Figur Figure1:Impr e: 2012unconditionalR ovementofatrisk*r SS*number atingsfrom20032012b sbyagecohortandg yagecohort ender $80,000 andgender males looking only References Also in 2009 . Testi Endnotes were p a a new m rtojected to lack adequate r hous ony. subrou ehold Joint D stine was add O with a proj L/SEC Publi ect ec e d to the m e Hearing tirement in d shortfall, t on Target Dates odel coh me for basic e aver to alloage shortfall i w simulation retirement expenses plu Funds. s of How Would Target-Date s larg variou er—sometim s styles of target- s uninsured es FT unds -173 70% Likely Impact Future 401(k) Contributions? (T-160). June 2009. date funds f health c consider a ably so. re c $70o ,0o r a compari 00sts. Howev son with partici er, when the same pant-direc simula ted tions were perf investments (VanD ormed for sin erhei, 2g 009). In April 2010, the le females for these age Copeland, Craig, and Jack VanDerhei. “The Declining Role of Private Defined Benefit Pension Plans: Who Will Boomer and Gen X Women be Able to Afford Retirement at Age 65? Evidence from the 60% cohorts th model was c 1 e results were ompletely re-p significantly worse: betw arameterized with 401(k) een p57 and 62 percent of th lan-design parameters for e sispon mulated lifep sors that had aths for Is Affected, and How.” In Robert L. Clark and Olivia Mitchell, eds., Reorienting Retirement Risk A full description of the EBRI Retirement Security Projection Model® (RSPM) is provided in Appendix A of VanDerhei 2012 EBRI Retirement Security Projection Model® . “Retirement Income Adequacy After PPA and FAS 158: Part One—Plan Sponsors' Reactions.” $60,000 adopted retired single Man automatic-enrollm agement males were p . Oxford Univ ent provisi rojected to lack adequate r ersity Press f ons (VanDoerrhei the Pen , e April 2010). A completely u tirement. sion Research Council, 2010: 12 pdated versi 2–136. on of the and Copeland (July 2010). A chronology of its development and utilization is included in the appendix to this Appendix: Brief Chronology of RSPM 50% EBRI Issue Brief, no. 307 (Employee Benefit Research Institute, July 2007). By Jack VanDerhei, Ph.D., Employee Benefit Research Institute testimony. See VanDerhei (February 2011) for additional detail on the impact of the 2008–2009 crises in the financial national model was produced for the May 2010 EBRI policy forum and used in the July 2010 Issue Brief United States Senate The original version of RSPM was used to analyze the future economic well-being of the retired The 2012 results ar GAO, and real estate Retirement Security: Women Stil markets on ret e an improvement fr irement income adequacy. l Face Cha om the 2003 llenges, GAO-12-699 results: some 3-6 percentage points f (Washington D.C.: July 19, 20 o12). r single males $50,000 (VanDerhei and Copeland, 2010). 40% . “Measuring Retirement Income Adequacy: Calculating Realistic Income Replacement Rates.” population at the state level. EBRI and the Milbank Memorial Fund, working with the governor of Oregon, 2 and 2-7 percentage points for single females. The improvement over the last nine years is largely due to See VanDerhei (October 2010) for more detail. EBRI Issue Brief, no. 297 (Employee Benefit Research Institute, September 2006). Helman, Ruth, Craig Copeland, and Jack VanDerhei. “The 2012 Retirement Confidence Survey: Job set out in the late 1990s to see if thi Special s situation c Committee ould be addressed on Aging for the state. That analysis (VanDerhei Introduction The new mod the fact that i 30% n e 2003, very l was used to an few 401(k) sp alyze how eligibility for pa onsors had implemented rticipation autom in a defined contribution p atic enrollment (AE) provision lan impacts s $40,000 3 In previous EBRI publications, the baseline version of RSPM was based on the assumption that households did not Insecurity, Debt Weigh on Retirement Confidence, Savings.”” EBRI Issue Brief, no. #369 and Copeland, 2001) focused primarily on simulated retirement wealth with a comparison to ad hoc A recent report by the United States Government Accountability Office (GAO, July 2012) found that retirement in and that the come ad participati equacy in Septem on rates among the lower ber 2010(Va -income nDerhei, September 2010). employees (those most likely to be at risk) wer It was also used to e . “Defined Benefit Pl use any net housing equity to finance their r an Freezes: Who' etirement expe s Affected, How Much nditures. Howe , and Replacin ver, two additional alternatives were also g Lost Accruals.” EBRI (Employee Benefit Researc 20% h Institute, March 2012). 