Episode 27: Debunking Retirement Myths with Nevin Adams

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Hello, and welcome to Revamping Retirement, a podcast brought to you by  CapTrust, where we tackle the retirement plan related issues, plaguing fiduciaries and plan sponsors. Our host, Mike Webb, has more than 25 years of experience in the retirement plan industry as a nationally recognized subject matter expert. We hope you enjoy Revamping Retirement.

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Thanks, Karen McCauley, as always, our executive producer for another dare I say blockbuster episode of Revamping Retirement. Mike Webb here with a very, very special guest. And I think I’m going to go through his general bio first, but I think the first thing I want to say is as someone who writes about retirement plans, I’m sure I’m not the only one in this world. Basically, I always feel like

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When I grow up in writing about retirement plans someday, I hope to be like our next guest. He is the chief content officer of the American Retirement Association. And if you’ve never heard of the American Retirement Association, get out from under the rock. But once you’re out from under the rock, I think you’ll still have heard of some of the organizations under the American Retirement Association umbrella, things like the Profit Sharing Council of America or the National Association of Plan Advisors or NAPA, or even if you’re a tax exempt folk, National Tax-Deferred

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Savings Association or NAWTSA. Those are just some of the organizations under the umbrella of the American Retirement Association. And welcome a big, big revamping retirement podcast. Welcome to Nevin Adams. I’m going to give you not even the golf clap. I’m going to give you- you go. Well, the only thing I’d say about that is would you say when you grow up, that would sort of presume that I am grown up, which I assure you is not the case. So not yet. Not yet. Working on it. You know, it’s kind of a thing I talk about. I’ve had a lot of thought leaders on this show. And I think-

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A common thread of the people who are really driven to do this and are really in love with what they do is they feel like they’re not done yet. They’re never done. Like they’re just, they’re still aspiring to do things better and better. And I think that comes out a lot in your writing. And I know we want to try to hit on a variety of hot topics today, but I think I want to share a little anecdote and I think that’ll get the conversation going. Whereas I always knew of you as kind of an industry leader, but I think I really didn’t connect with you until 2019.

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when I was kind of really getting rolling with stuff I was writing and building a social media presence and stuff like that. And an interesting thing happened where I get, as you probably do, all these content providers provide me stuff, you know, 50, 100 emails a day, because of course they want me to share their stuff. So I was reading one day and a very interesting thing happened, like almost all my content providers, and this had never happened before, some wacky statement comes across my little feed about

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that 40 % of people could not afford a $400 expense in life. And then that was the first time ever. Like I’d never questioned this stuff before. Like I just kind of accepted everybody’s surveys they sent me as the truth. And that was the first time I went, 40 % of people can’t, do these people not have retirement plans they can borrow against? Do they not have credit cards that they haven’t maxed out? Couldn’t they even get a payday loan?

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And then I started looking at actually the underlying research, which I’d never done before. I was just kind of blindly accepting all these articles. You may laugh at it now, but it’s like I kind of saying that it was the truth. And I started looking at the underlying research and I’m like, no, that’s not what the survey says at all. And then it was so funny because immediately I read an article by you after the talk that basically went piece by piece through this and just kind of said, this is not, you know, in a nice way, this is not.

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sense. That’s not what they’re saying at all. There’s some lessons to be learned here, truth be told. Yes, could people have more emergency savings? Absolutely. But there was no way on the earth were they saying that you had, that 40 % of people didn’t have $400, couldn’t get access to $400. So that’s how I got introduced to you. And you can use that in kind of a general context. You could talk about that specific issue. But that’s how I really, I think, got to know you because you were the guy who I could now say, hey, you know,

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Instead of getting all these 50 articles parroted to me on the same subject, because you see it nowadays too with PEPs and all kinds of things, I could have somebody who is kind of like the voice of reason for better or worse and say, hey, is this survey that says XYZ really true? How do you feel about how that sums it up? Well, Mike, your experience that you describe is what, honestly, it’s what everybody does. We’re all busy. We don’t have time. Even before all this nonsense, we didn’t have time. We sort of accept that things couldn’t be published.

