There are many great aspects of this career, but what I love most about being an actuary in my field is working with my clients and their advisors to help navigate the complicated world of defined benefit plans. Don’t get me wrong, I like the work and all its challenges, but it wouldn’t be nearly as rewarding without the relationships I have with all of you!

There are many different actuarial positions in many industries, but my favorite definition of an actuary is this one: An actuary is a person, who passes as an expert on the basis of a prolific ability to produce an infinite variety of incomprehensive figures calculated with micrometric precision from the vaguest of assumptions based on debatable evidence from inconclusive data derived by persons of questionable reliability for the sole purpose of confusing an already hopelessly befuddled group of persons who never read the statistics anyway!

Using the software for the first time, I was nervous as to how well I would age. The results were not spectacular, but seemed reasonable. Being young and working in the pension industry, I already contribute a healthy amount to my 401(k), so seeing myself age, I was not too concerned about how much I am contributing toward retirement.  More than anything I thought about my diet and how I take care of my body.  I am a pretty healthy person, but it did make me think about eating more fruits, vegetables, and opting for chicken or fish as opposed to steak more often. Seeing projections of how I would age made me think of all the little things I could change along the way to improve the future me. 

In order to get a better feel for the technology I tested out a few different photos, changing my smile, facial expressions, and (most drastically) shaving my beard.  The results were always consistent, my head shape became squarer, my face wrinkled, my skin drooped and my hair turned gray.  My only complaint of the technology is that no matter how big I smiled, as I got older my smile became a frown. I think this must be a subliminal message to keep users from getting complacent about their savings habits, as people seeing their future self may say “Hey, I look happy, I must be on the right track.” Overall, I can see how this technology would make somebody look at retirement and influence them to start planning early.

While the intent of the software is to help convince people to contribute more toward retirement, I found myself persuaded to live a healthier lifestyle. Seeing myself age 20 years at a time made me think about my future and how a few small changes could improve it.  For me, those changes focused on the physical, but for you the changes may be more financial. I suggest trying the site out; it may inspire you to make small changes as well.

Although bundled service providers often appear to cost less (in fact, the vast majority of small business 401k plan sponsors with bundled service providers believe they pay no costs for the plan), the investment costs alone for funds in the bundled service environment may heavily outweigh the overall costs of unbundled services.  Tom Lydon, citing a study by Deloitte and the Investment Company Institute, writes that “investment expenses make up 84% of a plan’s cost.” The long term effect of even small investment costs on the growth of a 401k account balance can be staggering.  For example, investment costs of 1.5% annually on $10,000 invested per year over a 30 year period with a 6% annual rate of return would net an account balance of $600,071.  Merely reducing the investment costs to 0.5% annually under the same circumstances would net an account balance of $714,355—an increase of $114,284.    

You can read Pete Kirtland’s article here and Tom Lydon’s article here.

Congress has begun working on tax reform to address the upcoming fiscal cliff.  All tax deductions and tax credits are on the table for consideration for reduction or elimination, including your tax-deductible salary deferral to your 401(k) plan. Proposals are already being considered by Congress today to cut the 401(k) contribution limit.

The 401(k) plan has become the main vehicle to save for retirement for the majority of Americans. Over 60 million of us participate in a 401(k) plan. If Congress reduces the salary deferral limit, or chooses to tax salary deferrals, many employees will reduce or eliminate the amount they contribute to their 401(k) plan. Employers will be less likely to make employer contributions to 401(k) plans because of the reduced tax incentive to business owners. If this happens, a great many of us will need to delay retirement, since social security alone will not provide enough for us to live on.

ASPPA (American Society of Pension Professionals & Actuaries) has set up a web site to provide contact information for your elected officials. From this web site, you may send an automated e-mail to your congressmen, or show your support via Facebook, Twitter, or YouTube. If you want to tell your elected congressmen to leave alone the 401(k) plan contribution and deduction limits, click on this link: http://www.savemy401k.com/. The link will take you to a web site that will identify and provide contact information for your governor, senator and representative based on your zip code. You may e-mail your elected official an automated e-mail requesting protection for 401(k) plans, or you may compose your own e-mail.

• For defined benefit plans, the maximum annual benefit for a participant with at least ten years of participation and a normal retirement age between 62 and 65 was increased from $200,000 to $205,000.
• For defined contribution plans (profit sharing and 401(k) plans), the maximum annual contribution for a participant was increased from $50,000 to $51,000. This limit includes deferrals but does not include catch up contributions.
• The limit on salary deferrals for 401(k) plans increased from $17,000 to $17,500, and the limit on catch up contributions for 401(k) plans, which are available to participants who attain age 50 by the end of 2013, remained the same at $5,500.
• The compensation limit used in determining benefits and contributions for both defined benefit and defined contribution plans increased from $250,000 to $255,000.

As 2013 approaches, so does the deadline to install a qualified plan for 2012. If you are interested in setting up a qualified plan, please contact us at 503-520-0848, or www.independentactuaries.com/contact.

