TM R Fro thR an R m a o a . “ .q f “ p u jI T u u ar sh s r W ter el t e 0 y E o . o 8 r B fk f i p n R in tan er h Ig o R ce cia s to etir e n l e i t) Ag ne . co th m A e e en t a n 7o 0 lto n m R R w 8 ics p ea ea est 0 ll p d-er in y ier n tes ce co s hp e s n ec m t e An R e ti ati x v q sp e, u w n en ar g er th :s tile e e fo t cr h R w u rR etir res h retir en oh e o h t m e a ld fm d ed en , en p th er t I re ev t I al nR co n io tax R co u m R s m e ltr y fe P ea o N r A r t ep OT h m do eq ar e un s atio b u t f eee ac ho o n y n rld ? 4 p an ” s 0 r o E d 1 in j ( B ec Fu k tR ) h ted tu I e p N lan b r e to o otto tes, P s h rh o av m a sn s p e q o ad ec u a . ar 8 ts v fi a tile o ( .n ” n E atag m EBRI nciall pf e lo T s- y f 176 yo ee r ? ? T Rh SP e M Maw rch as 2 si0 g1 n3 i fE ican BRtIl y N e on tes ha n ar ce ticle d fo (rVan the Der Mah yei 20 a0 n8 d E AB dR am I s p,o Ma licy r ch fo r2 u0 m 1 3 b)y u allo sedw a in m go a du ito fie m datic verseio nr no o llfm ent 5 Summary Retirement Savings for Low-Income Workers s s w u to o cc ch rk e I B er ast s sen s ss u f ic u e e w l fB i it h rth ea etir rR ief, h lt esear ie h g m n h ca o e er .n c r e 3 h t m 4 u co Iar 4 n n d s s g (t ts E er iitu n m jal ac u te, pm lo tax tu p Au y al s e rto e d ates ( gef u B 9 sa en 1 t 2 u .9 th lt c ef 0 p o 1 it er s 2 oR e ) n c : 1 ese tr w en ib h 0 t o ar – u w 2 tio p ch h 1 aile .n y I n r ta ate t sh x tio es tu ss e te, w at in er h J e u th ig lfy e h o er u to 2n 0 p r d 1 ates a 0 q to ) u. ar b e tile i re su scc ee ncr ess n ea as r fu se l a ec os eiv n a lyi r n esu to g 9 a lt o p ger rf ea ce th ter n e t in . b en crea efit se in R ofSP 40 M 1(to k) ass pares ticip s th an e ts pr w ob itab h ilit they p th oten at rtial f espoo nrd au ento t h m oatic usehescala olds w tio ou nld o fn co ot r nu trn ib su htio ort o ns fto m b oe ne in ycl in u d red etir (e Van men Der t if hei 6 Since 2003, EBRI research has analyzed the retirement savings and retirement income adequacy of low-income d f ref om au t lt h .. e “ “ d an th T R e df e h etir ef d er y e er C rd Ial e m o id rm al pp p ,elan e ac er in o nf t ce t o fth R d ac n ,f ea o tag t, 2 P sd 0 e P ac in e. 0 tax A 8 cu e )s o .e s m n s R )u R , atin late etir if og e th th s m er e a en a n ele d m t I R o m nu etir co en nt t m t es h m e e of e y fo n tr s t Sa h aid 4 e 0tax 1 v w ( in k o co ) g u s P ld d ar S e h b ticip ar o e re rtf eq ig al an u n ls ts ir o .f ed r” o ed r E in .Gen B Ho R thIe Xer I w 2 se s 0u v 1 se er 3 : T B R (r h an etir ief, e d I m e as n m p oac e s . e n 3v t o t Co 1er 8f al (E E n l E f m ig id B p ib e R lo n ili Ice y t ee y Baby Boomers and Gen Xers in the United States. This statement highlights those previous results and provides new publicatio f B oen r P ef ar n it s ticip R ha esear vatio e ex c nh p in lai In a n sted 4 itu 0)1 te, , (th k ) J e u P co n lan e n2 s .” 0 tr0 ai E 8B n ).tR s I co Nn otai tes, n ed no .in 6 I(R EC m p Secs. loyee 4 0 B2 en (ge )f an it R d esear 415(c) ch, I co nsm tit bu in te, ed J u w n it e h2 012): 9–21. ? A Su drd vitio ey.n al modifications were added for a Pension Research Council presentation that involved a By Jack VanDerhei, Ph.D. evidence on the importance of proper risk management techniques as a growing number of low-income workers n ondis ..cr “ “i E R m R etir iI nS atio e A m A e nn t 3 rt I eq 0 nu : T co ire m hm e e e Dec Ad ntseq lin fo ur e ac th oy fe P fac o riv rt u B ate al oo - dm Secto ef er ersr al a r n De p der Gen fin cen ed tag Xer Ben e s: E (ef Ait DP vid P) r en o an m ce d i s fac es a rotu m n al d th co An e 2 m n 0p u 1en it 2 y E s atio P BaR yn I m R p en er etir tce s: W en m tag en hat e t (W AC ill P) ? T “w he inJ nu er ne s/lo 20s1 er 3s E ” B an Ral I I ysssiu s e oB f d rief efi n (Van ed bDer enef hit ei, fr J ee un ze e s2 a 0n 1d 3 a) th e us en ed h a R nSP ced M eto m p plo ro yv er id co e a nd trir ib ec uti t c oo ns m p prar ov isid on ed o to f t he 4 Retirement Confidence for Low-Income Workers Research ® Director, Employee Benefit Research Institute (EBRI) approach retirement age. It would appear that while RRR values depend to a large degree on a household’s future have I Secu b t M een ea r it sn y h? o P ” w rE o nB j ec to R I tio s I er sn s v u Mo e e tB hd ei rel. ief, r in ” n ten E o.B d 2 R ed 6I9 N p (u o Ertes, m po ps lo n e: o y .r ee estrictin 5 B (E en me pflo g it R y co ee en s tr B ea ib en rch uef tio it In nR s sti esear m tuad te, e c Ma h b y I n y m s 2 to itu 0 re 0te, 4 h)i. g Ma hly y co 20 m 1p 2e ): 2 nsated –14. lik defel in yed b en coen ftr its United ib u un tio der n p sp lan ec St sif at ic a tth ytes e pe tism o Sen e f th De C d an e a fd in te DB edCo b ren etir emm feit p mela ntn it p s lan tee wer s.e fo ron ze F n (C ina opelan nce d an d VanDerhei, 3 What are the Primary Risks for Low-Income Workers After Retirement? years of eligibility in a defined contribution plan (as well as whether future Social Security retirement benefits are While individual confidence of achieving a financially comfortable retirement is not dispositive of the reality of that w orker .. s“ “ C Mo relati and Am if vy e ito n er g ica th tho e Af se Fed f m oad r er da e T l T b oy m ax n oo rT r no r-ea w hig 's R tm he ly et n t o co iree f m 4 sp : Re 0 en 1(sk s ated ) u lts Pla w Fro no C rk m oer n th tr s— ib e E u rtio es BR u nlti Is-: P E ng R r o i F R n jec a etir ted relati e Im m v e p el n ac t Sec y t o flat nu P m rit ar u yltip ticip Prle oan jec ot ftio fin nal 2010). ? The June 2013 EBRI Notes article (VanDerhei, June 2013b) used RSPM to show that 25–27 percent of Baby 17 ® th Subcommittee on Social Security, Pensions, and Family Policy r educed ), a great deal of the variability in these values could be mitigated by appropriate risk-management g ea oral, nin A Mo it c g cc sd o an at el. u n r b t B etir e ” in E ala eB s m tr R n en u I ce cti It a s ss .v ” u se e E a i B B n fu r R cr n ief, Ictio af N ti o nn o tes, ng .o 2 ed f 6 n s3 u o alar ca .