Figure 4 Number of Workers Working for an Employer Who Does NOT Sponsor an Employment-Based Retirement Plan and Number of Workers NOT Participating in an Employment-Based Retirement Plan, by Various Demographic and Employer Characteristics, 2013 th By h N o o u te the seho , ho . 1 “0 M we ldo i y s likel v d ear in r er, ifyin that y g t the Fed et oth run ire e m an se h eral Tax alysis n ot, rt 6 o 4f o perc m f aut To re nent at ey om m in o atic ent re f lo e tir o w f n em est 4 ro 0ll 1 en -in m (k) t co ent b P m u lan t p e als lan Co qu o s artil n ho m trib enti w e u h stio o o oo u nn n s ed ab eho s aft : Pr er ld o ojs v e r et e wo cte used the ire u dld m Im run ent pact t sh act his is o on u rt al p likel of T lan -1 y8 - 1 2 The Potential of 401(k) Plans to Produce Adequate Income Replacement Retirement Savings 2.0: Updating Savings Policy for the Modern Economy specifi moneyc , bu d Pefaul articip t ontl c y an o 1n 1 t Acc trib perce u otio un nt n t rate o Bal f tan hs oc s (t es.” e yin pical t EBRI No he lys 3 eco perc te nd s, ent - in n o c. 3 o of c m (e o Em m qu p partil lo ensati yee e w B oo enefit nu ). ld M fac an Res e y h a earch In av sim e il qar si ue st stio itu tuatio n te ed the , M n. arch Onl y 3 to take place. We find that 83 percent of the lowest-income quartile households would eventually run Percentage Percentage for Today’s Workers 2012): 2–18. p short wisdo erce n o m t f o o m f f c o tho n oey ns tin in retir e in uin th ge te t om h se ir ed n t - t the ra in if l co om nte g e -s tq at erm uartil thi care s re e and c la o tiv 1 sts p el a e yre rcent low coln ev o sid f t elered ( h in ose view in the hig ev o en if f rec they ent hes are ig em t-inp co iri n m cal oe red, the e qu vid artil ence v e alu are e Working for an NOT Working for an NOT By Jack VanDerhei and Craig Copeland th sim sugg uest lated ing t t o h run at h sho igher rt d oefa f mu olt c ney o by ntrib the uti1 o0 n rat year. es m ay not result in a substantial increase in opt-out is still 70 percent). Moreover, 72 percent of E the mpm loy w er il NlOT run sho Parrt ticipa of ting money E w mpith loye in r N te OT n years Paro tic f r ipa et ting irement The EBRI/ICI 401(k) database has been used to provide annual reports based on actual account balances . Testimony. U.S. Congress. Senate Finance Committee. Tax Reform Options: Promoting 10 6 Employee Benefit Research Institute (EBRI) Charac(6 rates. A ter4 is percen tic(s) 201 t 2 if l Eo BRI ng pu -ter b m licati care on cUn o sts si ited m are ig u S lated tan tes othe i S red). p So e nn s m o arp te C ing act ao o P m lan f increasi mittee In a o P nn lan g t Fh in ea c S nu p co rren e n sort ing pla a n P- lan specifi In c a d efaul Plan t th of large cross sections of 401(k) plan participants since 1996. Looking at consistent participants in the Retirement Security (T-170), 15 Sept. 2011. Even ignoring the cost of nursing home or home health-care expenses, by the 20 year in retirement, (in millions) (percentage of total) rates to 6 percent. Under a set of specified behavioral assumptions, more than a quarter of those in the EBRI/ICI 401(k) database in the wake of the financial crisis (over the five-year period from year-end 2007 more than two-thirds (69 percent) of the lowest-inco me quartile households would run short of money. . “The Impact of Automatic Enrollment in 401(k) Plans on Future Retirement Accumulations: A Total-AIn ll W presentin orkers g these results, EBRI does not favor o 7r 6.o 6ppose any sp 93.ecific 1 modifi 10cati 0.0% on to the cur 100.rent 0% lowest-income quartile who had previously NOT bee n projected to have a financially successful to year-end 2012), a joint EBRI/Investment Company Institute (ICI) analysis found that the average On the other hand, only 17 percent of those in the second-income quartile would face a similar Unde retire r age Si 3 m m 0 ent u ye latio ar sy s on s ld te Stud m. Ra y Ba ther, sed E o BRI’s n Plan m D issi