5 thresholds for retirement expenditures. compute quite low. women age 6 Reti $ The Pensi 30,0rement Savin 00 5 and over h on Protection Ac a gs Shortf d less retirem alls f t of oe r Ba 2006 contain nt income by Boomers and Generation Xer on average ed provision and had higher rates of pov s encouraging s in October plan sponsors to ad erty when opt included in the sensitivity analysis. Under the first, each household was assumed to purchase a reverse annuity Issue Brief, no. 291 (Employee Benefit Research Institute, March 2006). mortgage at age 65 with the proceeds from the simulated net housing equity. Under the second, households with compared to men. While this finding has important public policy ramifications for those already at auto 2010(VanD -enrollme erhei, October nt. 2010a). VanDerhe10 i, %Jack. “Modifying the Federal Tax Treatment of 401(k) Plan Contributions: Projected Impact on Subsequent to the release of the Oregon study, it was decided that the approach could be applied to homes at age 65 were assumed to remain in them until suc Hearing h point that they were no lo on: nger able to afford their $20,000 . “Projections of Future Retirement Income Security: Impact of Long Term Care Insurance.” 2005 conventional retirement ages, simulation analysis with respect to women younger than age 65 provides Participant Account Balances,” March 2012, EBRI Notes, no. 3 (Employee Benefit Research o simulated retirement expense ther states as well. Kansas s with their Social Security an and Massachusetts were d chosen as the next defined benefit benefits (if states fo any) after the de r analysis. Repletion of sults of Previous r In October 20 esearch by EBRI 10 testimony has dem before the S onstr eated th nate Health at on, eEducati of the most i on, Labor and Pen mportant fact siors c ons C oo ntributi mmittee on “The ng to American Society on Aging/National Council on Aging Joint Conference, March 2005. useful inform 0% ation for what current trends portend in terms of their future retirement income adequacy Institute, March 2012): 2–18. their defined contribution and IRA balanc singlemale singlefemale es. Although the original baseline pr singlemale singlefemale ovided information on the retirement singlemale singlefemale the Kansas study were presented Enhan to the cing state’s Women' Long-Term Care s Retirement Secu Services Task F rity orce on July 11, retirement in Wobbly Stool $10,0come ad : Retirem 00 equacy for the Boomers ent (In)security in America, and Gen ” the model was used to Xers is eligibility to participate in em analyze the relative ployment- as well as what factors within the current voluntary earlyboomers retirement pl lateboomers an system may be most genxers effective in income adequacy potential for households without relying on net housing equity, it has the disadvantage of not 6 2002(VanDerhei and Copeland, July 2002) , and the results of the Massachusetts study were presented . Testimony. U.S. Congress. Senate Special Committee on Aging. Do We Have a Crisis in America? based retirem importance 2003lsd ofe employer-pr nt plans. 39% VanDerhei (Aug ovided retirement benefit 65% ust 2011) 35% provides inform s and Social S 62% ecurity(VanD ation on h38 o% e w the relative v rhei, October 2010b). 