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Pension reform, 19th-century British novels and bonds: It all makes sense now

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This may be my sole opportunity, ever, to talk about 19th-century British novels and pension reform in the same breath, so I am seizing it. It's not often my English lit degree is so practical.

Alas, the idea is not original to me, however. An editor at the Harvard Business Review makes the link in a Feb. 25 blog post titled “What Do People Have Against Retirement Income?” What writer Justin Fox really wants to know is why more people don’t buy annuities.

That’s where the novels come in. From Jane Austen’s “Pride and Prejudice” through Charles Dickens and Anthony Trollope and stretching on to “Downton Abbey” (yes, I know this is set in the 20th century and not a novel, but I don’t expect all of you to be plowing through massive 19th-century novels for fun on a regular basis), characters spend a lot of time talking about money, worrying about money and trying to get money through marriage. Specifically, they put that money into terms of annual income.

The poor Bennet sisters, for example, can look forward to a fixed income from money invested before they were born (and not very much), while a desirable suitor is rumored to have a small fortune coming to him annually — again, a fixed amount produced by an investment instrument.

Frequently, those were bonds. A common plot point in many popular Victorian novels revolves around the financial disaster that results for families when someone passes up these safe investments and speculates with his capital. (I recommend Trollope’s “The Way We Live Now.” Gordon Gekko, Bernie Madoff and “The Wolf of Wall Street” are not new phenomena.)

Since you can read Fox’s blog for yourself, I will just highlight the point that hit home for me: He notes that the U.S. labor department is proposing a rule that would require retirement funds to state a predicted stream of income rather than just the account balance.

My question: Why aren’t they all doing it already? I can think of no better incentive to save.

In all of the bouncing around I’ve done to develop my career, I’ve had two funds that did this for me. Both made me think, and both made me act.

In the first case, a 401(k), the fund manager provided a preloaded calculator that gave me some idea of what I’d have to live on at my current savings rate, assuming I stopped working at full retirement age. The calculator let users run various scenarios, and after trying a few of those, you’d better believe I found a way to increase my contribution!

In the second case, I had that rarity, a traditional defined-benefit retirement plan. It was not as exciting as it sounds. I’d worked for an international corporation long enough to be vested, and every year when my statement arrived, it included a series of numbers. Monthly income at 62, 66 and 70.

Those numbers were self-serving, because the company wanted people like me to take their little lump sums and go away, the sooner the better. The most I had to look forward to was somewhere around $100 a month. If you did the math, many of my former colleagues and I discovered, at that rate you’d never capture the amount sitting in the account, tiny as it seemed.

Armed with that information, many found better ways to put that money to work, from modest down payments on homes and paying off college loans to simple rollovers into other retirement accounts. As did I.

I applaud the growing movement among employers that offer 401(k) accounts to switch from opt-in to opt-out. For myriad reasons, it’s hard to save, so forcing people is worth a try. But if people who hope to retire someday could see, in big red numbers, the teeny amounts they might have to live on when that day arrives, a few more might seize their destinies and change them, for the better.

The week ahead

There’s no question the word for this winter in the midstate is “brutal.” There’s also no question it’s had an effect on business. In the March 4 issue, reporter John Hilton tells us how serious that effect has been for the supply chain and truckers’ bottom lines.

Also Friday, we show you what federal spending has meant for the commonwealth in recent years. Pennsylvania ranks high, so where does all that money come from and what’s it for?

This week’s Inside Business Focus is family-owned and -operated businesses, with lists on document management services, commercial printers and, of course, the top family-owned and -operated businesses in the midstate.

Is it warm enough to venture out yet? Find local networking opportunities here.

The rewind

Back in November, when I was writing about Bitcoin, it seemed like few people had heard of the virtual currency. That’s changed, now that a major Bitcoin exchange, Mt. Gox, fell victim to thieves and filed for bankruptcy protection. As Business Journal Managing Editor Amy Gulli said, bemused by all of this, “What can you expect from a company that named itself after a character in a Dr. Seuss book?”

Bitcoin may be virtual, but the losses are said to approach a half-billion. Wary holders of bitcoins, though, are finding a real-world solution to protecting their wealth — a solution that emphasizes the difficulty people have with things they can’t touch and hold. Yes, they’re printing out their bitcoins and putting them in safe places, like banks.

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