esig onn re M m oain difi 22 sca t .9o tio pn ro s v o id f L e o arg 2b 9j .e 6 ect Plan ive Sp ano al ny s2 sis o 9rs. .9th ” at EBcan RI Iss inf uo e B 3r 1m .8 rief, decisi no. on 7 retirement under actual default contribution ra H te earin s we gre on fo : und to be successful as a result of the 401(k) account balance fell 34.7 percent in 2008, then rose from 2009 to 2012. Overall, the average situation, as would 5 percent of those in the third-income quartile and 1 percent of those in the highest- Part-time 22.9 28.7 29.9 30.8 341 (Employee Benefit Research Institute, April 2010). making by others. As the various design and program modification alternatives are debated (both increase in default deferral percentage. When emplo yees in the highest-income quartile were analyzed th account balance in this consistent sample increased at a compound, annual, average growth rate of 6.8 1 in com Intr e quo artil du e. By ctio tn h e 35 year in retirement, 70 percent of the lowest-income quartile households Less than $20,000 in annual earnings 33.3 41.2 43.5 44.3 reforms and status quo), it is instructive to keep in mind who’s most likely to come up short in under the same set of assumptions, the percentage o f those who had NOT previously been successful percent over the 2007–2012 period. VanDerhei, Jack, Sarah Holden, Luis Alonso, and Steven Bass.. “What Does Consistent Participation in would run short of money and 20 percent of those in the second-income quartile would face a similar Fewer than 50 employees 42.4 45.1 55.4 48.4 retirement, when, and why. (under the actual default contribution rates) that now ARE successful as a result of the change in Measuring retirement savings and retirement income adequacy for current workers is an extremely 4 Ret 01(k) ir P em lanen s Ge t n Sav erate in ?g Ch s 2 an .0 ges : U inpda 401t (k) inAc g co Sav unitngs Balan Policy ces, 2Figure 00 for 7–2 t 0he M 12.”1 EBRI I oder ssue Brief, n Econo no my . 40 1, Atsitua least tio onen o . f Onl the a yb 6 o perc ve ent of those in the third-inco 62m .2e quartile an 7Figure 4.d 1 1 percen 3 t o 81 f t .2hose in the hig 79.6hest- While this information is certainly useful to evaluate assertions (and anecdotal claims) with respect to im defe po rra rtant and l rate was com 18 p.lex 4 perc topent. ic, and EBRI started to provide this type of measurement in the late 1990s and ICI Research Perspective, Vol. 20, no. 4 (July 2 014). income quartile are simulated to run short of money eventually. EBRI looks forward to assisting the members of the Committee as they continue their investigations into 401(k) plans, it needImp s to be act suppof lem en Fu ted tu with si re Year mulatios of n mod elin Eligibility g for a proper fo assess r a mDefin ent of the ed Contribution ® 1 Years in Retirement Before Boomers and Gen Xers with the development of the EBRI Retirement Security Projection Model (RSPM). When we most Total-Private Wage & Salary Workers 63.7 77.9 100.0% 100.0% this extremely important public policy topic and we hope that they will be mindful of the necessity of TM p o te n tial . “4 o 0f1 4 (k) 01 P (k) lan p A lan sset s to Al pro locati duce on“ , Acc adequ ouat nt e” in Balaco ncm es, e an repl d L ace oan m Ac ent f tiv o ity r se in v er 20a 1 l reas 2.” EBRI Is ons: sue Brief, no. Plan for Gen Xers on 2014 Retirement Readiness Ratings, recently modeled the projected outcomes for Baby Boomers and Gen Xers in 2014, we found that Under age 30 years old Run Short of Mon 20.9 ey, by 26 .Prer 8 etiremen 32.8 t In3co 4.4 me Quartile Tuesday, September 16, 2014, 10:00 AM considering potential employer and employee behavioral changes as a result of policy change. For 394, (Employee Benefit Research Institute, December 2013); and ICI Research Perspective , Vol. 19, 3 Short Falls: Who’s Most Likely to Come up Short in Retirement, and between 57 percent and 59 percent were expected to have adequate retirement income to fund 100 Part-time ? The EBRI/ICI 401(k) database does not co 1n 8.tain 4 informatio 23.2n on individu 28al re .9 tirement ac 29.8 count 215 Dirkseby n Senate Prer Offiet ce iremen Building t Wage Quartile 4 Employment-Based Retirement Plan Participation Scenario: 100% of deterministic retirement expenses example, at the September 15, 2011 Senate Finance Committee hearing on “Tax Reform Options: no. 12 (December 2013). Lessp terce han $n 20 t ,o 00 f si 0 in m au nn lat uaed l eab rnasic ings retirement expenses ( 2h 7o .6using, food3 , e 4.2 tc.