Workforce
EBRI’s Retirement Readiness Rating examined retirement preparedness levels by age and income and found that no group is completely prepared. Nearly half (47 percent) of early boomers, people ages 56 to 62, won’t have enough for regular living expenses and uninsured health care costs. Nearly two-thirds (64 percent) of Americans in the two lowest pre-retirement income levels will likely exhaust retirement savings after 10 years.
While higher-income workers fare better, 5 percent may run out of cash after 10 years, and 13 percent may run out after 20 years of retirement, the study says.
“We have to do more than worry about whether people are saving; we have to worry about whether they are saving enough,” says Jack VanDerhei, EBRI’s research director.
The study, which was last conducted in 2003, took into account new pension funding trends including an increased number of defined-contribution plans (versus defined-benefit plans), automatic enrollment and automatic escalation of employee deferrals. (Under automatic escalation, the employee’s contributions are increased unless the employee specifically intervenes to halt the escalation.) People were considered to be at risk if their projected savings fell below a combination of certain estimated spending levels, including the Bureau of Labor Statistics’ Consumer Expenditure Survey.
Compared with 2003, Americans are saving more today, lowering risk levels. That year, early boomers had a 59 percent chance of being at risk, versus 47 percent today; late boomers, ages 46 to 55, had a 54 percent change of being classified as at risk in 2003, versus 43 percent now. With the growing trend of plan sponsors moving from defined-benefit plans to defined-contribution plans, the higher savings rate does show that 401(k) plans can work, VanDerhei says.
Thursday, September 16, 2010
Monday, August 16, 2010
WSJ: Another Threat to Economy: Boomers Cutting Back
WSJ
Low yields present retirees with a difficult choice: Accept the lower income offered by safer bonds, or take the risk of staying in the stock market. Either way, their predicament could put a long-term damper on the consumer spending that typically drives U.S. growth.
"If these rates stay as low as they are, then a lot more people are going to be hurting," says Jack VanDerhei, research director at the Employee Benefit Research Institute. The non-partisan outfit estimates that if current conditions persist, nearly three in five baby boomers will be at risk of running short of money in retirement. "There are going to be many luxury items that will simply have to be eliminated," for retirees to make ends meet.
...
At the same time, the return people can hope to earn on their assets has fallen, particularly for those who switch into bonds or annuities to guarantee a fixed income. The average yield on U.S. government, corporate and mortgage bonds stands at about 2.4%, while stock-market valuations suggest a long-term return of about 6%. At those levels of return, some 59% of people aged 56 to 62 will be at risk of not having enough money to cover basic living and health-care costs in retirement, estimates Mr. VanDerhei. If market returns are higher—8.9% for stocks and 6.3% for bonds—the picture isn't a lot better: The percentage at risk falls to about 47%.
Low yields present retirees with a difficult choice: Accept the lower income offered by safer bonds, or take the risk of staying in the stock market. Either way, their predicament could put a long-term damper on the consumer spending that typically drives U.S. growth.
"If these rates stay as low as they are, then a lot more people are going to be hurting," says Jack VanDerhei, research director at the Employee Benefit Research Institute. The non-partisan outfit estimates that if current conditions persist, nearly three in five baby boomers will be at risk of running short of money in retirement. "There are going to be many luxury items that will simply have to be eliminated," for retirees to make ends meet.
...
At the same time, the return people can hope to earn on their assets has fallen, particularly for those who switch into bonds or annuities to guarantee a fixed income. The average yield on U.S. government, corporate and mortgage bonds stands at about 2.4%, while stock-market valuations suggest a long-term return of about 6%. At those levels of return, some 59% of people aged 56 to 62 will be at risk of not having enough money to cover basic living and health-care costs in retirement, estimates Mr. VanDerhei. If market returns are higher—8.9% for stocks and 6.3% for bonds—the picture isn't a lot better: The percentage at risk falls to about 47%.
