Retirement insights from a Colorado PERA perspective

A distant view shows a mountainous landscape with sloping peaks, green trees in the foreground, and a cloudy sky above.

A digest of timely information and insight about finance, investing, and retirement.
<a href="http://time.com/money/5468239/jack-bogle-index-funds-problem/" target="_blank" rel="noopener noreferrer">Investing legend says there’s a big problem with index funds</a> | <a href="http://time.com" target="_blank" rel="noopener noreferrer">Time</a> 
A generation ago, Jack Bogle invented the index fund. Now he’s warning his creation may have a negative impact on the stock market. Bogle, who founded The Vanguard Group in 1974, <a href="https://www.wsj.com/articles/bogle-sounds-a-warning-on-index-funds-1543504551">wrote recently in The Wall Street Journal</a> that if current trends continue, index funds will soon own half of all U.S. stocks. He thinks that could lead to a dangerous vacuum in corporate governance – with nobody to effectively police the corporate executives who run America’s largest companies. “Public policy cannot ignore this growing dominance, and consider its impact on the financial markets, corporate governance, and regulation,” he wrote. “These will be major issues in the coming era.”
<a href="https://www.plansponsor.com/many-retirees-outspend-planned-budget/" target="_blank" rel="noopener noreferrer">Many retirees outspend planned budget</a> | <a href="https://www.plansponsor.com/" target="_blank" rel="noopener noreferrer">PlanSponsor</a> 
Thirty-nine percent of retirees are spending more than they had expected, according to the “<a href="https://www.copera.org/retirement-roundup-this-investing-expert-says-theres-a-big-problem-with-index-funds" target="_blank" rel="noopener noreferrer">Global Atlantic Retirement Spending Study: Perception vs. Reality</a>.” Forty-nine percent of pre-retirees believe planning for retirement is more difficult for them than it was for their parents. The typical non-retired U.S. consumer older than 40 spends an average of $2,993 a month, and retirees spend 32 percent less ($2,008), according to Global Atlantic Financial Group. The areas where retirees are spending less are entertainment (29 percent less), dining out (24 percent less), traveling (18 percent less) and on housing (23 percent less on mortgage payments and 22 percent less on rent).
<a href="https://www.fool.com/investing/2018/12/01/dont-retire-early-unless-you-answer-yes-to-these-4.aspx" target="_blank" rel="noopener noreferrer">Don’t retire early unless you can answer “yes” to these 4 questions</a> | <a href="https://www.fool.com/" target="_blank" rel="noopener noreferrer">Motley Fool</a> 
Retiring early is a dream for many, but jumping the gun by retiring too early can leave you pinching pennies at the end of your life when your savings run dry. Before you decide to retire, it’s important to make sure all of your finances are in order to avoid this grim picture. The four questions you should be able to answer “yes” to if you’re truly ready for a premature retirement relate to your debt, savings, health care plan, and retirement account withdrawals.
<a href="https://www.denverpost.com/2018/12/01/americans-retirement-age-working/" target="_blank" rel="noopener noreferrer">By choice or necessity, more adults are working past retirement age</a> | <a href="https://www.denverpost.com" target="_blank" rel="noopener noreferrer">Denver Post</a> 
A National Press Foundation seminar in Washington, D.C., earlier this year explored the topic of why Americans are working longer. “The population is getting older, fertility rates are quite low, and people are living longer,” Richard Johnson, director of the program on retirement policy at the <a href="https://www.urban.org/policy-centers/cross-center-initiatives/program-retirement-policy" target="_blank" rel="noopener noreferrer">Urban Institute</a>, said during the seminar. Johnson provided several reasons for the change in the labor landscape, including tightening of labor markets, pension uncertainty, and the availability of less physically demanding jobs.
<a href="https://www.cnbc.com/2018/11/28/most-struggle-to-save-for-retirement-no-matter-age-gender-or-income.html" target="_blank" rel="noopener noreferrer">Everyone is having some trouble saving for retirement</a> | <a href="https://www.cnbc.com" target="_blank" rel="noopener noreferrer">CNBC</a> 
In a perfect world, saving for retirement would be easy. That world assumes everyone makes an adequate salary, can afford all their necessities and a few frills, and feels comfortable setting aside some money for the future. Yet the reality is that retirement saving is not easy for everyone. Lower income and debt, whether from credit cards or student loans, are two items that can make it difficult to save for the future. When 30 percent of people <a href="https://learn.stashinvest.com/retirement-in-america-2018-survey" target="_blank" rel="noopener noreferrer">surveyed by Stash</a> feel financially squeezed, they start eyeing retirement contributions as a place to cut back. The investing app surveyed more than 2,100 people online in November.
<a href="https://www.forbes.com/sites/rcarson/2018/12/09/are-you-retirement-ready-easy-fixes-for-4-of-the-most-common-retirement-planning-mistakes/#6fb13bc926a2" target="_blank" rel="noopener noreferrer">Are you retirement ready? Easy fixes for 4 common planning mistakes</a> | <a href="https://www.forbes.com" target="_blank" rel="noopener noreferrer">Forbes</a> 
The 2018 <a href="https://www.ebri.org/retirement/retirement-confidence-survey" target="_blank" rel="noopener noreferrer">Retirement Confidence Survey (RCS)</a> conducted by the <a href="http://www.ebri.org" target="_blank" rel="noopener noreferrer">Employee Benefit Research Institute</a> (EBRI) and research firm <a href="https://greenwaldresearch.com/" target="_blank" rel="noopener noreferrer">Greenwald &amp; Associates</a>, found that only 32 percent of retirees are very confident in their ability to live comfortably throughout retirement. But what does that mean for the remaining 68 percent of retirees who are less confident? Equally important, what does it mean for working Americans actively saving for life in retirement?
&nbsp;