—plus un4 in 3.sur 3 ed health c 43 are c .9 osts, (IRA) rollovers, many of which may have originated as a 401(k) balance at an individual’s prior When? Promoting Retirement Security,” testimony included a distributional analysis of the winners and losers TM Figure 2 th Fewer than 50 employees 100%but no nursi 33.9ng hom 3e 6.5or home 53.2health c 4are 6.9 costs using EBRI’s Retirement Readiness Ratings (RRRs) as the gauge). Some retirement planners suggest A co ncern expressed by the several of the Committee members at the September 16 hearing dealt employer(s), and therefore may only provide information on a fraction of the participant’s under the two versions of 11 a proposal to substantially modify the tax incentives of employer-based 401(k) 80% At least one of the above 51.3 61.5 80.5 78.9 A recent EBRI publicatioYear n prov s in ides neRetirement w results showing ho Befo w soore n aftBaby er retirem Boo ent Bab mers y Boomer and and Gen Xers that with t m han e perc y hoentag usehoe ldo s are f the ab wo le t rko fo succ rce ac essful tually ly p cut e articip xpend atinitu g in a ret res belir oe w m tent plan he averag ae t a par expenses ticular when point in retirement accumulations if there have been one or more job changes in their careers. accounts; however, the underlying analysis held retirement saving contributions constant for both Source: Employee Benefit Research Institute estim 90 ate % s from the 2014 March Current Population Survey. Gen Xer households are simulated to run short of money, by preretirement income quartile. Figure 2 fin tim an e.cial Whi ly le co EBRI’s nstrain RSP ed. M The inrefo corp ro era , w te e s als thi o s inf com orm pute ati d o t n h , it resho focus lds es of m 8o 0re an o d n 9 t0 h per e ovcent erall nu of si m m bu er lated of y ears ? Even if one looks only at 401(k) participants who are on the verge of retirement and have had Run Short of Money, by Preretirement Income Quartile employers and participants. While EBRI had testified that day using several alternative results from shows the results assuming that 100 percent of the simulated deterministic expenses are met; in other that an in ex 7 penses Endnot and dividu oes n al that basi participate s fo s uin nd a t pla hat nthe R durin Rg Rs thfeir w or Bao brkin y Bo go cm arers eer and and Ge less n Xe onrs w a h t et a 9 her 0 p th erce ey hap nt pen to significant tenure with the current employer, there is a significant likelihood that they would not sim 70 u% lations based on survey responses to generic questions reflecting how workers indicated they 80% Scenario: 100% of deterministic retirement expenses, words, 100 percent of the average expenses (based on post-retirement income) for components likely b thresh e covo er ld ed du were rin bg et a we partic en 6u 7lar and “sna 70 per psho cent. t” of t When he un tih verse e thresh . old was further relaxed to an 80 percent have been eligible to participate in a 401(k) plan during their entire career with the current would likely react if they were no longer allowed 2 to defer retirement savings plan contributions from 8 thresh to be eo nld co , u the R nterRRs ed oin n cr a reg easu ed to 8 lar basi 1– s ( 8e.g 4 p., f erce oo n d t. , ho using, transportation). In addition to these relatively employer. 