Welcome to the latest edition of This Week in Pensions! We have gathered the best stories about pensions and retirement security from the previous week. This is the news you need to know in the fight for a secure retirement.
Retirement in America: What Happens When Retirement Lasts More Than 30 Years?
In the second episode of the National Institute on Retirement Security’s retirement-focused podcast, Retirement in America, longevity expert Ken Dychtwald, founder and chief executive officer of Age Wave, joins NIRS executive director Dan Doonan to discuss how longer lifespans are reshaping retirement.
The conversation on “What Happens When Retirement Lasts 30, 40, or 50 Years?” centers around modern life expectancy and its impact on everyday Americans. Calling it the “longevity revolution,” Dychtwald explains the impacts of this significant demographic shift on workers, healthcare, and financial security in retirement.
“We’re living in a moment in time, where because of breakthroughs in the last century…all of a sudden, living to 75, or 85, or 95, is becoming kind of commonplace,” he says, “and we are completely and totally unprepared.”
Dychtwald also discusses the concept of healthspan–the number of years an individual experiences optimal cognitive, physical, and mental health–and how Americans typically experience a 12-year gap between the onset of health decline and the end of their lives. This gap can be extremely expensive for seniors, with health and long-term care costs averaging over $472,000 in out-of-pocket expenses for a retired couple today.
Touching on retirement policy, Mr. Dychtwald said, “We need more education on how to plan for and understand what this longevity is all about.” He continued, “I’ve watched every presidential debate for the last 20 years, and these topics have never been brought up.”
Colorado PERA Investment Staff May See Compensation Changes Soon
The Colorado Public Employees’ Retirement Association (PERA) faced scrutiny earlier this year, following The Colorado Sun’s deep dive into the system’s compensation practices. Now, noting that PERA might be “getting too far out ahead” of its peers in terms of bonuses and earning capabilities, Executive Director Andrew Roth concluded, “If the incentive compensation philosophy generates numbers that would put us ahead of our peers, then I think we need to refine that philosophy, so that the maximum award opportunities that our philosophy drives are consistent with those of our peers.”
An initial review determined that the average bonus payout per employee rose from $187,000 in 2020 to $294,000 by 2025. Meanwhile, PERA’s investment staff has not met its performance targets since 2022.
Roth cited a 2022 academic study on public pensions, which found that higher-paid investment officers outperform their peers. “I think it’s really important that PERA remains competitive in the marketplace, and also remains appropriately situated in its peer group,” Roth said.
Kentucky Set to Receive Funds from Hedge Fund Lawsuit
Following seven years of litigation, the Commonwealth of Kentucky has reached an $18 million settlement with the Blackstone Group, seeking to recoup at least a portion of public funds lost to the hedge fund manager’s failed investments.
Two weeks ago, the Kentucky Public Pension Authority moved to end its lawsuits against various hedge funds accused of mismanaging more than $1 billion from the public pension system, granting the state full authority to settle any outstanding claims. Blackstone is now expected to pay the $18 million sum within 30 days of the agreement, which was entered into court in mid-June.
This win comes after the initial 2017 lawsuit suffered immense turmoil, including a dismissal by the Supreme Court in 2020, which was quickly revived by then-Attorney General Daniel Cameron. Current Attorney General Russell Coleman said in a statement that the settlement is “an excellent outcome ending a lengthy dispute that would have likely gone on for many additional years with uncertain results.”
Public Workers Feel More Prepared for Retirement Than Their Private-Sector Peers
A new study from Voya Financial Inc., “Beyond the Pension: What Really Drives Retirement Confidence for Public Employees,” found that while public workers feel they lack education and understanding of their retirement benefits, access to a pension gives them greater confidence in their retirement security than it does for private-sector workers.
The report notes that while 89% of government employees surveyed felt prepared for retirement, 80% of respondents still desired investment advice from a professional.
The study found a direct link between financial literacy and confidence about retirement. For example, workers who knew which pension plan tier they fell into were significantly more likely to feel confident about retirement (51%) than those who did not (32%). Yet 21% of respondents said they were unsure which tier they belonged to–a clear indication that not all pension systems are communicating with members as effectively as they need to be to instill faith in the system.
Gavin Gruenberg, Voya Financial’s government market retirement sales leader, said, “Pensions provide a strong foundation, but employees need help connecting pensions, savings and everyday finances.” He continued, “Many still need help translating that into informed financial decisions.”
Be sure to check back next Friday for the latest news in the fight for a secure retirement! For now, sign up for NPPC News Clips to receive daily pension news from across the country directly to your inbox.