FACTS$, the monthly fax newsletter of Lohmann International Associates. For further information, please visit our home page on the Web or send e-mail to Les Lohmann.


BenefitsLink Home PageThis page proudly hosted by BenefitsLink
© 2021 BenefitsLink.com, Inc.