100% of nursing home or home health care costs 1 13 Still it is valuable to investigate the characteristics of workers who did not participate in a particular tax Ad ab ditio le inc nal o dm eta e, ils o we n RSPM made an a70 d c to % hm e a m ss it um ment ptio t no s ca incl n b ud e fo e th un e dspecifi in VanDe c pro rhev i (J isiu on n es bein 2013). g The fi propo nan sed in cial mark the next et predictable expenses, the stochastic costs arising from nursing home and home health-care expenses ? Since the passage of the Pension Protection Act of 2006, many of the 401(k) plans that had 90% y Who re ear. F s 60 ult % is s a m o re rthc o gen st at oe m ra ri in ted sk g fro EBRI of n m o st re t h o search sh av chastic a ing adeq n o n ws u u al ate tre hat tu retir rn ins 2 with em 01en 3 a , t 7 lo in 6g .6 co -n m o m rm il eli ? al oNo n d is wo t tr sur ib rke u p tio rs risi n w a no g nrke ly, d a lo n d a fo we rith r an r-m in e co tic m mee an of 8.6- annual Retirement Confidence Survey. We were able to combine this new participant information with are assumed to be covered in years when the model simulates their existence. previously allowed eligible empS lo ta yee temen s to v t o fo lu rn ttaril he R ye e cn oro rdll have been modified to automatically h p em e orce u p seho lo nt yer/ re ld al u s re n hio av tun rn e t for m hat uch lo sd to id cks n w ot an er 60 spons d RRR 2.6 % sp :o e The r a rceretir n2 t 01 reem al 4 b re ent pla aselin turn fo en r RRRs , and bond 9 s ran . 3.g 1e m fr ilo lim on 1 w 7 o prkers ercen did t fo n r ot the l particip owestat - e in a separate survey by AllianceBernstein that provided information on plan sponsor reactions to the Percentage of Simulated 2 th 3 12 enroll eligible employees. Although these employees will have the ability to opt out of such VanDerhei (February 2014). Note that in Figure 2, by the 10 year in retirement (assuming retirement at age 65), nearly 3 in 4 (72 an inco em me plo h yo m uen seho t-bld ased r s to 8 et 6 ir pem erce ent plan nt for the hig (Figure hes 4). t-in co Of t mh e oh se ou 7seh 6.6o m ldil s w lion ith a workin 100g p ferce or a n nt oo nf si spons mulat or, ed Life-Paths That specific proposal. The results suggested significant changes for both employees and employers and, as 80% 3 Preretirp em articip ent in atio come n, i in t RSP is clear M Jac isk V d tha ea ter t nthes Derh mine e d ep in i, lan Ph a man s ha .D. v a ne n er d hs ad C im ra a ilar i su g C to b o t stantial p h e el a an ve dra , im Ph gep - .in act D. d eo xe nd partici -month ply atio -ear nn ra ing te s s, Will Not Run 50% ex 2 p2 erce 5 p .9 0 enses % m nil t)li o o thresh f nthe l (29.o 9 o per w ldest . The cent) -in m co iwe m dd e le c re q y ulass (d ar ou tile h nger efin othan useho ed as ag ld e tho s3 w 0s o . eu Alm in the s ld run ost sho 2 ec 3o m rt nd il oli and f o m n ( o t 2 nh 9 ey ird .9 , w pe inc hrcent) il o e m few e q we er uartil r than e p eart fo 1 in r -ti m 5 e opposed to the assumption of constant retirement savings contributions, our baseline analysis indicated 9 Lowest-Income Quartile computation for Social Security with the following modifications: especially for lower-income employees. Short of Money Employee Benefit Research Institute (EBRI) (19 percent) of those in the second-income quartile would face a similar situation. Only 7 percent of an pud rp 3 o3 ses .3 m of t illih ois n st (4at 3.e 0m per ent cent) ) had h an ad RR ann Ru o al earn f 62 perc ingent. s of At less a t 9 h 0 an percen $20,0t 0thresh 0. Furth old er , the R more, RR 42 fo .4r m mil id lio dn le that plan-sponsor modifications, combined with individual participant reactions, would result in an ? in Ret All ear irement ned incom e is included up to the age of retirement (i.e., there is no maximum taxable wage base 70% ? An analysis based so40 lely % on current balances will, of necessity, not be able to assess the impact those in the third-income quartile and 2 percent of those in the highest-income quartile are simulated to (5 class ho 5.4 perc usent) ehold w s incr orked f ease or s em to p 7l4 o percen yers with less t (indicatin