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Or printed, certainly not under any kind of an academic or government heading that couldn’t be accurate. I mean, we have this sort of latent sense, even with the Internet, even in the area of fake news — that somehow a responsible individual would stop it from being shared broadly if it was just false. But the reality is, and surveys have done this for a long time. mean, aside from the fact that surveys are notoriously inaccurate because people

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A, they never tell you the truth. B, they tend to be aspirational. You know, they tend to talk about what they would do, not what they actually will do. But none of that ever comes through. And a lot of times it’s acknowledged, deep down buried in the hard to read footnotes. And who’s got time to do that and to check that out and all that kind of stuff. And meanwhile, what ends up happening is these sort of sweeping broad generalizations get sort of thrown out there. I mean, what draws my attention is they’re almost always done in a way

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to cast doubt or to have a negative connotation about the retirement system that I’ve been a part of, you know, basically my whole life as a participant, as a defined benefit participant and seeing how it can work, seeing how it’s worked even with my parents’ lives, very modest income individuals. And it all seems to be with this motive. It’s one of two things. I want to down the current system because I want to give you an alternative, or it’s just, it bleeds, leads. And

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If the headline said everybody can come up with $400, I mean, let’s face it, you wouldn’t have read it. wouldn’t have clicked. And so clickbait is what we call now. But the truth is that kind of stuff has been going on before there was an internet. It just gets magnified these days. And the good news is since, as you said, people keep sharing this kind of stuff, I never run out of things to write about. And it’s always interesting too, because when you get into this stuff, and some of the stuff I’ve seen over time has been just fairly ridiculous.

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from highly regarded individuals and institutions. And I’ll tell you, I step out with a little bit of trepidation sometimes because I’m like, who am I to question a researcher from Harvard University, for instance? But it’s my gig. It’s what I do. So. And kind of touching upon one of the things you said, a lot of it tends to lend towards the negative because of exactly what you said. Negative kind of attracts things. And if I read something about people having $400, a lot of people struggling with a $400 expense.

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it wouldn’t have been interesting to me. Well, it might have been interesting to me because I’m an industry geek, but for most people it wouldn’t have been interesting. I think that happens a lot with retirement expectations because I read hundreds of articles about the sky is falling. People don’t have enough money to retire. They’re never going to have enough money to retire no matter what they do. They’re all doomed. And then it’s so funny because then I look at my plan sponsors and they go, how are your retirees doing? And they’re like, pretty good.

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These aren’t plan sponsors to have pension plans or anything. These are plan sponsors where it’s the 403B or 401K or Social Security for them. That’s it. And a lot of them and I actually talk to retirees. You know, it’s like I don’t know any retirees or anything. And I talk to retire participants in plans. And they all say the same thing. I’ve never had a retiree come to me, to be honest, Nevin, and say, you know, I’m desperate. Well, but you hit on a key point there. And that’s something that I don’t think we ever want to lose sight of.

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And it certainly was true during the COVID environment. I think people who have access to a retirement plan at work, I think are okay. I think they take advantage of it. And we’ve seen data that shows, and we’ve reported on this, that individuals are 12 times more likely, you know, making 30 to 50 grand a year. So we’re not talking about, you know, the higher income people that are always…

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dished. are 12 times more likely to save for retirement if they have access to the program or work. mean, technically speaking, nothing keeps any of us. mean, heck, you don’t even have to get out of your pajamas these days. You go online, open an IRA with your local bank or with, you know, some kind of a provider or whatever, and you could be saving for retirement. You don’t need the retirement plan at work to do it. But human beings, you know, that’s what we’re relying on. And so we really do see and we talked about the coverage gap. It’s real.

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is that there are a lot of people out there who right now don’t have access to a plan at work. And then sadly, they’re not doing anything about retirement for any variety of reasons, not only because they can’t afford or they don’t think they can afford. Sometimes it’s just, they don’t even know how to get started. And so that’s the challenge that remains for this industry and what we’re trying to do. I do think people have access to a plan at work, have got a fine chance at having the kind of retirement that they aspire to and that we all want them to have. But

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We got a lot of people that don’t have that yet. And just hitting on that coverage thing, because I saw a stat the other day and it could be getting one of those that’s dubious because they actually didn’t provide the underlying survey information. So that’s always a red flag to me now. But I saw a stat the other day and I’m sure the stats aren’t that far off actually from what the stat said, but that primarily coverage in retirement plans is a large employer is a large employer thing. Large employers almost universally cover.

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cover people in retirement plans. Whereas, this this statistic might be way low, but I think the actual statistic is probably still low enough to merit discussion. The stat that was quoted was that 12 % of sponsors with fewer than 500 employees have a retirement plan, whether it’s a single employer plan, or PEP, or any sort of, you know, formal or simple or any sort of formal retirement plan relationship in place, so that small employers like, you know, Jane the plumber or whomever, primarily they don’t have retirement plans.

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which is why the auto IRAs and kind of the PEPs presumably are stepping in to fill the gap. Now we can argue it’s not 12 % because maybe that survey was totally bogus, but it’s probably not great. Today is 50%. That’d still be well off of that. So yeah, be generous with your assumptions. And that’s true. The coverage gap in this country really is. It’s small employers. And when you talk to small employers about this, I mean, as I said, you talk about people don’t even know how to get started. We talk.