64%alue of the quantifying the recent and rather volatile changes in the real estate market. Consequently, EBRI modified its choice improving their likelihood of affording retirement at . “Tax Reform Options: Promoting Retirement ag Security.” e 65. EBRI Issue Brief, no. 364 (Employee on Dec. 1 20,12 20 lsd02 (VanD 36% erhei and Copelan 62% d, December 32% 2002). Wi 60th the assi % stan 32% ce of the Kan5s 7% as Insurance Results From the EBRI-ERF Retirement Security Projection Model (T-141), 27 Jan. 2004. of baseline to the second alternative described above (net $ housing equity used “as needed”) and is using similar defined benefit plan accruals impact retirement income adequacy, while Figure 2 provides similar Benefit Research Institute, November 2011). earlyboomers lateboomers genxers TM Source:EBRIRetirementSecurityProjectionModel,®Version120201. scenarios in its comparison to the 2003 RSP In February 2011, the m Department, EBRI was abl odel was used to an e to create Retirement M results. alyze th Readiness Ratin e impact of th ge 2008–2009 crisis in th s based on a full stoch e financial astic and informati Measuring retirement secur on for eligibility in defined con ity—or retire tribution plan ment incomes for Gen Xer adequacy—is an s in 2012. In extremely important top the latter case, the ic. EBRI *Anindividual singlemal isconsidered e tobeatriskin$3 thisversion 3,704 ofthemodeliftheiraggregateresourcesinretirementarenotsu $33,420 fficientto $41,529 July 25, 2012 at 2 pm VanDerhei, Jack, and Craig Copeland. “The Impact of Deferring Retirement Age on Retirement Income meetaggregateminimumretirementexpendituresdefinedasacombinationofdeterministicexpensesfromtheConsumerExpenditureSurvey(asafunction real estate m decumulati 4 ona model that took into acc rkets on retirement incom ount the hou e adequacy se (VanDerh hold’s longevi ei, Fetbruary 2011 y risk, post-r ). etirement inv estment singlefemale $64,749 $67,057 $75,827 . Testimony. U.S. Congress. Senate Finance Committee. Tax Reform Options: Promoting launched a major project to provide this type of measurement in the late 1990s for several states number of future year The baseline version of RSPM assumes indivi s that workers are eligible to participate in a duals retire at age 65. However, given that a defined contribution plan m n increasing pe akes rcentage of a ofincome)andsomehealthinsuranceandoutofpockethealthrelatedexpenses,plusstochasticexpensesfromnursinghomeandhomehealthcare Adequacy.” EBRI Issue Brief, no. 358 (Employee Benefit Research Institute, June 2011). expenses(atleastuntilthepointtheyarepickedupbyMedicaid).TheresourcesinretirementwillconsistofSocialSecurity(eitherstatusquooroneofthe risk, and exposure to potentially catastrophic nursing-home and home-health-care risks. This was current workers state their intentions to defer retireme Retirement Security (T-170). 15 Sept. 2011. nt beyond age 65 (Helman, Copeland, and VanDerhei, 2012), tremendou concerned whether their r s difference in th esidents woul eir at-risk rati d have suffici ngs. For example, acc ent income ordi when they reac ng to the simhed retirement age. Af ulation results, single ter specifiedreformalternatives),accountbalancesfromdefinedcontributionplans,IRAsand/orcashbalanceplans,annuitiesfromdefinedbenefitplans(unless TM TM An April 2011 article introd Source:EBRIRetirementSecurityProjectionModel,®Version120201. uced a new method of analyzing the results from the RSPM (VanDerhei, April thelumpsumdistributionscenarioischosen),andnethousingequity(intheformofalumpsumdistribution).Thisversionofthemodelisconstructedtosimulate EBRI has recently modified RSPM to compute Retirement Readiness Ratings for retirement ages greater than 65. followed by the expansion of RSPM and the Retirement Readiness Ratings to a national model and the TM conducting studies for Oregon, Kansas, and Massachusetts, a national model—the EBRI Retirement male Gen Xers with no future years of eligibility would run short of money in retirement 47 percent of the "basic"retirementincomeadequacy;however,alternativeversionsofthemodelallowsimilaranalysisforreplacementrates,standardoflivingandotherthresholds. . “The *TheRetirement EBRI Retirem SavingsShortfalls(RSS) ent Readiness Rating: aredeterminedSubmi asapresent ttevalueofretirement d R Te estimony tirement Inc deficitsat by ome Prepar age65.Foradditionaldet ation and Futur ail,see:Jacke See VanDerhei and Copeland (2011) for more details. 2011). Instead of simply computing an overall percentage of the simulated life paths in a particular . “The Importance of Defined Benefit Plans for Retirement Income Adequacy.” EBRI Notes, no. 8 Foradditionaldetail,see:VanDerhei,J.,Copeland,C.