( E 3tio m y (E p ac nm lo al rp o y a lo s ee n sy d th ee B pe en o B i lic n e en f co y it e m g f R it oe ese als R ran esear ar . Dr g ch e.a ch Iw Fi nis g n Iti n u g tu s r e r tit te, es 9 uu te, o No lt fs Van Ma v fe ro m rm Der ch b er t h 2 h e 2 0ei, 0 1 20 2 4 Ho 3 ): 2 ) .an ld –n 1 en u 8al ., A R lo etir nse om an en dt ? A Bo lso om in er 2 s 0 an 09 d, Ge a nn e w Xer susb w roh uo ti n we ow uld as a ha dv de ed h ad to ad allo eq w u ate simru etir lati eo m nen s o t in f vco ario mu e su sn ty dle ers r o etu f tar rn g as ets-u dm ate ptio fun ns d s b ased for a on W tech hile niqth ues a e prt o obr ab nilit earies o retir fe n m oe t n ru t a ng ne. in g short of money in retirement for a low-income Baby Boomer or Gen Xer is 17 Confidence Survey, Figure 3 shows the distribution of conf idence in 2014 that, for households with income of less B ass ( 2 .. “ 0 “Kan T 13 ax ) s sR h aef s o w F ou s rm tu th rOp e e rR atio tio etir n s o e: f m P 4 en r0 o1 t I m (k o n)tin co ac m gc e o Ru et Ass nir t-e b em alan sse m nt Sec e ce nt P -tou r -o s rit al ject. y ar .” y ” E fA o Br R p p I rar o Ij sticip ec sut o e an B f rth ts ief, e in E n th B o.R e 3 ir I6 E 6 4d 0 (u sE ca fm otio r p lo th ny e an ee yea d B R ren -esear en ef dit 2ch 01 2 co hism top rar ical isoanv er wit ag hes par wticip ere s an im t-u dlir ated ected to in env des utp m re un ntn s in (Van g shDer ort o hei, f m Jo un ne e y2 i0 n0 r9 etir ). ement if today’s historically low p ercent when a threshold of 100 percent of simulated expenses is used, 30 percent with a 90 percent threshold, and v th er an sio R Fu $n 3 esear n 5 o d ,f 0 an 0 th ch 0d e , I th E th nB e s e ti R r Milb tu esp I/I te, C oa I n No n d P k en ar v Me e ticip t ( m an m ber an o dr s ial t2- p 0 Dir o 1 Fu u 1sec )e) n . d ted .w Jill u R ly etir h av 16 e e ,m 2 een n 0o 0t P u 2g . la h n m Data oney C to o llect live io con m P fo ro rtab jectl,y th th e ro lar ug gh est, out r metir ost ement years. interest rates were assumed to be a permanent condition. ? In April 2010, the model was completely re-parameterized with 401(k)-plan design parameters for sponsors 1 Introduction 5 Fo 5 rp ex erce am np t le, with th e an a n 8n 0u p itizatio ercent th n orfes a h po old rtio , it sh n ofo th uld e d bef e in no ed ted co th nat trib thu etio se n ar an e d av Ier Rag A e bs ala fon rce ho s u m seh ayo s ld us b s itan n th tiall esey co in hcr or ea tss , e A rep lth resen o u .. g T “h tativ Ma esti a to sm e stal ac o rep n ho y u o f .s s U. 4 etts ito 2S. r p y Fu er C o ce o tfu n i n rg n e t o r f ess R of retir m th . atio Sen eesm e n ate e lo n of w t I Fin -in in n co d a co iv n m ce m id e e u A C al hs o o sm 4 u es 0 s m eh s 1m itt (k o e ee ) ln d p t P .slan Ta w ro er x p jec e ar Rn efo ticip t.” ot a r A m an t a pOp r t a ll c ojcc tio ec on o t nf u o s id n :f te P th sn r ie t t o nmo E h th B ee y tin R w w Ig o E o r R u d ld ld etir u. ca h Fo eme tio av r e n th n en an o t S so d e ec u w gu h it r h ity ? th Th at e h A ad ug ad uso t 2 pted 013 au Eto BR m Iatic Issu -e e nB ro rief llm ( en Van t pDer rovih sei, ion A s u (Va gus nt 2 Der 01 h3 ei, ) u A sed pril 2 RSP 01 M 0).to analyze the Obama Hearing on: th ane d p th ro e bac abtilit ual yr o esu f nlts ot r m ua ny n in dig ff s er h o m rt o ark f ed mlo yn , ed yep th en rod uin gh go o un t r heti ow re v m ar en iot ( usVa ris nk Der coh ne tin i, g Sep encies tem b pe la r y 2 0 o0 u6 t a an fter d P retir ark,e 2 m 0e1 n1 t) . .I n m 20o o nr e R (T y m esear -f1 o o7 rre 0 th ch ) y,ea is 1 Fu 5 r ds ef Sep n od ifn an ten it t. io 2 du 0 n th r1 e o 1 e , t f. M r h eese ilb tire an r m atio k e n Me t in s am rco e oh m rial ig e h ad F es u eq t f nd u o.ac r Dec th y,o ts eh e m e w b ner it uh m 1 tb ,h er 2 e 0 s lo 0 d 2 w iv . e er st gsed alar su yb rsan tan gtia es. llFo y w r th heo ns e thw e ith sam sh po le rter was administration’s fiscal year (FY) 2014 budget proposal to include a cap on tax-deferred retirement savings ? A completely updated version of the national model was produced for the May 2010 EBRI Policy Forum Measuring retirement savings and retirement income adequacy for low-income workers is an extremely important 15 Mo 200r6 eo , E vB erR , I a p w rel ov l- id fu ed nc a tio dn etaile ing m d ar an kal et yisn is lo on f g th -ter e rm ep lace care m in es nu t- rr an ate celev wo els r uld eq apu pir ea ed r to to p prro ov vid ide e an retir ex ee trs e m wel ith y v uar sef io uu l s bifurcated into those with a retirement plan and those without. Only 18 percent of those with a plan were not at all ten ure s .. ,“ “ th Or Th e eg e ratio Io m np s F o u f ro tan tu r rth e ce e R o lo etir f w D e e ef m stien - nied nt I co n B m co en e m ef qe u it P ar Ass tile a lan es ss rf m e oe rn n R ea t P et rlir ry oem ject. as en lar ” t g A Ie n co as t pro m j hec e os A t o e din f eq th a ue n ac y E y o B .t ” R hE er I B E in R dI u co ca N m o tio e tes, ca n an te no g d .o 8 R r y es (. E ea m r pch lo yee that would limit the amounts accumulated in specified retirement accounts to that necessary to provide the and used in the July 2010 EBRI Issue Brief (VanDerhei and Copeland, 2010). and complex topic, and EBRI started to provide this type of measurement in the late 1990s with the development of 11 p tech robn aiq bilit ue ies o to help f ha li vm init g t “su he fffin ican ien cial t” rv etir olat em ilit en yt i frn oco m m th e. e sto Ach s p as ar tic, t o flo th ne g- an ter al m y sh is ea , a lth “ b ca uild re irn is gk b . lock” approach was confid Fu Ben en nd ef t, an it bu R d t t esear th he is Milb lac