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You know, in this industry, the small plans are sold and not bought. The reality is a small business owner usually has got bigger fish to fry. They’ve got more important things. In a lot of cases, we did a survey when I was at the Employee Benefit Research Institute years back, asked small employers why they didn’t. I mean, one of the, like the number two reason was nobody’s asked me for it. You know, again, okay, that’s probably true because again, people don’t, they’re not focused on it. They don’t thinking about it. They think social security will be enough.

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There’s a remarkably large number of the population who thinks they have a pension, who clearly don’t by any statistical evidence have a pension. you know, the message, I think people understand that sooner or later, they’re going to have to worry about it. I think the problem is getting them to worry about it when it’s there’s enough time for it to be easier than it would be otherwise. And COVID has brought a lot of this to light. I mean, honestly, a lot of the industries that have been hardest hit by COVID also tend to be the small business owners we hear so much about.

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that have been legitimately sort of pushed to the margins during all this. And their workers probably didn’t have a plan to begin with. So they weren’t able to sort of ride up with the markets last year the way most of us were fortunate enough to be able to do. They didn’t have that option to begin with and they got hit with the unemployment as well. And then you hear talk, the other thing is workers who are part-time, part-year, not fully in with the workforce, the rise of the gig economy. So there’s a constituency of folks out there who

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who haven’t yet had access to these kinds of programs and therefore, they’re going to have a problem down the road. And let’s talk about that solution a bit because I’ve seen such things such, auto IRAs and PEPs are probably two of the topics I read the most about, arguably, of any content. I I’ve just bombarded with PEPs and auto IRAs. And the retirement plan writer in me kind of pushes back from that and gets a little critical and tries to kick the tires on these things a little bit to say they’re not a panacea.

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PEP is not a panacea for this problem. And a state auto IRA is not a panacea for this problem. And then I kind of come off as looking as critical of those things, which I’m not trying to be. But my thought is, is that I don’t care how those people are covered. These people, let’s just say, like I said, if it’s 50 % of coverage, we need to get that other 50 % of small businesses covered. So these people have an opportunity to be in the plan. And I don’t really care if it’s a PEP or a state auto IRA or a single employer plan. I just want

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there to be covered. Maybe having a bigger menu is a good thing, even though I can rail all day on maybe PEPs are more expensive or state-run IRAs are more expensive than a single employer plan. But I don’t think that’s going to get me anywhere at the end of the day because the problem is going to be I’m going to still go back to that 50 % or 12 % or whatever between it is figure and say, hey, we’ve still failed these folks. And I’d love to hear your thoughts on that. Well, I’m with you.

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think we need to hit all the levers we can. And I don’t think there is one silver bullet that fixes this problem. know, coverage, remember, health care has been an issue now for a decade, right? And one of the big things we were trying to fix with health care with the Affordable Care Act was coverage. And even when it included things like the individual mandate and things like that, it still wasn’t covering everybody. It just covered more people. And so to me, again, to what you’re saying, and I think statistically, if you look the success,

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or at least the accomplishment of the state IRA programs, they’ve got the benefit of a mandate, a government mandate, and still there are people who are slipping through the cracks, either because they opt out or because they change jobs so often they don’t, you know, they can’t keep up with whatever. you know, that’s maybe part of the solution. Maybe a federal version would do a better job or at least expand the impact that you’re having now in about seven different states. And so maybe that would be good. The PEPs, I mean,

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Yeah, I think the peps probably may shift existing plans more than create new ones than they do to create new ones. But I do believe that the structure of the pep at least will provide an expanded opportunity for people who support these plans to have some profit and some encouragement, if you will, to do in it. I think it will encourage more of the sales of these plans to the point earlier. I think these plans are sold and not bought kind of thing. And so I think that will encourage that and anything that that sort of helps us gather up.

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some of these loose ends, I’m all for. I only get a little hinky when some of the solutions that are put forth out there kind of shove aside some of the other options. I am a little nervous about some of the big government kind of solution problems that I think they don’t understand the way the current system works in terms of tying the incentives of business owners and more highly compensated individuals to the people who otherwise wouldn’t have access to a plan and wouldn’t participate anyway. think.

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Government mandates are a blunt instrument for solving the problems that you want to do. think, you know, if you argue that before you had zero and now you’ve got, you know, 30%, well, I’ll take that as a win, but I’ll compare that next to what the voluntary system has done among like 401ks and say, well, there we’re doing 70%, 80%. So really, why don’t we go with one of these instead? Aren’t these better? I mean, the other is better than a poke in the eye with a sharp stick.