Retirement Roundup: This investing expert says there’s a big problem with index funds

A digest of timely information and insight about finance, investing, and retirement.



<a href="https://money.cnn.com/2018/09/17/pf/things-to-do-before-you-retire/index.html" target="_blank" rel="noreferrer noopener" class="broken_link">Five things you must do before you retire</a> |&nbsp;<a href="https://money.cnn.com/" target="_blank" rel="noreferrer noopener">CNN Money</a> If you’re looking forward to retirement, you’re not alone. Countless workers dream of leaving their jobs behind and enjoying the freedom of unstructured days. But before you pull the trigger on retirement, be sure to tackle five critical steps so you don’t come to regret your decision later on.



<a href="https://www.cnbc.com/2018/09/10/post-financial-crisis-retirees-still-struggle-to-find-reliable-retirement-income.html" target="_blank" rel="noreferrer noopener">A decade after the financial crisis, this retirement dilemma still hasn’t been solved</a> |&nbsp;<a href="https://www.cnbc.com/" target="_blank" rel="noreferrer noopener">CNBC</a> When it comes to how individual investors have fared since the financial crisis, it’s still largely a tale of the haves and have-nots. To see evidence of this, look no further than where individuals are when it comes to the biggest financial goal of all: retirement. As news of 401(k) plan millionaires hits the headlines, other individuals are still left picking up the pieces after the last decade’s precipitous market drop decimated their nest egg or a job loss led to them to raid their retirement funds.



<a href="https://www.cbsnews.com/news/hsa-health-savings-accounts-many-benefits-for-retirement-savings/" target="_blank" rel="noreferrer noopener">Many savers missing out on the HSA’s benefits for retirement</a> |&nbsp;<a href="https://www.cbsnews.com/moneywatch/" target="_blank" rel="noreferrer noopener">CBS MoneyWatch</a> One of the best places to accumulate assets for retirement is a health savings account, or HSA. But many Americans aren’t getting the message. HSA account holders have accumulated over $51 billion in these&nbsp;<a href="https://www.cbsnews.com/news/the-many-benefits-of-health-savings-accounts/" target="_blank" rel="noreferrer noopener">special saving plans</a>&nbsp;– a 20.4 percent increase since last year. And the number of HSAs has grown over 11 percent, totaling 23.4 million accounts, according to the&nbsp;<a href="http://www.devenir.com/research/2018-midyear-devenir-hsa-research-report/" target="_blank" rel="noreferrer noopener">2018 Midyear Devenir HSA Market Survey</a>.&nbsp;But most people use their HSA as a pass-through and are getting only the advantage of a tax-free way to pay for out-of-pocket medical costs. So they are missing out on these accounts’ most valuable feature: tax-free growth of invested HSA assets over long periods of time.