ch k I a n o n sftk itu co Me n te, fm id Au o en rial g ce u sFu in t 2 cr n 0d ea 1.1 s 2 )ed 0 : 7 0 to 1 – ®a. 1 m 6 .o re than half (52 percent) for those without a plan. 1 maximum annuity permitted for a tax-qualified defined benefit plan under current law. ? The new model was used to analyze how eligibility for participation in a defined contribution plan impacts the EBRI Retirement Security Projection Model (RSPM). When we most recently modeled the projected adopted where the risks of investment, longevity and long-term health care costs were added in incremental layers. W hile ..th “ “A C isap i B np eh fo in r ag m v io T atio ax ral n -P Mo irsef ce d er el rr tain ed fo rR l y Pre etir usd ef eictin m ue l to ng t Co E ev m al np tr u lo ate ib yu ee tio a sC s ner o s: P n tio trr ib n eli su ( tio m an in n dar s ato y n ec E 4v 0 did 1 o(tal en k) ce clai Plan om f st.s h ” )e w N Io m ith rp th ac r esp A t o merica ec f th t to e Natio n 4 0 A1 ctu (k n)a a p l ria lan l s, ? The December 2013 EBRI Notes article (VanDerhei, December 2013) used RSPM to expand the analysis in outcomes retir for e m Ben abt i y B nco oom me er ad s a eq nd u ac Gen y i n Xer Sep s te inm 2014 ber 2 , 0 w 1e 0 f(o Van undDer that hei bet , Sep weete nm 5b 7er per 20 ce 1n 0t a ), an ndd 5 w 9 a pser la ce ter nt w used ere to ex pected 12 Retirement Savings for Low-Income Workers E TB he Rim I lo po ac kt o s fo f r tw war o d o fto th ass esei s rti isn kg s tar he e m aneal m yb ze erd s b oelo f thw e .Su bcommittee as they continue their investigations into this it nee C Jo do s u m r to n m a b is le ( s2 s io u 0n p 0 p 1 ole b n) m .Fis en ca ted l Res with po s nis m ib uilit latio y a nn m d o Rd eeli fon rm g fR oe r co a p m ro m peer nd ass atio ess nsm .” eE nB t o RfI tN he otes, poten no tial o . 7 (E f m 40 p1 lo (k y) ee p lan Ben s e to fit co the m Jp uu nte e 2 R 0e1tire 3 Im sse un e t Sa Brief. vin R gs at Sh her o rth tfal anls tr (y R in SS g )to f o rr ef B lect abyt h B e oro ea mler -w so an rld d v Ge arn iatio eratio n in n Xer DB sac in cr Octo uals, bth ere 2b 0aseli 10 ne to have adequate retirement income to fund 100 percent of simulated basic retirement expenses (housing, food, extremely important public policy topic. p Van rodDer R uce esear h “ ead i, ch eq Jac Iu n k ate” s , ti an tu d in te, L co o Ju m ri L le y r 2 u e0 ca p1 lace s 1.) “ : T m 2h – en e 6.t I m fo prac sev t oer f al Au rto ea-se on nrs o:ll ment and Automatic C TM ontribution Escalation on analysis in the previous analysis used the median accrual rate in the sample (1.5 percent of final etc.—plu (Van s unDer insu hrei, ed Octo health ber ca 2 r0 e 1 co 0a) sts . , using EBRI’Figu s Retirer me en 3 t Read iness Ratings (RRRs) as the gauge). Some 3.1 R etir . Lon “R eetir mgevi ee nm t Ie nn t co t I y R m nco e isk A md e eq Ad uac eq yu .ac ” E yB : A RIlter Iss nu ati e B ve rief, Th rn esh o. o 3l 4d 9s (an Em d p th lo e yIee m p B oen rtan efce it R oesear f Futch ure In Es lig titu ibte, ilit No y in v e De mb fier ned compensation per year of participation) as the stylized value for the baseline counterfactual simulations. The retirem ? en In t p Octo lann ber ers test sugig m est t onyh b at ef m or an e y th h e oSe usn eate hold Hea s arlt e hab , E le du to ca stio ucc n,ess Lab fuo llry an cu dt e Px en pen siodnit su C re osm bm elo itte we th oe n av “T er hag e W e obbly ® Wednesday, February 26, 2014, 10:00 AM ? C 2 0 o1 n0 tr T )ib ; a h De u istr n tE d io B ib DC nR R u I/I tio e IItire C An I R 4 m o e 0f e s 1n ea co (t P kr)n ch lan d fiatab d R s en ep .” as ce o Er e B t ( in d RNo o I 2 es n N 01 v oem tes, o 4 t c b th er n oat o n 2 .tain 0 4 resp 1 (0 E i)n m . o f o p n rlo d my en atio eet B n (an en on d ef in sp it dR o iv esear u id se) ual ch wil retir Il nh seti ave m tu ete, nt a en A cc o pu r oil 2 g uh nt ( 01 I1 R)A : 1 ) 0–19. In an attempt to assess the impact of longevity on retirement income adequacy, relative longevity quartiles were Appendix A: Brief Chronology of the EBRI Retirement Security Projection Model new research computed the actual final-average DB accrual that would be required to provide an equal expenses when financially constrained. Therefore, we also computed thresholds of 80 and 90 percent of simulated Stool: Retirement (In)security in America,” the model was used to analyze the relative importance of ® . “The Impact of Modifying the 215 Dir Exclusio ksen n of ES m ep na lote O yee C ff oic ntre ib B utio uil nding s for Retirement Savings Plans From rollovers, many of which may have originated as a 401(k) balance at an individual’s prior employer(s), and establish m ed o n bey ased to o li nv fe am co ilm y s fo tatu rtab s, g ly en thro der, u an gh do ag ut e retirem cohort. Ient t sho yu ears ld be bn yo w ted h et thh at er ththe e imh po ac u t seho would ld n h oas t be as severe ? The Retirement Security Projection Model (RSPM) grew out of a multi-year project to analyze the future amount of retirement income at age 65 as would be produced by the annuitized value of the projected sum expenses e m an pd lo o yn er t- hp at rob vasi ided s f o retir und e m the at nt th be en R ef Rit R ss an fod r So Bab cial y B Sec oom urer ity s an (Va d n Ge Der nXer hei, s Octo at a 9 b0 er p 2 e0 rce 10n bt ).th reshold was Taxab thle eref Ino co re m m e: ay R o es nu ly lt s p r Fro ovid me th in e f2 o0 rm 11 at R ioetir n oe nm a efn rt ac C t o io nn f id of en th ce e p Su arrticip vey.an ” E t’B s R retir I Ne om tes, en t a nocc . 