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but we can do better. Yeah, and I think that’s for people who operate in those states where there’s an auto IRA. I think there’s a perfect opportunity for the advisor or the other professional to step in and say, hey, you you can go with the state plan, but you’ve always had this single employer option. Oh, and by the way, here’s a pep. If you don’t like the single employer option for whatever reason, you think it’s too much work. You know, you don’t have just the state option. Well, and anecdotally, that’s exactly what

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And I know you’ve heard and I’ve heard from the individuals. Anecdotally, that’s exactly what’s happening. All of a sudden, if you tell an employer who maybe wasn’t even thinking about this before, you’re going to the state’s going to now require you to do this, and they’re going to sit up then and they’re going to say what? What is this? And that’s a great opportunity for somebody to come in with what I like to call a real plan to come in and say, look, this this will not only be better for your workers and it’ll satisfy the employer, the mandate from the state, but it’ll be better for you individually.

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because you as a small business owner are probably not given thought and attention to your retirement the way you should either. Most of them see their business as their retirement. Well, that’s fine unless you were planning to retire in the time of COVID, in which case, maybe that wouldn’t be a great plan. So yeah, like I said, let’s hit all the levers we can. I’m excited to get them into the plans because we have auto enrollment and that’s just an amazing, once you cover employees, auto enrollment does, I will argue that auto enrollment is a panacea.

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I mean, to me, it’s like one of the greatest things since, you know, since target date funds came into the industry way back in the ’90s. I think auto enrollments right up there with one of the greatest innovations. And I want to talk to you a little bit about that because you did a wonderful article because I knew it was coming because I saw this study that said, well, auto enrollment is not optimal. And I’m like, what? What in the world? And I’m like, Nevin Abad, your table is ready. You’re definitely going to write about this in some form, but sure enough.

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I think I had a way today. I do have to actually read this stuff. And honestly, you’re one of the people that sort of continues to spur me on to do this kind of so it’s your fault, or at least partially. No, I mean, you’re right, because well, it gets into this this stuff. And it was a it was a it was a typical academic study. And it was trying to sort of do this cost benefit analysis that no regular human being would ever do in their life. And the idea being, you know, the tradeoff between

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you know, parking, you putting money aside in a retirement plan now versus what you as particularly as a younger individual could instead do with that money. And the the what the economists like to call the utility of that money and the and the benefit you might derive from that outside of the retirement plan. The idea being that basically you can get around to saving for retirement later on when it, you know, more more suits your lifestyle and things like that. And they prove this by putting together this really weird

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algebraic formula that looks official and scientific, uses a lot of funky Greek letters that nobody has ever seen outside of the country of Greece for the study of classic literature and purport to sort of prove their point mathematically. Well, they make all kinds of assumptions that are again articulated that are embedded in this, but ultimately what gets down to is we’ve sort of made up some numbers about

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how much value you’d get from this versus that. And when you apply our made up set of numbers, we get this kind of result kind of thing. And doesn’t take into account a lot of the other stuff. So the headline is all you read. Maybe if you’re lucky, you read the abstract. And if all of a sudden, if you’ve got some qualms about automatic enrollment, they’ve given you all you need. You can just say, well, look, I just read a study and it said, but nobody ever really pays attention to the underlying assumptions that are there.

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And the trade-offs that are being made. And I think it’s unfortunate because that’s exactly the kind of messaging that gets picked up and spread around in the media because it’s counterintuitive. And if it’s negative or if it’s counterintuitive, that’s journalistic clickbait. I’ll tell you, I can’t resist it myself. And as a writer, sometimes I’ve actually been known to employ those tactics.

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I think that’s a good place. We’ve covered a lot of ground. I think that’s actually a good place to put a pin in it. Nevin, I can’t thank you enough. I think we really hit a lot of good topics on our podcast and I’m really thankful to have you as a guest today. Well, I appreciate the invitation. I enjoy your work and your writing as well. You do, as I said, you provide me fodder in lots of different ways. And one time out there, not too distant, we can talk about social security. Oh yeah.

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I think I’ll have to have you back on another podcast definitely for that. For Nevin Adams, our entire cap trust production between Karen McCauley, I’m Mike Webb, and this has been Revamping Retirement. The discussions and opinions expressed in this podcast are that of the speaker and are subject to change without notice. This podcast is intended to be informational only. Nothing in this podcast constitutes a solicitation, investment advice, or recommendation to invest in any securities.

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CapTrust Financial Advisors is an investment advisor registered under the Investment Advisors Act of 1940. CapTrust does not render legal advice. Thank you for listening to Revamping Retirement.