(July2010). ® TheEBRIRetirementReadinessRating:™RetirementIncomePreparationandFutureProspects.EBRI present VanDerhei, ation Retirement of the first micro-simulati SavingsShortfallsforToday’sWorkers on retire ,October ment-i 2010, ncome-adequ Vol.31,No.10,EBRI acy model Notes , built in part from time, wh Security Proj ereas only 13 per ection Model c(RSP ent of th M)—was developed in ose with 20 or mo 2003, and in re years of fu 2010 it was ture eligibility would run short. updated to incorporate The IssueProspec Brief. ts.” EBRI Issue Brief, no. 344 (Employee Benefit Research Institute, July 2010). 5 cohort that (Employee Benefit Researc would not have sufficient reti h Institute, A rement uincom gust 2011): e to pay f 7–16. or the simulated expenses, the new With the adoption of AE in the past few years, the participation rates for lower income employees enrolled in these administrative 401(k) data at the EBRI December 2003 policy forum(VanDerhei and Copeland, 2003). The several significant changes, including the impacts of defined benefit plan freezes, automatic enrollment magnitude of the results for single females are even more striking: single female Gen Xers with no future Jack VanDerhei, Ph.D. method c types of 401(k) plans ha omputed the perc ve often increased to values in entage of households th exce at would meet ss of 80 percen that requirem t. See VanDerh ent more than a specified ei (April 2010) for a 1 basic model was subsequently modified for testimony for the Senate Special Committee on Aging in 2004 . “The Impact of PPA on Retirement Income for 401(k) Participants.” EBRI Issue Brief, no. 318, years provision of eligi s for b 401(k) plans, and the recent ility would run short of money in retirement 74 perc crises in the financial an ent of the d housing markets. time, decreasing EBRI has rec all the way ently . “Capping Tax-Preferred Retirement Contributions: Preliminary Evidence of the Impact of the comparison of simulated 401(k) accumulations at retirement age under automatic enrollment vs. voluntary percentage of times in the simulation. to quantify the beneficial impact of a mandatory contribution of 5 percent of compensation (VanDerhei, (Employee Benefit Research Institute, June 2008). updated RSPM for changes in financial and real Research estate market c Director onditions as well as underlying to 25 percent for those with 20 or more years of future eligibility. enrollment broken out by income quartile. National Commission on Fiscal Responsibility and Reform Recommendations.” EBRI Notes, no. 7 January 2004). demographic changes and changes in 401(k) participant behavior since January 1, 2010 (based on a 6 (Employee Benefit Research Institute, July 2011): 2–6. As explored in the June 2011 EBRI Issue Brief, the RSPM allowed retirement-income adequacy to be While it is true that years of future participation in a defined contribution plan would have a more direct association . “ERISA At 30: The Decline of Private-Sector Defined Benefit Promises and Annuity Payments: Employee Benefit Research Institute (EBRI) database of 23 million 401(k) participants). This testimony provides a comparative analysis of single with retirement income adequacy than the years of future eligibility for participation, the latter metric was chosen to assessed at retirement ages later than 65 (VanDerhei and Copeland, June 2011). Retirement Savings Shortfalls In an analy What Will It sis to determin Meane the impact ?” EBRI Issue of annuitizing Brief, no. 269 (Employee Benefit defined contribution and IR Research In A balances at retirement stitute, May 2004). TM . “Retirement Income Adequacy: Alternative Thresholds and the Importance of Future Eligibility in illustrate the importance of working for an employer that sponsors such a plan. Even if an employer sponsors a males and single females in the Boomer and Gen X cohorts using EBRI Retirement Readiness Ratings age, The aggreg VanDerh ate deficit num ei and Copela ber, taking in nd, 2004, were able to de to account cumonstr rrent Soci ate al S that for ecurity retirement benefits and the a household seeking a 75 percent 2 defined