than g t 50 h e at m np early loy S eec 3 es. in 4 on The d of n tho umsb e er ho ou f w seho ork ld ers s wo who uld fall in have to average percentage reduction in 401(k) balances of between 6–22 percent at Social Security normal constraint, and the calculation terminates at retirement age). th Lowest-Income Quartile of future employee activity (such as poten 14tial cash-out behavior at job change) nor the impact of 40% ru suf nfici sho ent fina rt of m n o cial ney r w eso ith uin rc es a decade. B to cover 9 y0 t percen he 20 t yo ear i f sim n re ulated ba tiremen sic re t (agtire ain, as ment sum expe ing re nses, tireas det ment at ail ag ed e any of these characteristics—younger than age 30, part-time worker, have annual earnings below retirement age for workers currently ages 26–35. ? Instead of indexing for changes in average national wages, tT hhi e mod rd el indexes based on assumed, after-tax 30% future financial market returns. Second 65), more than 4 in 5 (81 percent) of the lowest-income quartile households would run short of money, ab $2o 0,0 ve) 00 . At , or an w 8 ork 0 perc for e ent mpthresh loyer with le old, 88 ss t percen han 5 t 0 o e f t m hp el o m yid ee dsle c —rlas eaches s hou6 s2 eho .2 m ldil s li ar on e o pr redi 81.ct 2 perc ed toent hav o e f all 60% rate of return based on asset allocations that are a function of the individual’s age in each year. suf com fici pared ent re with 3 tirem8 ent perce inco nm t o e. f t hose in the second-income quar Hi tile t gheh sa t-t In w co ou me ld fac Qua e ra si tilemilar situation. workers working for employer not offering a retirement plan. Third In an attempt to assist the Senate Finance Subcommittee on Social Security, Pensions, and Family Policy Percentile distributions are then established based on population statistics for each five-year age cohort. 20% 4 30% Only 19 percent of those in the third-income quartile and 8 percent of those in the highest-income 6 References in Fig its ure ev 3 alu ofati Vao nn D o erh f the ei (Fe ro blru e o ar f 4 y 2014) 01(k). pla ns in December of 2013, EBRI Hi ’s gh RS es PtM -In was com used e Qua to rti anal le yze the H Amo owe nv ger pri , it vat sh e ose uld ct be or w no ag te ed and that salary these w p o rrkers obab, 6 ilities 3.7 m wil ill dep lion w end ork f too a r an lar e ge m e p xlo te yn er t / ou nn w ioh ne no ther t ofu fferin tureg a 50% th 5 quartile are simulated to run short of money by the 20 year. Only Gen Xers are shown in this portion of the analysis given their longer future working careers until age 65. potential of 401(k) plans to produce “adequate” income replacement for retirement. That undertaking y retire ears m of ent em pla plon y and ment t 77a .9 ke m pil lace w 10 lio% n we ith e re n m op t lo particip yers spo atin nso g in an ring defin emped loyco men ntrib t-bu ase tiod n re retire tirem men ent t p plan lan. s or 6 Utkus, Stephen P., and Jean A. Young. “How America Saves 2014, A Report On Vanguard 2013 Defined See VanDerhei, Holden, Alonso and Bass (December 2013) for the most recent results. 4 found that, assuming current Social Security benefits are not reduced, 84 percent of middle class These values continue to increase until all households either run short of money or there are no n Lo oo t. kin Pre g at vio t uh s e EBRI ana same cha lysis racte show ristics s t as he ab poo siti ve, ve 51 im .3p m ac ilt lio of futu n of 6re 3.7 years millio on f e (8 li0 gib .5il pe ityrcent) for a d wo efin rke ed rs have at 7 20Co %ntribution Plan Data.” VanDerhei, Holden, Alonso and Bass (July 2014). 