A Post-Crisis Assessment of Retirement Income Adequacy for Baby Boomers and Gen Xers

February 2011
EBRI Issue Brief #354
Paperback, 28 pp.
PDF, 778 kb
Employee Benefit Research Institute, 2011

Download Issue Brief PDF pdf

Executive Summary

DETERMINING THOSE “AT RISK” OF INSUFFICIENT RETIREMENT INCOME:

The analysis in this paper was designed to answer two questions:

1) What percentage of U.S. households became “at risk” of insufficient retirement income as a result of the financial market and real estate crisis in 2008 and 2009?

2) Of those who are at risk, what additional savings do they need to make each year until retirement age to make up for their losses from the crisis?

The results are from the 2010 EBRI Retirement Security Projection Model® by the Employee Benefit Research Institute.

KEY FINDINGS:

Range at risk: The percentage of households that would not have been “at risk” without the 2008–2009 crisis but that ended up “at risk” varies from a low of 3.8 percent to a high of 14.3 percent.

50–50 chance of adequacy: Looking at all Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), the median percentage of additional compensation for these households desiring a 50 percent probability of retirement income adequacy would be 3.0 percent of compensation each year until retirement age to account for the financial and housing market crisis in 2008 and 2009.

90 percent chance of adequacy: Looking at all Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), the median percentage of additional compensation for these households desiring a 90 percent probability of retirement income adequacy would be 4.3 percent of compensation.

Range of adequacy: Looking only at Early Boomer households that would need to save an additional amount (over and above the savings already factored into the baseline model), that had account balances in defined contribution plans and IRAs as well as exposure to the real estate crisis in 2008 and 2009 shows a median percentage for of 5.6 percent for a 50 percent probability and 6.7 percent for a 90 percent probability of retirement income adequacy.