contribution plan, eligible employees may choose not to www.ebri.or participate g for some or all of the years that they are Defined Contribution Retirement Plans.” EBRI Notes, no. 4 (Employee Benefit Research Institute, as well as the Retirement S In a July 2011 EBRI Notes article(VanD avings Shortf erhei, alls. July 2011), it provided preliminary evidence of the impact of . “Can America Afford Tomorrow's Retirees: Results From the EBRI-ERF Retirement Security probability of assumption that net h retirement in ousing equity is u come adequacy, the tilized “as n additi eeded,” is c onal saving urrently estimate s that would oth d to be $4.3 erwise need to be set trillion for all eligible. The distinction between these two measurements will be explored in more detail in a future EBRI Notes April 2011): 10-19. ® the “20/20 caps” on proj Figur Figure2:Impactoffutur eec :ted retiremen 2012conditionalR t accumulation eyearSS*number sof401(k)eligibility s proposed sbyag by the Nation ecohortandg on2012a al Commis trisk* ender sion on Fiscal Projection Model. ” EBRI Issu 7 e Brief, no. 263 (Employee Benefit Research Institute, November article. aside each year until retirement to Baby Boomers and Gen Xers. Howev achieve this ob er, while trillion-dollar deficits jective would decrease by a m are useful in focusing edian amount of 30 attention on $160,000 Responsibility and Reform. ratingsf TM orGenXersbygender 2003). 7 EBRI Retirement Readiness Ratings percent. Addi this problem . “A Post-Crisi , tional refin they do little s Assessment emto he ents were intr lp policy of Retire makers und oduced in ment Inc 20 o erstand exactl me Adequac 05 to evaluay te the impact y for Baby Boomers where these deficits of purchasing long-term and Gen Xers.” are coming This number is somewhat smaller than the $4.6 trillion reported in VanDerhei (October 2010); however, the 80% 8 TM 3 Figure 1 com baseline assum EBRI Issue Br ppares th tions used in the 2010 a e Retirement Readi ief, no. 354 (Employee Benefit Resear nalys nis did not provid ess Ratings for 2003 and 2012. e for the utilization of net housing equity to ch Institute, February 2011 The EBRI Re ). tireme improve nt care insur from. ance on retirement income adequacy (VanDerhei, 2005). The August 2011 EBRI Notes article(VanDerhei, August 2011) evaluated the importance of defined . “Kansas Future $140,000 Retirement Income Assessment Project.” A project of the EBRI Education and TM retirement income adequacy. When the 2012 analysis is repeated with the same assumptions as used in 2010, the 70% Readiness Ratings measure the percentage of simulated life paths in retirement that are at risk of benefit plans for households, assuming individuals retire at age 65, while demonstrating the impact of Research Fund and the Milbank Memorial Fund. July 16, 2002. Figure 3 depicts Retirement Savings Shortfalls (RSS) by age cohort, as well as marital status and gender, aggregate deficit actually increases to $4.8 trillion. . Testimony. U.S. Congress. 4 Senate Health, Education, Labor and Pensions Committee. The The model was next used in March of 2006 to evaluate the impact of defined benefit freezes on inadequate retirement income. A household’s simulated lifepath in retirement is considered to be at -risk defined benef $120,000 it plans in achieving retirement income adequacy for Baby Boomers and Gen Xers. 60% for both Baby 8 Boomers and Gen Xers. The RSS provide information on average individual retirement Wobbly Stool: Retirement (In)security in America (T-166). 7 Oct. 2010. participants b Unfortunately yon simulating the minimum employer-c e of the most significant components of Retirement Savi ontribution rate ngs Shortfalls ( that would be needed to fi RSS) comes from an nancially in the baselin . “Massachu e version setts Fu of the model if its aggregate ture Retirement Income Ar se se sour ssme ces in r nt Project.” A pr etirement are not sufficient to meet oject of the EBRI Education income deficits. These numbers are present values at age 65, and represent the additional amount that exposure that faces most retirees but very few choose to actively address. VanDerhei (October 2010) provides