40% th 5 workers with more than 30 years of eligibility in a voluntary enrollment 401(k) plan are simulated to surviving retirees. By the 35 0% year in retirement (age 100, assuming retirement at age 65), 83 percent of 8 least contrib on u e tio of ntho plas n e o cha n retir racte em ristics. ent inco Co m nsequ e adeq enu tly acy , an . Fo or verw Genh X elm ersin in g t m haj e o srit ecy o n od f t and hose th w ird orkin inco g f m oe r an The proposed regulations for 401(k) plans were first introduced in November of 1981 and it took several years for Lowest-Income Highest-Income Van have Dsuf erhei, fici ent Jack. 40 “1 ’Sh (k)o acc rt’ F uall mu s:lati Wo ho ns t ’s M hat ost , when Likely c o to m C bo in m ed e u with So p Short cial in R Se et cur ireity ment, and retirem W ent h benefits en?” EBRI , Second Third q the lo uartil we ess wi t-in th no com fu e qu ture artil ye ears o houf seh elio gld ibs w ilityo in uld a defin run sho edrt co on f m trib ou nti eo y and n pla al n, t mh oe st RR hal R v f (4 alu 7 perc e when ent) m o easured f those employer not sponsoring a plan have these particular characteristics. many sponsors to introduce the plans. Moreover,Q m ua anry ti p lelan s that were originally introduced as supplemental Quartile wouN ld otes, be abl no e . 6 to ( r Eepl mpace loy at ee Be least nefit 60Re perc search In ent of t sh titute, eir ag Ju e 6 n4 e w 20 ag 1es 4a): an 2d – salar 18. y on an inflation-adjusted in th30 e se %cond-income quartile would face a similar situation. Only 28 percent of those in the third- with a 100 percent of simulated expense threshold is 51 percent—indicating that almost ½ of this cohort plan 10 s% to existing defined benefit plans have been modified to provide more generous employer contributions at 0 17.2% 44.2% 57.4% 72.5% basis. When the threshold for a successful retirement financing is increased to 70 percent replacement, are pro income je qct uartil ed te o run and sh 13o per rt o cent f moo nf t eyh in r oseet in the hig irement. T hes his v t-inalu com e increas e quartil es e are to 5 sim 6 per ula cent ted t fo or t run ho sh se in ort the of the time the defined benefit plans were frozen (VanDerhei, April 2010). . “What Causes EBRI Retirement Readiness Ratings to Vary: Results from the 2014 Retirement 1-9 27.1% 47.8% 64.5% 79.6% 9 75 percent of these workers will still meet the threshold, based solely on the combination of projected ® money eventually. m 5 Se ide d Fi Sum le c gulas re m 24 s wi a oth fry Utk o n ue s a to n ni d Yn oe un fu g (201 ture 4 y) for earsr o ece f e nli t ge ib vid ility en in a defin ce. ed contribution plan. The RRR value Security Projection Model, ” EBRI Issue Brief, no. 396 (Employee Benefit Research Institute, February 20% The views expressed in this statement are solely those of Jack VanDerhei and Craig Copeland and should 10 10-19 35.6% 61.6% 80.2% 91.2% 401(k) savings and Social Security combined. At an 80 percent replacement rate, 62 percent of the VanDerhei (September 2012). increases further to 71 percent for those in this category who have 10–19 future years of eligibility in a 0% 2014). n Fio gt ub re e at 3 si trib mu ulate ted t s t oh te h sa e E m m e psce loyn ee ari Ben o as Fig efit R uese re 2 ar in ch I ter nm stitute s of de (EBRI), termin th istic e EBRI Ed expens ues, catio bu nt and this R tiese me ar the ch 11 20 or more 35.9% 71.3% 87.7% 94.7% Since 2003, EBRI research has analyzed the retirement savings and retirement income adequacy of Baby middle class will still meet the threshold. VanDerhei (June 2014) defined co 0ntrib 1 utio 2 n pla 3 n 4, an 5d re 6ach 7es 8 a m9 axim 10 um 11 va12 lue 13 of 80 14 perc 15 ent f 16 17 or t18 hose 19 with 2 20 21 0 or 22 mo 23 re fu 24 tur 25 e 26 27 28 29 30 31 32 33 34 35 Fund, any of its programs, officers, trustees, sponsors, or other staff. The Employee Benefit Research 12 model assumes that any cost of nursing home or home health-care expenses are not borne by the Bo o m ers . “What and G a en X Sustain ers in ed L tho e w Un -yield ited St Raate te E sn . v This st ironm ate ent m M ent eans hig fo hli rg Re hts tire thm osent Inc e previo om us re e Ad sul equ ts ac any d : Results This 10 in % cludes the 76.6 million who worked for employers/unions that did not sponsor a plan plus 16.5 million years of eligibility in a defined contribution plan. When