<a href="https://www.marketwatch.com/story/even-people-with-pensions-work-into-their-retirement-years-2018-09-14" target="_blank" rel="noreferrer noopener">Even people with pensions work into their retirement years</a> |&nbsp;<a href="https://www.marketwatch.com/" target="_blank" rel="noreferrer noopener">MarketWatch</a> Having guaranteed income for retirement in the form of a pension is a dream for many workers, but workers may still change jobs or prolong their working years before they retire. Transitioning into retirement — the actual act of moving away from the workforce — isn’t all that different among public and private sector workers. Even though many public workers get guaranteed income in the form of a pension during retirement, they still tend to take another job or reduce their hours to part-time before fully embracing retirement. Private workers, on the other hand, similarly work into their retirement years, though they may not have the option if they haven’t saved enough for their retirement.



<a href="https://www.benefitnews.com/list/25-best-cities-for-retirement" target="_blank" rel="noreferrer noopener">The 25 best cities for retirement</a> |&nbsp;<a href="https://www.benefitnews.com/" target="_blank" rel="noreferrer noopener">BenefitNews</a> There might be one fairly simple and smart way to ensure employees have enough money in retirement: Relocating to a city that has a lower cost of living and can stretch post-career savings. WalletHub, an online personal finance site, researched the Best &amp; Worst Places to Retire by comparing 46metrics across more than 180 cities, including cost of health care, affordability, things to do and quality of life. (Spoiler: Denver is #4!)



<a href="https://www.denverpost.com/2018/09/11/social-security-comes-up-short-in-colorado/">Study: Social Security doesn’t stretch far in Colorado</a> |&nbsp;<a href="https://www.denverpost.com/">Denver Post</a> Social Security recipients collect $1,295 a month on average, but that payment won’t cover&nbsp;basic living costs in any state, including Colorado, according to a&nbsp;<a href="https://howmuch.net/articles/cost-of-living-social-security" target="_blank" rel="noreferrer noopener">survey from HowMuch.net and GoBankingRates</a>. That monthly payment covers only 36.3 percent of basic living costs in Colorado, ranking the state 11th worst for coming up short. Hawaii, California, Massachusetts, Alaska and New York are the toughest states for those trying to get buy on just Social Security, while Arkansas, West Virginia, Oklahoma, Alabama and Mississippi are where payments go the furthest.

Retirement Roundup: Five things you must do before you retire

A digest of timely information and insight about finance, investing, and retirement.



<a href="http://www.denverpost.com/2017/10/13/social-security-benefits-rise-2-percent-2018/" target="_blank" rel="noreferrer noopener">Social Security going up 2 percent in 2018, average recipient to get extra $25 a month</a> |&nbsp;<a href="https://www.denverpost.com" target="_blank" rel="noreferrer noopener">Denver Post</a>Millions of Social Security recipients and other retirees will get a 2 percent increase in benefits next year. It’s the largest increase since 2012 but comes to only $25 a month for the average beneficiary. Over the past eight years, the annual COLA has averaged just above 1 percent. In the previous decade, it averaged 3 percent. The average monthly Social Security payment is $1,258, or about $15,000 a year.



<a href="http://www.latimes.com/business/hiltzik/la-fi-hiltzik-401k-20171010-story.html" target="_blank" rel="noreferrer noopener">Bad news: Your 401(k) won&#8217;t give you a decent retirement |</a>&nbsp;<a href="http://www.latimes.com" target="_blank" rel="noreferrer noopener">Los Angeles Times</a>For nearly 40 years now, we’ve been hearing that 401(k) plans are the key to a comfortable retirement. By giving a tax break to workers contributing part of their paychecks to their retirement nest eggs, the plans were designed to supplement Social Security benefits and employer pensions. <a href="http://crr.bc.edu/wp-content/uploads/2017/10/IB_17-18.pdf" target="_blank" rel="noreferrer noopener">A new survey from Boston College’s Center for Retirement Research</a> demonstrates, however, that 401(k) plans are destined to fail millions of Americans. They’re not offered by enough employers, they’re not taken up by enough workers, and for most people, their balances aren’t large enough to provide for a decent retirement.