a first- indemnify the employees for the reduction in their expected retirement income under various rate-of- 50% aggregate mi Finally, EB and Research RI’s Septemb nimum retire Fund and th er 2011 Senate Finance test ment expe e Milbank nditures, defined Memorial Fund. im ony (VanDerhei, Septem as a combin December 1, ation of 2002. deteber 2011) an rministic expenses from alyzed the $100,000 . “Retirement Savings Shortfalls for Today’s Workers.” EBRI Notes, no. 10 (Employee Benefit order approximation of the impact of the stochastic nature of the nursing home and home health care expenses on individuals would have to save by age 65 to eliminate their expected deficits in retirement (which, return assumptions (VanDerhei, March 2006). Later th at year, an updated version of the model was the Con potentiasl impact of v umer Expenditure Survey (as a arious types of tax-reform function of option ins on re come) tireme as wellnt in as some h come adequacy. Thi ealth insuranc se was and out -of - the RSS values 40 by age cohort, gender and m % arital status. Adding this nursing home and home health care expense Research Institute, October 2010): 2 -9. depending on the simulated lifepath, could be a relatively short p ® eriod or could last decades). The . “Oregon Future Retirement Income Assessment Project.” A project of the EBRI Education and developed to enhance the EBRI interactive Ballpark Estimate worksheet by providing Monte Carlo pocket health expanded in the November -related expenses, plus stochast 2011 EBRI Issue Brief ic expen (VanDerhei, Nov ses from nursing home and ember 2011) and a new home health set of survey care (at increases the average individual RSS for married households by $25,317. Single males experience an average $80,000 additional savings required for those on the verge of retirement (Early Boomers) is $34,000 for single The viewsResearch Fu expre 30ssed % in this nd and the Mil statement are bsole ank Mem ly those oof ri Jack al Fund. 2001 VanDerhei and a. should not be attributed to the Employee Benefit simulations of the necessary replacement rates needed for specific probabilities of retirement-income increase of $32,433 while single females have an increase of $46,425. A precise evaluation of the impact would least until the point such results were . “Retiadded to th rement Income Adequacy e expenses model in the are p for To March 2012 icked up by day’s Worker EBR Medicaid). The resourc I No s: How Certain tes article (VanD , How Much es erh in ei, March 201 retirement are Will It Cost, and 2). assumed males and $65,000 for single females. Even though the present values are defined in constant dollars, Research Institute (EBRI), the EBRI Education and Research Fund, any of its programs, officers, trustees, sponsors, or other staff. involve a comparison of the values supplemented with the premiums required to fully insure the financial adequacy under alternative-risk-management treatments (VanDerhei, September 2006). to consisHow D t of Social Se oes Elig curity (status qu ibility for Participation in o benefits a Defined Contribution Plan for the baseline version of the Help?” simulati EBRI Notes, on); account no. 9 $60,000 20% . “A Behavioral Model for Predicting Employee Contributions to 401(k) Plans.” North American consequence of nursing home and home health care expenses. For an example of this comparison with a different the RSS for both genders increase for younger cohorts, largely due to the assumption that health care- The Employee Benefit Research Institute is a nonprofit, nonpartisan, education and research organization established in (Employee Benefit Research Institute, Sept. 2010): 13–20. balances from defined contribution plans; individual retirement accounts (IRAs) and/or cash balance output metric, see VanDerhei (2005). Actuarial Journal (2001). related c Washington, osts DC,will increase f in 1978. EBRI does aster than not take th policy e general infl positions, nor ation r does aitte. lobby, advocate specific policy recommendations, or RSPM was sig 10n %ificantly enhanced for the May 2008 EBRI policy forum by allowing automatic enrollment of plans; annuiti $40,00 es or lump 0 -sum distributions from defined benefit plans; and net housing equity (in the receive federal funding. 