the threshold for a successful retirement is However, when the same analysis is conducted for automatic enrollment 401(k) plans (with an annual 1 In ho stitute useho is ld a . As n e on xp pr ect ofit, ed, no th ne par perc tisan entag , ede ucati of h o o ® n u and seho rld es s in an earch y o inc rg ® an om izatio e qu n artil este ab th liat shed in run sho Wash rt oin f m gto on ne , y Years in Retirement (Assuming Retirement at Age 65) Source: EBRI Retirement Security Projection Model Version 1995. w sum ho work mariz ees d for nee w mrp ese loyarch ers th show at spo in ns go h re od w as p o lan on b sho ut d rtfal id no ls are t particip likely at t e in o o tccur in he plan r for etir w em hatent by ever re inco asonm . e From the 2013 EBRI Retirement Security Projection Model. ” EBRI Notes, no. 6 (Employee Benefit measured at a 90 percent of simulated expense threshold, the RRRs range from 62 percent for those 13 percent automatic escalation provision and empirically derived opt-outs), the probability of success for N D ot C, in e: The 19 v 7 al 8ue . EBRI d s in thio s es figu no re trep take res p en ot lith cy e po pesi rctio enta ns, ge no s of r d sio m es ulat it ed lo b life by -pa , ad thv s o th cate at w spec ill not ru ific n p so ho lic rt yof money in retirement assuming that 100 percent within a particular time period is smaller in Figure 3 than in Figure 2, where those costs are VanDerhei (September 2011) quartil Rese e. ar Tw ch In o pri stitut mary e, fin Ju d n in e g 2 s e 01m 3b erge: ): 2– Fir 12. st, for those young enough to still have a significant number of with no future years of eligibility to 88 percent for those with 20 or more years. At an 80 percent of o14 f simulated retirement expenses are paid. Additional information on the percentages that would be able to satisfy less stringent thresholds (viz., 80 and 0% middle class workers with more than 30 years of eligibility increases substantially: 92 percent at a 60 co reco nte m m m p end lated. ati M ono s, re oo r r vece er, t iv he e fd ederal fu ifferences ndil in lu gstra . te the significance that ignoring these important costs VanDerhei (March 2012) ® Source: EBRI Retirement Security Projection Model version 2030. years before retirement (i.e., Gen Xers), the probability of retirement income adequacy depends to a 90 percent of simulated expenses) is provided in Appendix B of VanDerhei (February 2014). simulated expense threshold, the RRRs range from 79 for those with no future years of eligibility to 96 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 p erce n . t “thresh Increasin old g ; D 87 efaul perc t ent at Deferr a 7 al Rat 0 per es cent in Au rt eo pm lace atim c Enr ento and llment 81 4 p0 erc 1(k) ent a Plan t an s: The 80 p Im erce pan ct t t oh nresh old makes in any accurate simulation of retirement income adequacy. large degree on a household’s future years of eligibility in a defined contribution plan. Second, the percent for those with 2 th 0 or more years. Retirement Savings Success in Plans With Automatic Escalation.” EBRI Notes, no. 9 (Employee are assumed to have sufficient resources at those levels. EBRI • 1100 13 St. NW #800 • Washington, DC 20005 • (202) 659-0670 • www.ebri.org Years in Retirement (Assuming Retirement at Age 65) relative pre-retirement income quartile of a household plays a huge role in determining not only if a Benefit Research Institute, September 2012): 12–22. ® Source: EBRI Retirement Security Projection Model version 2030. E E E E E EB B B B B BR R R R R RIIIIII T T T T T T- - - - - -181 181 181 181 181 181 S S S S S Se e e e e en n n n n na a a a a atttttte e e e e e F F F F F Fina ina ina ina ina inan n n n n nc c c c c ce e e e e e S S S S S Se e e e e ep p p p p ptttttte e e e e em m m m m mb b b b b be e e e e er r r r r r 1 1 1 1 1 16 6 6 6 6 6,,,,,, 2 2 2 2 2 20 0 0 0 0 01 1 1 1 1 14 4 4 4 4 4 Pag Pag Pag Pag Pag Page e e e e e 2 1 4 3 5 6 Cumulative Probability Cumulative Probability