Retirement Income Security: A Look at Social Security, Employment-Based Retirement Plans, and Health Savings Accounts

August 2005, Vol. 26, No. 8
Paperback, 12 pp.
PDF, 144 kb
Employee Benefit Research Institute, 2005

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Executive Summary

Threats to secure retirement: Various factors increasingly suggest that individuals who are trying to plan for a secure retirement face a gathering storm. About 100 participants in the Employee Benefit Research Institute’s spring 2005 policy forum examined the different forces at work that threaten economic security in retirement, and heard ERBI researchers and others discuss three topics: Social Security overhaul, 401(k) enrollment and accumulations, and health savings accounts.


Retirement health care expenses: Health care expenses should be considered a key component of any retirement savings plan, forum participants seemed to agree. These often-neglected expenses are likely to be higher than most individuals anticipate and could add 20 percent or more to the amount of preretirement income that workers will need to replace in retirement. Health savings accounts can get workers started, but are not the complete answer, according to a study presented at the forum.


Automatic enrollment in 401(k) plans: Speakers at the forum also agreed on the idea of automatically enrolling all workers who are eligible to participate in 401(k) plans. Automatic enrollment could have a dramatic impact on the amount available for retirement income, especially for low-income workers, according to another study presented at the forum. Forum participants also heard results of a model projecting the amount of wealth that could be accumulated through a lifetime of participating in employment-based 401(k) plans.


Social Security split: Forum participants expressed widely divergent views on President Bush’s proposal to restructure Social Security to set up individual accounts within the current program. Some speakers argued for maintaining Social Security as a defined-benefit system, while others said individual accounts are the key to offering workers the opportunity to accumulate more retirement wealth than Social Security will provide. EBRI research presented at the forum explored the effects of several possible changes in Social Security.