For a more complete list of the new 2013 annual limits, please visit the following link on our website: http://www.independentactuaries.com/resources/retirement-plan-limits/

NFL referees are currently covered by a Defined Benefit (DB) plan, a retirement plan which guarantees a monthly retirement benefit based on earnings and years worked.  Keeping the DB plan was one of the central goals of the NFL Referees Association.  However, under the terms of the new agreement, the DB plan will remain open to current participants only through 2016, or until a referee earns 20 years of service, whichever comes first. At that point the DB plan will freeze benefits.

The DB plan will be replaced with a 401(k) plan. The 401(k) plan will provide new hires (and, beginning in 2017, all referees) an average contribution of $18,000 annually.  This amount will increase to more than $23,000 by 2019. Referees will also receive a match on their salary deferrals.

The change from a DB plan to a 401(k) plan shifts investment risk from the employer to the participant.  From what I have read, the switch is not a cost-saving move, but is meant to match a growing trend in America of offering 401(k) plans as opposed to DB plans.

After all of the national attention given to the replacement referees, which peaked with the Monday night game involving the Seahawks and Packers, I figured there would be a quick end to the lockout, and that the NFL would immediately cave to the referees’ demands before their product was further damaged. Looking at the change in pension benefits, though, it does not look to me like the NFL caved.  While most Americans would be jealous of an $18,000 annual employer contribution, a 401(k) plan does not provide the same level of retirement security as a DB plan.

If you’re a business owner contact Independent Actuaries to see what type of retirement plan is right for you and your employees.

Flexibility is becoming the norm for a lot of small businesses and it is proving to increase productivity, job satisfaction, and lower employee turnover (as this Forbes article points out). Flexibility is a core value of Independent Actuaries, Inc. and we are excited to receive national recognition as a recipient of the 2012 Sloan Award for Excellence in Workplace Effectiveness and Flexibility. This award highlights employers across the country that have effective, flexible workplaces and how these workplace policies and values help employees exceed at work and at home.

Maybe it is just the “spoiled” characteristic so common of my generation, but being able to wake-up and work from home without having to battle rush hour traffic or wait in line at Starbucks to get my morning cup of iced coffee, is a big factor in my level of job satisfaction. And job satisfaction, no matter the generation, is a key point in retaining quality talent and supporting a successful business.

I recently read a study by an actuary, Phillip Lehpamer, called “Skin in the Game” comparing the mortality rates of professional baseball and football players in 1930, 1950 and 1980 to the general population. The results showed that both football players and baseball players lived longer than the general population, with the greatest life expectancy for baseball players. The longevity of both groups is also improving faster than the general population. Could this be a sign that football is not detrimental to one’s health? The study went on to identify many other factors that could be at play here. Professional athletes are actively employed, more health conscious and have higher socioeconomic status, all factors that usually suggest a longer life expectancy. Is it a sign of the dangers of football that baseball players in the study have a longer life expectancy than football players? The study suggests it may be due to demographic features of the league, such as western league expansion, improved travel methods, the racial makeup of the league, or Body Mass Index (BMI). Whatever the case may be, there is just not enough information to come to a conclusion.

Lehpamer’s study reminded me of an article I had read in ESPN The Mag, comparing the likelihood of ailments (such as Heart Disease) of NFL players to the general population. The results strongly showed that NFL players were less likely to suffer from the ailments when compared to the general population, suggesting they are healthier despite the risks they undertake. I also recently came across an ESPN feature on the dangers of football and the media’s exploitation of the issues. The conclusion was to point out that there was not enough evidence to say that football was detrimental to one’s health.

The media often exaggerates and exploits the dangers of football by looking at isolated incidents. While broken bones, tears, concussions and more dramatically paralysis make the news, these unfortunate individuals are the minority. Millions of Americans play football every week without getting hurt. While I do sympathize for the unfortunate individuals who are hurt, I find it refreshing to see data showing that football may not be as dangerous as it is made out to be. It’s also exciting when two of my interests, actuarial science and sports, have a chance to intersect with one another.

And weirdly enough, I moved to another city that touts its strangeness via ‘Keeping it Weird’ bumper stickers: Austin, Texas. And although so many things here are different, quite a bit has stayed the same.  The scenic mountains are replaced by the beautiful hill country, my running sanctuary in Forest park has become Town Lake trail, and my occasional weekend spent at the beach with just my toes in the freezing water are now spent at Barton Springs, well, still with just my toes in the freezing spring fed water!

It is exactly the uniqueness of both Portland and Austin that fosters the growth and independence of small businesses that do outstanding work, such as Independent Actuaries. Founded in Portland in 1994 by Paul Engstrom on core values of respect, trust and quality work, the company has now become the largest independently owned actuarial firm in the Pacific Northwest and has clients throughout the United States.

So now Independent Actuaries brings their superior retirement plan design and administration consulting skills to the capital of the Lone Star State. And I have to add that I feel very fortunate to work with this group of talented, caring individuals, albeit now from a few miles away. I look forward to helping them expand from a city I loved exploring to a city I am continuing to discover!

If you are interested in exploring a qualified plan, from Austin, Portland, or any other city, please contact us at 503-520-0848 or www.independentactuaries.com/contact!