3u (m Eu m latio ploy nee s i f B ten her ef e it if E n all drn etir oe tm ee sn t income was taken in the form of an annuity (either as a real annuity such as Social Security, or a o ec f o th ne om 40 ic 1(w kell ) an -b dei In RgA o r fo tllo he v re et rir bed alan po ce pu s.latio n at the state level. The Employee Benefit Research Institute between 67 and 70 percent. When the threshoa ret ld was irem furth ent er p relax lan:ed * to an 80 percent threshold, the RRRs increased ? The November 2010 EBRI Issue Brief expanded upon earlier work by EBRI to provide the first results of a Research Institute, March 2011): 2–10. have bee2n one or more job changes in their careers. nominal annuity such as that offered by private-sector defined benefit plans); however, given that only a very small (EBRI) and the Milbank Memorial Fund, working with the office of the governor of Oregon, set out in the ? The January 2014 EBRI Notes article (VanDerhei, January 2014) used RSPM to model the likelihood that to 81–84 percent. new simulation mod el H tho at e useho stimated lds with the im inp co acm t o e f o ch f an less ginthan g 401 $ (k 3)5 p ,0 lan 00 d esign variables and assumptions . “A Post-Crisis Assessment of Retirement Income Adequacy for Baby Boomers and Gen Xers.” EBRI Issue p 1 erce ?n tag E e vo en f d ief f o in ned e lo co ok ns tr o ib nu ly tio an t 4 an 01 d( k IR ) A par bticip alanan ces ts ar w e hcu o ar rre en otl ny t h ae nn vu er itized ge of ( r an etir d e th m at en at a n in nd cr h ea av se inh gad per sig cen nif ta ica ge no t f late 1990s to see if this situation could be evaluated for the state. The resulting analysis (VanDerhei and 401(k) participants currently ages 25–29 would have sufficient 401(k) accumulations that, when combined See Apo pn en retir dixe A m en for t in a b co rief me cad hro eq nu oac log yy . Un of t til r he ec mo en dtl el. y however, there was extremely limited evidence on the impact 100% Brief, no. 354 (Employee Benefit Research Institute, February 2011). 2 tenure with the current employer, there is a significant likelihood that they would not have been eligible to defined benefit accruals are taken as lump-sum distributions when the option is available), the prospect of “out- Copeland, September 2001) focused primarily on simulated retirement wealth with a comparison to ad hoc with Social Security benefits, could S tat repe lace me 6 n 0t f , 7or 0 o t r h 80 e R pere ce co nt o rd f their preretirement income on an Who is most at risk of not having adequate retirement income? Not surprisingly, lower-income households have VanDer oh f ei au( to Feb matic ruarco y 2 n0 tr1 ib 4u ).tio n escalation (VanDerhei and Lucas, 2010). 7 . Testimony. U.S. Congress. Senate Health, Education, Labor and Pensions Committ 3ee. The Wobbly Stool: liv 3 90 in% g” thp eir ar ticip retirate eme in n t a w 4ea 01l( th k) is p lan a v er du yr r in ea gl r this eir k fen ort ir m e aca nyr ee low r w -in itco h th me e cu Bab rren y B t e om om plo ery ser an . d Gen Xers. thresholds for retirement expenditures. much loin wer flatio RRn R -ad s: T juh se ted 201 basis 4 baselin . e RRRs range from 17 percent for the lowest-income households to 86 percent Preretirement income in RSPM is determined in a manner similar to the average-indexed-monthly-earnings ? In February 2011, the model was used to analyze th e impact of the 2008–2009 crisis in the financial and real Retirement (In)security in America (T-166), 7 Oct. 2010b. ? Since the passage of the Pension Protection Act of 2006, many of the 401(k) plans that had previously ? The April 2001 EBRI Issue Brief (VanDerhei and Copeland, April 2001) highlighted the changes in private for the highest-income households with a 100 percent of simulated expenses threshold. At a 90 percent threshold, computatio estate n fo m r ar So kcial ets o Sec n retir urite ym w eit nt i h th nco e f m oe llo ad weq inu gac my o d (Va ificat nDer ionh sei, : February 2011). 80% Jack VanDerhei, Ph.D. . “Retirement Savings Shortfalls for Today’s Workers.” EBRI Notes, no. 10 (Employee Benefit Research Figure 1 shows the impact of relative longevity quartiles on 2014 RRRs by preretirement income quartile. For the allowed eligible employees to voluntarily enroll have been modified to automatically enroll eligible pension plan participation for defined benefit (DB) and defined contribution (DC) plans and used the model the RR R for the lowest-income households increases to 30 percent (indicating that 3 in 10 of those households ? All earned income is included up to the age of retirement (i.e., there is no maximum taxable wage base ? An April 2011 article introduced a new method of analyzing the results from RSPM (VanDerhei, April Institute, October 2010a): 2-9. Research Director lo70 wes %t-ine co mm plo e y qee uar s. tile si Althm ou ug la hted these to d eie mp in lo th yee e ea s w rlies ill h t r av elati e thv e e ab loilit ngy ev to it y o q pt uar outile, t of th sue ch R R par Rticip with atio a 1n 0,0 it is per clea cent r that to quantify how much the importance of individual-account plans was expected to increase because of these would have sufficient financial resources to cover 90 percent of simulated basic retirement expenses, as detailed constraint, and the calculation terminates at retirement age). 2011). Rather than simply computing an overall percentage of the simulated life-paths in a particular cohort References 8 . “Retirement Income Adequacy for Today’s Workers: How Certain, How Much Will It Cost, and How Does expenditure threshold is 36.7 per Empl cent. o Ty his ee is B 1e 9ne .9 p fit R ercen etag sea e rp co h inIts nsti lartut gere th (a EB n th R e Io )v erall average for this income these plans have had a substantial impact on participation rates, especially for lower-Ve inco ry m co e ne fm idp elo ntyees. changes. above). At an 80 percent threshold, 55 percent of the lowest-income households are predicted to have sufficient 60% ? th In at stead wou ld of n in od t h ex aiv ne g sfu ofrf icie chan ng t e retir s ine a m ven erag t in e co nam tio e n to al pw ay a g fes, or th the e sm im ou dlated el ind ex exp een s bsased es, t ho e nn ass ewu m met ed h,o af d ter -tax