PLANADVISER - July/August 2018 - 19

A Secure Retirement for Only 50%
8 out of 10 households could be fine-if costs could be reduced
JUST over half, 57.4%, of U.S. households
headed by individuals 35 through
64 years old are on track to cover
100% of the average costs that peer
retirees-according to age, income and
family status-will have, and not run
out of money, writes Jack VanDerhei,
Ph.D., in a recent Employee Benefit
Research Institute (EBRI) Issue Brief.
This finding puts the retirement deficit
for households at $4.13 trillion in 2014
dollars.
However, writes VanDerhei, if
expenditures are reduced 10%, to 90%
of the average costs for retirees, 68.1%
of households will be on track for sufficient
savings, reducing the retirement
savings shortfall by nearly half to $2.09
trillion; if expenditures are cut to 80%,
82.1% of retirees will retain sufficient
money, and the deficit will decline to
$70 billion.
If long-term care costs are removed
from the equation, 75.5% of U.S. households
will be on track to cover 100% of
expenses.
According to the report, EBRI made
these projections to help policymakers
TALKING POINT
Eye on Retirement: A Matter of Perspective?
n Pre-retirees n Retirees
91%
78%
56%
28%
Are confident their
savings will last
their lifetime
Source: MassMutual
7%
Worry they'll have
too little money to
enjoy themselves
Worry they'll
have too little
money
Are anxious about
changes to Social
Security benefits
Think low interest
rates could hurt
their income
Wish they had
started saving
sooner
51%
81%
69%
69%
57%
55%
84%
comprehend the size of the retirement
deficit. At various times, the paper
says, policymakers have sought ways
to increase access to defined contribution
(DC) plans and to keep money
in the system until workers
Conversely,
retire.
they have also considered
reducing pretax contributions.
" Such policymaking can lead to unintended
and undesirable consequences
if not informed by sound research, "
VanDerhei writes.
If all employers that do not provide
a defined benefit (DB) or defined contribution
plan were required to provide
an automatic individual retirement
account (IRA) with an initial deferral
of 3%, the retirement deficit would
decline by 6.5% or $268 billion, the
paper says. If the Automatic Retirement
Plan Act of 2017 were passed,
whereby all but the smallest employers
were required to offer plans and automatically
enroll workers, including
part-time workers, at 6%, the retirement
deficit would decline by 15.6%, or
$645 billion.
According to the brief, if all
If all employers,
regardless of
size, had to offer
a DC plan, the
retirement deficit
would decline
by 19.4%, or
$802 billion.
employers, regardless of size, had to
offer a DC plan, the retirement deficit
would decline by 19.4%, or $802 billion.
" Such initiatives would have correspondingly
much greater impact on
younger age cohorts, " VanDerhei writes.
If all leakage were removed, 27.3%
more participants in the lowest
income quartile could achieve retirement
success; for those in the highest
income quartile, 15.2% more participants
could be successful. -Lee Barney
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PLANADVISER - July/August 2018

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