<a href="https://www.bloomberg.com/news/articles/2017-10-10/thank-richard-thaler-for-your-retirement-savings" target="_blank" rel="noreferrer noopener">Thank Richard Thaler for Your Retirement Savings |</a>&nbsp;<a href="http://www.denverpost.com/" target="_blank" rel="noreferrer noopener">Bloomberg</a> Over the last few decades, as more and more American employers killed off their pensions, workers were offered 401(k)s or similar retirement plans, with defined contributions instead of defined benefits. These voluntary accounts should have worked, in theory. Standard economic theory assumes people act rationally: Workers, left to their own devices, should save and invest properly to meet their long-term goals. But Thaler and other adherents of behavioral economics pointed out that workers saving for retirement can be their own worst enemies. Without help, Thaler argued, they’ll never retire.



<a href="http://www.marketwatch.com/story/advocates-fear-trump-tax-plan-may-rothify-401k-plans-2017-09-28" target="_blank" rel="noreferrer noopener">Pre-tax Retirement Contributions at Risk in Trump Tax Reform |</a>&nbsp;<a href="http://www.marketwatch.com/" target="_blank" rel="noreferrer noopener">MarketWatch</a>Tax reform proposals of past years from both political parties have targeted the break people get for 401(k)s because it is a gigantic source of untaxed money – perhaps more than $580 billion over five years, according to a 2016 Joint Committee on Taxation estimate. If Congress gets rid of this system, saving for retirement would be more like saving in a Roth IRA or Roth 401(k). With a Roth, you do not get any tax benefit when you contribute, but the money grows tax-free in the accounts. These accounts are also not subject to required minimum distributions, which retirees must take from 401(k)s beginning at age 70 1/2.



<a href="http://crr.bc.edu/working-papers/how-much-does-out-of-pocket-medical-spending-eat-away-at-retirement-income/" target="_blank" rel="noreferrer noopener">How Much Does Out-of-Pocket Medical Spending Eat Away at Retirement Income? |</a>&nbsp;<a href="http://crr.bc.edu" target="_blank" rel="noreferrer noopener">Center for Retirement Research at Boston College</a>The adequacy of retirement income – from Social Security benefits and other sources – is substantially reduced by Medicare’s high out-of-pocket (OOP) costs, according to a new report.



<a href="https://www.plansponsor.com/db-plans-far-eliminated/" target="_blank" rel="noreferrer noopener">DB Plans Far From Being Eliminated</a>&nbsp;|&nbsp;<a href="https://www.plansponsor.com" target="_blank" rel="noreferrer noopener">Plansponsor</a> While headlines have stated the disappearance of defined benefit (DB) retirement plans, a report from Aon shows only 6 percent of U.S. corporate DB plan obligations have actually been settled since 2012. “While the number of closed and frozen defined benefit plans continues to increase, plan sponsors still have an obligation to fund these plans, which means they are far from being eliminated altogether,” says Rick Jones, retirement and investment senior partner at Aon.

Retirement Roundup: Social Security Gets a Bump

A digest of timely information and insight about finance, investing, and retirement.



<a href="https://www.washingtonpost.com/graphics/2017/national/seniors-financial-insecurity/?utm_term=.cca7f14421behttps://www.yahoo.com/news/apos-long-1-million-retirement-195553143.html" target="_blank" rel="noreferrer noopener" class="broken_link">“I’m going to work until I die:” The new reality of old age in America</a>&nbsp;|&nbsp;<a href="https://www.washingtonpost.com" target="_blank" rel="noreferrer noopener" class="broken_link">Washington Post </a>People are living longer, more expensive lives, often without much of a safety net. As a result, record numbers of Americans older than 65 are working — now nearly 1 in 5. That proportion has risen steadily over the past decade, and at a far faster rate than any other age group. Today, 9 million senior citizens work, compared with 4 million in 2000.



<a href="https://www.bloomberg.com/news/articles/2017-09-25/having-children-can-ruin-your-retirement" target="_blank" rel="noreferrer noopener">Having Children Can Ruin Your Retirement |</a>&nbsp;<a href="https://www.bloomberg.com/news/articles/2017-08-24/health-care-costs-could-eat-up-retirement-funds-forecast-shows" target="_blank" rel="noreferrer noopener">Bloomberg </a>Parenthood has plenty of non-monetary perks, but the financial effects can last the rest of your life. It may seem obvious that kids make it harder to save. In practice, however, parents can compensate for the extra costs of parenting by spending less on themselves. Parents are often forced to budget carefully—a skill that will pay off long after their children are grown. Some people may even decide to take their careers more seriously after having kids, and studies show that some fathers end up earning more than if they’d remained childless.