Copeland, Craig, and Jack VanDerhei. “The Declining Role of Private Defined Benefit Pension Plans: Who Is Eligibility for Participation in a Defined Contribution Plan Help?” EBRI Notes, no. 9 (Employee Benefit cohort. This value decreases slightly to 20.1 percent in the second relative longevity quartile and 5.6 percent in the ? An analysis based solely on current balances will, of necessity, not be able to assess the impact of future ? With the assistance of the Kansas Insurance Department, EBRI was able to create the EBRI Retirement retirement income. co rate mpo ufted retu thre n p ber ased cen ta on g e ass of e t a holu lo seh cao tio ldn ss t h th at at w ar oe uld a f m un ee ctio t th na o t r f eq the uir in ed m iv en idt um alo ’s re ag th e ai nn a ea sp ch ecif yea ied r. percentage Affected, and How.” In Robert L. Clark and Olivia Mitchell, eds., Reorienting RetiremenSom t Rise k w Ma hat n a co geme nfide nn t. t TM Research Institute, September 2010): 13–20. th50 ird% relative longevity quartile. For the lowest-income quartile with the longest relative longevity, the RRR falls all employee activity (such as potential cash-out behavior at job change) nor the impact of future financial Readiness Rating (RRR) based on a full stochastic decumulation model that took into account the Percentile d of tiis mtr eib s in utio thn e ss ar im e uth latio en estab n. lished based on population statistics for each five -year age cohort. New York: Oxford University Press for the Pension Research Council, 2010: 122–136. . “The Impact of Automatic Enrollment in 401(k) Plans on Future Retirement Accumulations: A Simulation th e way to 2.8 percent. Similar influences are found when less rigorous thresholds are used. With a 90 percent of 4 market returns. Not too confident However h,o it sh useho ou ld ld ’ sb lo e n no gted evit th y at risth k,e p so e sp t- rro etir bab eilit meies nt in wv ill d estm epeen nt r d is tok a , an lar dg ex e ex po te su nr t o e to n w lo hn eth g-ter er m fu tn uu rr es y in ea g- rh s o om f e and Figure 3 of VanDerhei (February 2014). 40% ? As explored in the June 2011 EBRI Issue Brief, RSPM allowed retirement income adequacy to be assessed Park, Youngkyun, “Retirement Income Adequacy With Immediate and Longevity Annuities,” EBRI Issue Brief, no. Study Based on Plan Design Modifications of Large Plan Sponsors.” EBRI Issue Brief, no. 341 (Employee simulated expense threshold, the RRR for the earliest relative longevity quartile is 57.2 percent decreasing to only 5 employm ho en m t ta e-h kea e p ltlace h-ca r w e it rh is k es m . p Tlo he yer fir ss s t state ponso -lev ring e l RS defiP ned M r co esn utr lts ib u wer tioe n p retir resen em ted en t to p lan the sKan or nso ats. ’P L rev onio g-u T ser Em B R CIar e Only Gen at r etir Xer es m ar en e t a shg oes late wn in rt h th is a n p o 6r5 tio (Van n ofDer the han ei al an yd sis C g oiv pela en n th deir , Ju lo ne n2 ger 01 1 fu ).t u re working careers until age 65. 357, (Employee Benefit Research Institute, May 2011). Not at all confident Benefit Research Institute, April 2010). 4 5 9.30 0 p % ercent for those with the longest relative longevity. The gap between the earliest and latest quartile is I 6n an attempt to assist the Subcommittee in its evaluation of the role of 401(k) plans, in December of 2013, EBRI’s analysisSer shv oices T ws the ask po s Fo itirv ce e io m np J ac ult o y 1 f 1 f,u 2 tu 0r0 e 2y ( ea Van rs o Der f eli hei gib an ilid t y C fo op relan a def d,i n Jed uly co 20 n0 tr2 ib ),u an tiodn th plan e resu . Fo lts r G of en th Xer e s in the See VanDerhei (March 2011) for more detail. Utkus ?, Step In a hJen ul y P .2 , 0 an 11 d E Jea BR nI A. No Yo tesu ar ng ti.cle 201 (Van 3. HDer ow h Am ei, er Juica ly 2 Sav 011 es 2 ), R0 SP 13M , Aw R as ep uo sr ed t O to n p Va ron vg id ue arp dr el 20 im 12 in Def aryin ev ed id ence 9 . “Falling Stocks: What Will Happen to Retirees' Incomes? The Worker Perspective,” Presentation for The approximately the same at the 80 percent threshold, with 79.2 percent of those in the earliest quartile having 7 RSPM was used to analyze the potential of 401(k) plans to produce “adequate” income replacement for retirement. lowest-in Ma cos m sac e q hu uar setts tile sw tu it dh y n w oer fu e tu pr re esen yea ted rs o ofn el Dec igib . il 1it , y 2 0 in 0 2 a (d Van efinDer ed co hei ntr an ib du C tio on p elan pland , ,t h Dec e ReR m R b e vral 2u 0e 02 w )h . en T 20 h% e proposed regulations for 401(k) plans were first introduced in November of 1981 and it took several years for Cono tr fib thu e tio im np P ac lan t o Data f the .“ 20/20 caps” on projected retirement accumulations proposed by the National Economic Crisis of 2008: What Will Happen to Retirees’ Incomes? 2009 APPAM Fall Conference (November sufficient retirement income decreasing to only 34.8 percent of those in the latest (longest-living) quartile. That undertaking found that, assuming current Social Security benefits are not reduced, 86 percent of workers in the TM measu ?r ed R SP wiM th a w1 a0 s 0 ex pp er ace ndn ed t o to f s a im nu atio lated nal ex mp oen del s— e th th re esh fir osld t n is atio on nlal, y 1 m 7.icr 2 poer -sce im nu t— latin iod nicat , retir ing em th eat nt- m in oco re m th ea-n ad 8eq in u ac 10y many sponsors to introduce the plans. Moreover, many plans that were originally introduced as supplemental plans VanDerh C eo i, m Jm acis ks . io “W n o hat n Fis Caca usl Res es EB pR on I sR ib etir ilite ym ae nn dt R Re ea fod rin me . s s Ratings to Vary: Results from the 2014 Retirement 2009). lo10 wes %t-income quartile with more than 30 years of eligibility in a voluntary enrollment 401(k) plan are simulated to of this cohort are projected to run short of money in retirement. This value increases almost 10 percentage points, to model, built in part from administrative 401(k) data. The initial results were presented at the EBRI to existing defined benefit plans have been modified to provide more generous employer contributions at the time Security Projection Model,®” EBRI Issue Brief, no. 39 6 (Employee Benefit Research Institute, February 2014). ? The August 2011 EBRI Notes article (VanDerhei, August 2011) used RSPM to analyze the impact of . Testimony. Joint DOL/SEC Public Hearing on Target Dates Funds. How Would Target-Date Funds Likely 3.2 have suLon fficieg n- t 4 T0 erm 1(k) ac Ca cu re muR latio isk ns that, when combined with Social Security retirement benefits, would be able to 27.1 perDec cent f em or b er th o 2s0 e 0in 3 p th oe licy low fo es ru t-m in co (Van me Der quar hei tile an w di th Co on pelan e tod n , in 20 e 0f3 u)t.u re years of eligibility in a defined the defined benefit plans were frozen (VanDerhei, April 2010). 