All or Nothing? An Expanded Perspective on Retirement Readiness

Abstract

Past analysis using EBRI’s proprietary Retirement Security Projection Model® (RSPM) has found that roughly 44 percent of Baby Boomer and Gen X households are projected to be at-risk of running short of money in retirement, assuming they retire at age 65 and retain any net housing equity in retirement until other financial resources are depleted. However, that includes a wide range of personal circumstances, from individuals projected to run short by as little as a dollar to those projected to fall short by tens of thousands of dollars. This paper takes a closer look at where different types of people are likely to fall within the range of retirement income adequacy. Looking specifically at Gen X households (those born between 1965-1978, currently ages 34-47), EBRI’s RSPM analysis finds that (1) nearly one-half (49.1 percent) will have substantially more (at least 20 percent more) than the income threshold deemed adequate to afford basic retirement expenses and uninsured health care costs; (2) approximately one-third (31.4 percent) will be close to the threshold for retirement adequacy (between 80-120 percent) of the financial resources necessary to cover basic retirement expenses and uninsured health care costs; (3) about 1 in 5 (19.4 percent) are projected to be substantially below (less than 80 percent) of what is needed. EBRI also finds that a worker’s future years of eligibility in a defined contribution retirement plan makes a huge difference in his or her likelihood of having enough money to cover basic retirement expenses and uninsured health care costs. Among Gen Xer single females simulated to have no future years of defined-contribution-plan eligibility, nearly two-fifths (39 percent) are in the most vulnerable (less than 80 percent) category, although this shrinks to only 8 percent for those with 20 or more years of future eligibility in a defined contribution plan.

The PDF for the above title, published in the November 2012 issue of EBRI Notes, also contains the fulltext of another November 2012 EBRI Notes article abstracted on SSRN: “Self-Insured Health Plans: State Variation and Recent Trends by Firm Size.”

Keywords: Defined contribution plans, Employment-based benefits, Pension plan coverage, Retirement income, Retirement income adequacy

JEL Classification: D31, D91, J26, J33