Tuesday, August 10, 2010
USAT: Boomers wanting to work past retirement age find limited options
USA Today
Nearly half of Baby Boomers ages 56 to 62 are at risk of not having enough savings for basic expenses and uninsured medical bills, according to Employee Benefit Research Institute's new Retirement Readiness Rating. And 41% of the lowest-income older Boomers .... are likely to run short of money after 10 years of retirement.
Monday, August 9, 2010
Health care, variable payouts factor into retirement puzzle
Rockford Register Star
The EBRI study, last done in 2003, evaluated national retirement income adequacy based on a database of 24 million 401(k) participants. The newest version takes into account many new retirement plan changes, such as auto-enrollment and auto-escalation of contributions in 401(k) plans, as well as updates on the financial market and employee behavior.
The EBRI study, last done in 2003, evaluated national retirement income adequacy based on a database of 24 million 401(k) participants. The newest version takes into account many new retirement plan changes, such as auto-enrollment and auto-escalation of contributions in 401(k) plans, as well as updates on the financial market and employee behavior.
Thursday, July 29, 2010
Chicago Trib: Calculating how much you need for retirement
http://www.chicagotribune.com
It's a shocking statistic: About 47 percent of early baby boomers and 44.5 percent of Generation Xers — age 36 to 45 — are on course to run short of money for basic living expenses like food and electricity in retirement, according to the Employee Benefit Research Institute.
It's a shocking statistic: About 47 percent of early baby boomers and 44.5 percent of Generation Xers — age 36 to 45 — are on course to run short of money for basic living expenses like food and electricity in retirement, according to the Employee Benefit Research Institute.
Monday, July 26, 2010
Good News and Bad News
hreonline
The Employee Benefit Research Institute's EBRIRetirement Readiness Rating, released July 13, finds about two-thirds (64 percent) of Americans in the two lowest preretirement income levels will be running short after 10 years in retirement.
Moreover, after 20 years of retirement, one-third (29 percent) of those in the next-to-the-highest income level will run short of money, as will more than 1 in 10 (13 percent) of those in the highest income level.
The findings have created enough alarm in the business community and the media that the study became the subject of a recent NBC Today Show discussion between show host Matt Lauer and Jean Chatzky, NBC's financial editor.
The Employee Benefit Research Institute's EBRIRetirement Readiness Rating, released July 13, finds about two-thirds (64 percent) of Americans in the two lowest preretirement income levels will be running short after 10 years in retirement.
Moreover, after 20 years of retirement, one-third (29 percent) of those in the next-to-the-highest income level will run short of money, as will more than 1 in 10 (13 percent) of those in the highest income level.
The findings have created enough alarm in the business community and the media that the study became the subject of a recent NBC Today Show discussion between show host Matt Lauer and Jean Chatzky, NBC's financial editor.
Sunday, July 25, 2010
NY Post: Retirement woes
http://www.nypost.com
Even the seemingly well off may find they are struggling to make ends meet in the so-called golden years.
They could begin their retirement with what appears to be a healthy nest egg, only to run out of money years later, and needing to return to work.
That's one conclusion of a recent report by a Washington-based retirement institute. The Employee Benefits Research Institute (EBRI) warns that millions of Americans who think they are well-prepared for retirement are "likely" to have insufficient assets for all their years in retirement. That's because they didn't save or insure themselves enough or haven't calculated the many ways their retirement plan could fail.
Even the seemingly well off may find they are struggling to make ends meet in the so-called golden years.
They could begin their retirement with what appears to be a healthy nest egg, only to run out of money years later, and needing to return to work.
That's one conclusion of a recent report by a Washington-based retirement institute. The Employee Benefits Research Institute (EBRI) warns that millions of Americans who think they are well-prepared for retirement are "likely" to have insufficient assets for all their years in retirement. That's because they didn't save or insure themselves enough or haven't calculated the many ways their retirement plan could fail.
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