0% . d “T efh in e ed Ro b le en oeff it p Social lansSecu in ac rit hie y,v De ing f ir netir ed e B m en en ef t in its,co an m de P ad riv eq ate uaR cy etir foe r m Be ab nt yA B cc oo om un er tss ia nn th d e Gen Face Xer ofs .th e Impact Future 401(k) Contributions? (T-160), June 2009. www.ebri.org/pdf/publications/testimony/t160.pdf 13 8 replace at least 60 percent of their age 64 wages and salary on an inflation-adjusted basis. When the threshold for a contribution plan. The RRR value increases further to 35.6 percent for those in this category who have 10–19 future One o ?f tT he he prb iasic m mary fo in dd el inw gs as s of u ab 2 seq 01u 2en Etl By R m I p ou db if licatio ied fon r test on r ietir mon ey m f eo nrt in the co Sen me ate adeq Sp uec acial y C w oas th mmitt e ee sig o nn if ica Agn in t g im to p act See Figure 23 of Utkus and Young (2013) for recent evidence. Retirement Crisis,” EBRI Notes, no. 1 (Employee Ben efit Research Institute, January 2014): 8–21. No Plan Plan Total ? In September, it was used to support testimony before the Senate Finance Committee (VanDerhei, . “The Expected Impact of Automatic Escalation of 401(k) Contributions on Retirement Income.” EBRI Notes, s 9uccessful retirement financing is increased to 70 percent replacement, 76 percent of these workers will still meet o yea f srto s ch of aeli stic gib hilit ealth y i n ca a re def cois nts ed o co n o nv trer iball utio retir n pe lan me , n at in nd co rea m ch e es a adeq m ua ac xy im . T um hese valu ine clo ufd 3 e 5h .ea 9 p lter h ce can re t fco ors th ts o in se retir with em 2e 0n o t r quantify the beneficial impact of a mandatory contribution of 5 percent of compensation. (VanDerhei, Additional details on RSPM and the assumptions used in 2013 can be found in VanDerhei (June 2013). The . “How Much Would it Take? Achieving Retiremen t Income Equivalency between Final-Average-Pay September 2011) in analyzing the potential impact of various types of tax-reform options on retirement no. 9 (Employee Benefit Research Institute, September 2007): 2–8 the threshold, based solely on the combination of projected 401(k) savings and Social Security combined. At an 80 more future years of eligibility in a defined contribution plan. When the threshold for a successful retirement is that are n Jan ot li uar kel y y 2 0 to 0 4 o)cc . ur every year (in fact they may never occur for many households), but when they do they financial market results are generated from stochastic annual returns with a log-normal distribution and an arithmetic Defin So ed ur cB e: en Em efpl it P oye lan e B eA ne cc fitr R ue al se sar an ch d Ins Vo titut lue n an tar d yG E ren er nwal ollm d e &n Ass t 4o 0c1 iat (k e) s, P 2014 lans R e in ti rt eh m e eP ntr iv Coate nfide Secto nce Sur r.v ” ey E BRI Notes, no. income. This was expanded in the November 2011 EBRI Issue Brief (VanDerhei, November 2011). . “Measuring Retirement Income Adequacy: Calculating Realistic Income Replacement Rates.” EBRI Issue percent replacement rate, 69 percent of the lowest-income quartile will still meet the threshold. It should be noted, m ma ea ys h ua red ve at a ca a tast 90 p ro er pce hic nt o fin fa sn im cial ulated imp ac ex t, pen dus e e to th th reeir sho rld elati , thv e el R yR h R ig s h r an dail ge yf co rom st a 2n 8d .6 /o p rer pce ote nn t f tiall or y th lo osn e gw dit uh ratio no n fu . ture mean ?o f T 8 *h .H 6 e as -m p a er o re d ce tel irn et r w me as e ea ntl r pl n an etu ha in s rn ce de ffd o ine rto d s to allo asck any w s h an a on us d an e 2ho .al 6l d y ps ter ha isce to cn f ur t r trh eea e nti ll r y m ha etu pac s at rt n lo e ff as o an r t o bn ne ou n io d tizi fs t.he n f go d llo ef wi in ng ed : an co IRn Atr , m ibo u ne tio y i n n and 12 (Employee Benefit Research Institute, December 2 013): 11–23. ? A March 2012 EBRI Notes article (VanDerhei, March 2012) used new survey results to update the analysis Brief, no. 297 (Employee Benefit Research Institute, September 2006). h 10owever, that the percentage of those in the highest-income quartile deemed to be “successful” from just these two years of eligibility to 51.7 percent for those with 20 or more years. At an 80 percent of simulated expense threshold, Unlike man an e ym o pl th oer yer r -sp etir ons em ore ed n t rep tir ro em jec ent tio sa nv im ngo s d pl els, an, o R r SP a de M fine hd as be ex nep filicitl t plany included the costs of nursing home and home individual retirement account (IRA) balances at retirement age (VanDerhei and Copeland, 2004). VanDerhei (September 2012). . “The Impact of a Retirement Savings Account Cap ,” EBRI Issue Brief, no. 389, (Employee Benefit of the potential impact of various types of tax-reform options on retirement income. . “Defined Benefit Plan Freezes: Who's Affected, How Much, and Replacing Lost Accruals.” EBRI Issue r 11 etirement components drops to 59 percent from 83 percent when measured against the 60 percent threshold. h th ea e lt Rh R ca Rs r e ran cog se tsf in ro m its 5 d 1ec .7u fm oru th latio ose n w m it oh d el nos f iu ntu cer e its y ea inirtial r s of e elea ligib se ilit iny 2 to 00 7 30 to .4 ac per co ce un nt f t fo or r th tho ese se co wit nh ti n 2g 0e o nrcies. mor e Van ?Der Ad hd ei itio (Sep nalte rm efb in er em 2e 0n 0t6 s) .w ere introduced to evaluate the impact of purchasing long-term care insurance on Research Institute, August 2013). B ?r ief, Th n e oMa . 