401(k) participants with the potential for automatic escalation of contributions to be included (VanDerhei . “The Impact of Automatic Enrollment in 401(k) Plans on Future Retirement Accumulations: A form of a lum VanDerhei, Jack, and L 0% p -sum distrib ori Lucas. “ ution at the p The Im opact of Au int that othe to-enr r financi ollment al resources are exhaus and Automatic Contribution Esc ted). This ve arlati sioon n of While the RSS values in Figure 3 may appear to be relatively small considering they represent the sum of 0 19 1019 20ormore and Copeland, 2008). Additional modifications were added in 2009 for a Pension Research Council Simulation Study Based on Plan Design Modifications of Large Plan Sponsors.” EBRI Issue Brief, $20,000 the model i on Retiremen s constructed t t Income Adequacy.” o simulate "basic" re EBRI Issue tirement income Brief, no. 349 (Employee Benefit adequacy; however, alternative version Research s 3 present v alues that may include decades of deficits, it is important to remember that only a fraction of presentation that involved a “winners/losers” analysis of defined benefit freezes, and the enhanced no. 341 (Employee Benefit Research Institute, April 2010). singlemale 47% 32% 22% 13% Institute, November 2010); and DCIIA Research Report (November 2010). of the model allow similar analysis for replacement rates and other thresholds. the simulated lifepaths modeled were considered to be “at risk.” In other words, the average RSS values employer contributions pr singlefemale 74 ovided to defined contributi % 54% on plans at the time the defi 40% ned benefit plans were 25% $0 earlyboomers lateboomers genxers represented in Figure 3 are reduced by the inclusion of simulated retirement lifepaths that will not run . “Falling Stocks: What Will Happen to Retirees' Incomes? The Worker Perspective,” Presentation TM frozen (Copeland and VanDerhei, 2010). When the EBRI Retirement Readiness Ratings were simulated in 2012 for Early Baby Boomers singlemale $94,509 $103,918 $129,398 Source:EBRIRetirementSecurityProjectionModel,®Version120201. short of mon for The ey. Looking only at those Economic Crisis of 2008: What situations wh Will Happen ere shorto Retirees’ Incomes? tfalls are projected, Figure 4 shows th 2009 APPAM Fall at the th *Anindividualisconsideredtobeatriskinthisversionofthemodeliftheiraggregateresourcesinretirementarenotsufficientto singlefemale $104,799 $112,120 $133,349 EBRI 1100 13 St. NW #800 Washington, DC 20005 (202) 659-0670 www.ebri.org (individuals born between 1948–1954), Late Baby Boomers (born between 1955–1964) and Generation meetaggregateminimumretirementexpendituresdefinedasacombinationofdeterministicexpensesfromtheConsumerExpenditureSurvey(asafunction values fo Conference ( r Early Boomers i November 20 s $95,000 for 09). single males and $105,000 for single females. In sum, when ofincome)andsomehealthinsuranceandoutofpockethealthrelatedexpenses,plusstochasticexpensesfromnursinghomeandhomehealthcare Source:EBRIRetirementSecurityProjectionModel,®Version120201. Xers (born between 1965–1974), between 32 and 36 percent of the simulated lifepaths for retired single expenses(atleastuntilthepointtheyarepickedupbyMedicaid).TheresourcesinretirementwillconsistofSocialSecurity(eitherstatusquooroneofthe *TheRetirementSavingsShortfalls(RSS)aredeterminedasapresentvalueofretirementdeficitsatage65.Foradditionaldetail,see:Jack specifiedreformalternatives),accountbalancesfromdefinedcontributionplans,IRAsand/orcashbalanceplans,annuitiesfromdefinedbenefitplans(unless VanDerhei,RetirementSavingsShortfallsforToday’sWorkers,October2010,Vol.31,No.10,EBRINotes thelumpsumdistributionscenarioischosen),andnethousingequity(intheformofalumpsumdistribution).Thisversionofthemodelisconstructedtosimulate "basic"retirementincomeadequacy;however,alternativeversionsofthemodelallowsimilaranalysisforreplacementrates,standardoflivingandotherthresholds. 7 6 1 5 4 2 3 Foradditionaldetail,see:VanDerhei,J.,Copeland,C.(July2010).TheEBRIRetirementReadinessRating:™RetirementIncomePreparationandFutureProspects.EB .