<a href="https://www.copera.org/retirement-roundup-older-workers-new-problems" target="_blank" rel="noreferrer noopener">Colorado spends the most on out-of-pocket health care but that could be a good sign |</a>&nbsp;<a href="http://www.denverpost.com" target="_blank" rel="noreferrer noopener">Denver Post</a> Colorado spends the most on out-of-pocket health care costs, according to a JPMorgan Chase Institute healthcare spending study. But that’s not necessarily a bad sign. The study, examining anonymous data from 2.3 million Chase customers across 23 states from 2013-16, found that families increased their health care spending when they came into more income or assets.



<a href="https://www.forbes.com/sites/nextavenue/2017/09/13/why-the-tax-reform-crew-may-target-your-retirement/#740796a4194e" target="_blank" rel="noreferrer noopener">Why The Tax Reform Crew May Target Your Retirement |</a>&nbsp;<a href="https://www.forbes.com" target="_blank" rel="noreferrer noopener">Forbes </a>It’s&nbsp;<a href="http://www.nirsonline.org/index.php?option=com_content&amp;task=view&amp;id=882&amp;Itemid=48" target="_blank" rel="noreferrer noopener">no secret</a>&nbsp;that the trend to 401(k) plans from traditional pensions has put more pressure on individuals to save enough for retirement. Combine that with recent moves by the federal government to roll back rules that might have made saving easier, and the retirement landscape has never been more treacherous. Fortunately, there are still some common-sense steps you can take to make your financial future more secure.



<a href="https://www.bloomberg.com/news/articles/2017-09-29/who-s-left-out-of-401-k-nation" target="_blank" rel="noreferrer noopener">Who’s Left Out of 401(k) Nation |</a>&nbsp;<a href="https://www.bloomberg.com/news/articles/2017-08-24/health-care-costs-could-eat-up-retirement-funds-forecast-shows" target="_blank" rel="noreferrer noopener">Bloomberg </a>Only 45 percent of U.S. workers participate in an employer-sponsored retirement plan, according to the Pew Charitable Trusts. Many don’t even have the option—one-third of U.S. workers aren’t offered a pension or 401(k)-style plan by their employers.



<a href="https://www.copera.org/retirement-roundup-older-workers-new-problems" target="_blank" rel="noreferrer noopener">Proposed 401(k)s cost more than Kentucky’s existing defined benefit pension plans</a>&nbsp;|&nbsp;<a href="http://www.nkytribune.com" target="_blank" rel="noreferrer noopener">Northern Kentucky Tribune</a> Kentucky needs ideas that work to reduce its unfunded pension liabilities. Moving employees into 401(k)-type defined contribution plans is actually more expensive, increases the cost of paying off existing liabilities, and harms retirees, while making it much more difficult to attract and retain a skilled workforce.

Retirement Roundup: Older Workers, New Problems

A digest of timely information and insight about finance, investing, and retirement.



<a href="http://www.plansponsor.com/Taxpayers-Not-Burdened-by-Public-Pensions/">Taxpayers not burdened by public pensions |&nbsp;</a><a href="http://www.plansponsor.com">PlanSponsor</a>



Taxpayers only contribute about 20 cents on the dollar toward public pensions plan contributions, according to a <a href="http://www.ncpers.org/files/NCPERS%20Research%20Series_2017%20Public%20Pensions%20Are%20A%20Good%20Deal%20for%20Taxpayers_Web.pdf" target="_blank" rel="noreferrer noopener">recent paper</a> by the <a href="http://www.ncpers.org/" target="_blank" rel="noreferrer noopener">National Conference on Public Employee Retirement Systems</a> (NCPERS). And <a href="http://www.nirsonline.org/index.php?option=com_content&amp;task=view&amp;id=945&amp;Itemid=76" target="_blank" rel="noreferrer noopener">research</a> from the <a href="http://www.nirsonline.org" target="_blank" rel="noreferrer noopener">National Institute on Retirement Security</a> (NIRS) indicates that every dollar paid in pension benefits creates $2.21 in economic output.