29 y1 2 ( 0E 1m 2 p Elo By Ree I N B oen tes ef ar it R ticle esea (Van rch Der Instit hei, ute, Ma Ma y 2 rch 01 2 2) 0 0 p6 ro ).v ided 2012 updates for the previously 12 years. EBRI ris etir cu erm ren entl t i yn w co om rke in ad g eq onu a ac sy ep (ar Van ate Der stuh de yi, to 2 0 m 0o 5d ).el sequence of return risk that will need to be completed . “Reality Checks: A Comparative Analysis of Futur e Benefits from Private-Sector, Voluntary-Enrollment . “p P urb olis jec htio edn R s R of R Fu s as tur w e eR ll a etir s e th m ee R nt I SSn . co me Security: Impact of Long Term Care Insurance.” 2005 American When the same analysis is conducted for automatic enrollment 401(k) plans (with an annual 1 percent automatic Figure 2 filters out those simulated life-paths with no stochastic health care costs in retirement and categorizes those before investment risk in the decumulation period can be appropriately analyzed in RSPM. Additio ? n T al he an m al oy ds el is w was as c uso ed nd to ucted eval w ua itte h rth esp e iec mt to pac t o cof n f d id ef ein nc ed e in ben ha ef viit f ng r ee en ze ou s g o hn m par onticip ey to an p tay s b y fo s ri m lou nlati g-ter ng m t h ca e re 401(k) Plans vs. Stylized, Final-Average-Pay Defined Benefit and Cash Balance Plans” EBRI Issue Brief, no. So ? ciet Thy e o Ju nn Ag e 2i0 n1 g2 /Natio EBRI n al NoC tes ou ar nci ticle l on( Van Agin Der g Jh oei, int Co Junn e f2 er 0e1 n2 ce ) i , n Ma tror dch uce 2d 0 0 s5 ev . er ity categories in the RSS escalatio 13 n provision and empirically derived opt-outs), the probability of success for workers in the lowest-income costs into quartiles (based on the present value at age 65 of the per capita stochastic health care costs in 2014 VanDerhei (August 2012). ( shou 3ld 87 it b m (E in m e im n pee lo um y dee ed em )B p d elo u nref y in er ig t Res - co retir nea tr eib m rch u eti n I to n . n s R ti resp ate tute, o th n J d at u en n w e ts o2 u w 0 ld 1 ith 3 ba) e h.o n u ee seh ded old to i n fin co am nciall es leys s i n td he am n $ ni 3f5 y, 0 th 0e 0 e ap mp pea lor y ee to sb feo q r u th ite e . Testimony. U.S. Congress. Senate Special Committee on Aging. Do We Have a Crisis in America? Results projections for Gen Xers. q 14u artile with more than 30 years of eligibility increases substantially: 94 percent at a 60 percent threshold; 90 dollars). Assuming a threshold of 100 percent coverage of simulated expenses, the results for the lowest-income Note that even though Medicaid eligibility is factored into RSPM, an extended stay in a nursing home is still 2 co gniza Th n red t o e P u f ctio ot the en r n is in tial k s t hs eir h of o w 401( ex np iec n ted Fi k) g u rP eti re lan r 2e, m s to as 5 ent i 2P n pco r er od ce me n ut u cw n ed er Adeq ee r v nar ot a io u t a uat s ll c re ate In o- nof fc id o -ren m etu t er ab R n o as e up s t u tlace m his p tio asp m ne ec s n (t o Va t f fn or th Der eir L h ow rei, etir Ma -emre cn ht . “What a Sustained Low-yield Rate Environment Means for Retirement Income Adequacy: Results From the The views expressed in this statement are solely those of Jack VanDerhei and should not be attributed to the From the EBRI-ERF Retirement Security Projection Model (T-141), 27 Jan. 2004. ? The August 2012 EBRI Notes article (VanDerhei, August 2012) provided additional evidence on whether percent at a 70 percent replacement and 85 percent at an 80 percent threshold are assumed to have sufficient 16 ® quartile show that for this group of families unfortunate enough to experience the highest quartile of stochastic likely to leave those alive at the end of the nursing home stay (or the surviving spouse) in a financially depleted costs2 .01 2 3 T0 h E 0 is B 6 )R co . I m Rp etir ares em w en itt h Secu 30 pr er itce y P nr t o ojfec resp tion o n Mo den del. ts w” ith E B hR ou I s N eh otes, old in no co . 3 m (e Eb m et pw loee yee n $ B 3en 5,0 ef 0it R 0 an esear d $7c 5h ,0 I0 n0 s tan itud te, 1 3 Employee Benefit Research Institute (EBRI), the EBRI Education and Research Fund, any of its programs, officers, VanDerhei, Jack, and Nevin Adams. “A Little Help: The Impact of On-line Calculators and Financial Advisors on Ind cef ome errin Wor g retirk ee mr es n t to age 70 would provide retirement income adequacy for the vast majority of Baby resources at those levels. health care costs, the probability of not running short of money in retirement is virtually zero (an RRR value of 0.1 condition. percent for those with household incomes above $75,000. J ? u ne Later 201 3 th ba ): t 2 y– ea 1r 2,. an updated version of the model was developed to enhance the EBRI interactive Ballpark trustees, sponsors, or other staff. The Employee Benefit Research Institute is a nonprofit, nonpartisan, education and Setting Adequate Retirement-Savings Targets: Evidence from the 2013 Retirement Confidence Survey,” EBRI B 14oomers and Gen Xers. 15 ® percent). Not surprisingly, those in the lowest-income quartile who experience the lowest quartile of stochastic Defined as any household that currently has at least one of the following: an IRA, money in an employer- . “E A $lti l o mrate Noth bin y g p? ro A vid n in Ex gp Mo andn ed te P Cer arslo pec sitiv mu e latio on R netir s ofe tm he en rt Read eplaceim ness ent r .” ates n EBRIee N do ed tes, fo n r o s.p 1 ec 1i ( fE ic m pp ro lo by ab eeilit ies At least part of the concern with respect to retirement savings for low-income workers appears to stem from, among research organization established in Washington, DC, in 1978. EBRI does not take policy positions, nor does it Notes, no. 3 (Employee Benefit Research Institute, March 2013). ? The September 2012 EBRI Notes article (VanDerhei, September 2012) analyzed the impact of increasing the Note, however, that the analysis of automatic enrollment plans mentioned above used the actual plan-specific default health care costs have a much higher probability of having enough money, with an RRR value of 30.0 percent. At a sponsored retirement savings plan, or a defined benefit plan. otherB th en io n ef fg it r setir , R a esear d eesire men ct in h to In co in stcr m itu ea e te, ad se No eq thu e vac epm er yb ce u er niv d2er ed 01 alter 2 fa ): 1 irn n1 es ati –s 2 v 3 of e.