<a href="http://time.com/money/4902055/retirement-planning-mistakes-fix/">This is what retirees would do differently if they could go back in time |&nbsp;</a><a href="http://www.time.com/money">Time-Money</a>



A little bit of practical advice or a fresh perspective on the retirement savings journey could come from recent and soon-to-be-retirees who shared some of the lessons they learned on their own retirement paths.



<a href="http://www.denverpost.com/2017/08/09/modern-wealth-index-denver-lower-than-national/">Denverites define $2 million as the entryway to wealth, lower than national mark |&nbsp;</a><a href="http://www.denverpost.com">The Denver Post</a>



Being wealthy can mean different things to different people, but for residents of the Mile High City, the threshold is a net worth of $2 million, according to the new <a href="https://content.copera.org/retirement-roundup-pensions-taxpayers/" target="_blank" rel="noreferrer noopener">Modern Wealth Index for Denver</a> from Charles Schwab &amp; Co. Nationally, the “wealthy” mark was $2.4 million and the “financially comfortable” mark was $1.1 million. In metro Denver, financially comfortable was defined as $541,700.



<a href="https://www.nytimes.com/2017/08/09/business/labor-department-fiduciary-rule.html">Labor Dept. seeks delay of consumer protection rule for financial advisors |&nbsp;</a><a href="http://www.nytimes.com">The New York Times</a>



Regulators are seeking to delay the deadline for financial advisors to fully comply with a rule that would require them to act in their customers’ best interest, according to a federal court filing earlier this month. [<a href="https://www.copera.org/retirement-roundup-long-1-million-last" target="_blank" rel="noreferrer noopener">Read more</a> about the federal rule as it was first introduced in April, 2016.]



<a href="https://www.nytimes.com/2017/08/12/business/why-the-dow-isnt-really-the-stock-market.html">Why the Dow isn’t really the stock market |&nbsp;</a><a href="http://www.nytimes.com">The New York Times</a>



The <a href="https://content.copera.org/retirement-roundup-pensions-taxpayers/" target="_blank" rel="noreferrer noopener">Dow Jones</a> Industrial Average, the oldest and best-known measuring stick for the American stock market, has risen more than 18 percent over the last 12 months, a spectacular return. Meanwhile, the <a href="https://content.copera.org/retirement-roundup-pensions-taxpayers/" target="_blank" rel="noreferrer noopener">Standard &amp; Poor’s 500-stock index</a>, the benchmark for large companies used by many stock professionals, has been far less impressive, with a gain in the last 12 months of a little over 12 percent.&nbsp; To a surprising extent, the divergence depends on just two stocks, Apple and Boeing, and on the ways in which the two indexes are constructed. The Dow is an old and simple index, including only 30 stocks that are weighted by price, meaning that the highest-priced share of a stock – which happens to be <a href="http://www.boeing.com/" target="_blank" rel="noreferrer noopener">Boeing</a> at the moment – has the greatest sway in the index. The S.&amp;P. is known as a “market-weighted index” and is used by professionals much more widely than the Dow.



<a href="http://www.marketwatch.com/story/why-loneliness-is-more-dangerous-than-obesity-2017-08-10">Why loneliness is more dangerous than obesity |&nbsp;</a><a href="http://www.marketwatch.com">MarketWatch</a>



Loneliness is just as much of a public health hazard as obesity, according to research presented at the American Psychological Association annual conference. Research from a large number of studies showed people who had greater social connections had a 50 percent reduced risk of dying early, and social isolation, loneliness or living alone each played a significant role in premature death. Over 42 million Americans over the age of 45 suffer from chronic loneliness, according to the <a href="http://www.aarp.org/research/topics/life/info-2014/loneliness_2010.html" target="_blank" rel="noreferrer noopener">AARP</a>. People that considered themselves lonely were less likely to engage in social activities, such as going to religious services, volunteering or finding a hobby. (The AARP <a href="https://content.copera.org/retirement-roundup-pensions-taxpayers/" target="_blank" rel="noreferrer noopener">promotes group activities</a> for seniors.)

Tag Archives:

Retirement Roundup: This investing expert says there’s a big problem with index funds

Retirement Roundup: Five things you must do before you retire

Retirement Roundup: Social Security Gets a Bump

Retirement Roundup: Older Workers, New Problems

Retirement Roundup: Pensions Benefit Taxpayers

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