- r tis he k-cu ma rrn en ag t r em etir en et tr me ea nt sa tmevn its ng (sVa syn sDer temh . e Ti, his Sep “lac tem k b oer f lobby, advocate specific policy recommendations, or receive federal funding. VanDerhei, Jack, and Craig Copeland. “The Impact of Deferring Retirement Age on Retirement Income Adequacy.” co 16 ntribud tio efn au rlt ate -co s ( nttr yp ib icall utioy n 3 rate perfce orn au t oto f m coat mic pen ensratio ollm n) en . Ma t 40 n1 y( k h)a v pe lan qu s esti wito hn a ed uto th m e at w ic isescalatio dom of co n n otfin co uin ntr gib to u tio set nts h.e 90 percent expense threshold, 59.3 percent of the households in the bottom quartile of stochastic health care costs Another 21 percent of respondents in this group were not too confident. . “2 I0 n0 cr 6ea ). s ing Default Deferral Rates in Automatic Enrollment 401(k) Plans: The Impact on Retirement fairness” hypothesis is often mentioned in conjunction with the so-called “upside-down incentives” provided by the EBRI Issue Brief, no. 358 (Employee Benefit Research Institute, June 2011). 17 rates a ?t th Th ise rN elativ ovem elb yer lo 2 w 0 1 le 2v E elB in R Iv N ieo w tes o far rec ticle ent e (Van mpDer irical hei, ev No iden ve ce m s bu er g g 2e 0s1 ti2 n)g r ec that lass hiif gied her td hef e au RR lt c Rso to ntr p ib ro uv tio idn e rates have adequate retirement income, but those in the top quartile are still virtually certain to run short of money (an th See VanDerhei (February 2014) for details. curren Sav t ta in xg s sy S su te cc mes w sit in h r P esp lanec s W t to ith th Au e tax tom trat ea ic tm Een sca t o latio f con n .tr ” iE bB utio RI n N so ites, n th e no 4.0 9 1 ((k E)m sp ys lo te ym ee. Benefit Research Institute, 10 EBRI • 1100 13 St. NW #800 • Washington, DC 20005 • (202) 659-0670 • www.ebri.org . “The Changing Face of Private Retirement Plans.” EBRI Issue Brief, no. 232 ((Employee Benefit Research may not r ad esu ditio lt in nal a in su fb os rm tan atio tial n in on cr th eao ss e e in su o bp stta -o nu tiall t rates. y abA ov 2 e 0 t1 h2 e th EB res Rh I o pld ub ; c licatio lose to n th si e m th ur late eshd o ld th; a e in m dp s ac ub t o stan f tially September 2012): 12–22. Institute, April 2001). increasin bg elo thw e c th ue rrten hrt p esh lan old -s.p ecific default rates to 6 percent. Under a set of specified behavioral assumptions, more E E E E E E E E EB B B B B B B B BR R R R R R R R RIIIIIIIII T T T T T T T T T- - - - - - - - -1 1 1 1 1 1 1 1 17 7 7 7 7 7 7 7 76 6 6 6 6 6 6 6 6 S S S S S S S S Se e e e e e e e en n n n n n n n na a a a a a a a attttttttte e e e e e e e e F F F F F F F F Fina ina ina ina ina ina ina ina inan n n n n n n n nc c c c c c c c ce e e e e e e e e S S S S S S S S SC C C C C C C C C o o o o o o o o on n n n n n n n n S S S S S S S S So o o o o o o o oc c c c c c c c cia ia ia ia ia ia ia ia ial l l l l l l l l S S S S S S S S Se e e e e e e e ec c c c c c c c cu u u u u u u u ur r r r r r r r riiiiiiiiittttttttty y y y y y y y y,,,,,,,,, P P P P P P P P Pe e e e e e e e en n n n n n n n ns s s s s s s s sion ion ion ion ion ion ion ion ions s s s s s s s s,,,,,,,,, a a a a a a a a an n n n n n n n nd d d d d d d d d Fina Fina Fina Fina Fina Fina Fina Fina Finan n n n n n n n nc c c c c c c c cial ial ial ial ial ial ial ial ial P P P P P P P P Po o o o o o o o oli li li li li li li li lic c c c c c c c cy y y y y y y y y Feb Feb Feb Feb Feb Feb Feb Feb Feb......... 2 2 2 2 2 2 2 2 26 6 6 6 6 6 6 6 6,,,,,,,,, 2 2 2 2 2 2 2 2 20 0 0 0 0 0 0 0 01 1 1 1 1 1 1 1 14 4 4 4 4 4 4 4 4 Pag Pag Pag Pag Pag Pag Pag Pag Pag e e e e e e e e e 10 2 3 5 1 6 7 8 9 Figure 1 Impact of Relative Longevity Quartile* on 2014 Retirement TM Readiness Ratings, for Lowest Income Quartile 100% 90% 80% 70% 60% Percentage of Simulated Life-Paths That 50% Will Not Run Short of Money in Retirement 40% 30% 20% 10% 0% 100 percent 90 percent 80 percent Earliest Quartile 36.7% 57.2% 79.2% Second 20.1% 37.1% 64.9% Third 5.6% 13.7% 37.0% Latest Quartile 2.8% 9.0% 34.8% ® Source: EBRI Retirement Security Projection Model Version 1995. Note: The values in this figure represent the percentages of simulated life-paths that will not run short of money in retirement assuming that 100 percent of simulated retirement expenses are paid. * The longevity quartile is established relative to family status, gender, and age cohort. Figure 2 Impact of Stochastic Health Care Costs on 2014 TM Retirement Readiness Ratings, by Preretirement Wage Quartile: Only Those Simulated Retirement Paths With Stochastic Health Care Costs Greater Than Zero 100% 90% 80% 70% 60% Percentage of Simulated Life-Paths That Will Not Run 50% Short of Money in Retirement 40% 30% 20% 10% 0% 100 percent 90 percent 80 percent Bottom Quartile* 30.0% 59.3% 91.9% Second 13.6% 36.5% 65.4% Third 1.1% 4.5% 36.9% Top Quartile 0.1% 0.8% 9.0% ® Source: EBRI Retirement Security Projection Model Version 1995. Note: The values in this figure represent the percentages of simulated life-paths that will not run short of money in retirement assuming that 100 percent of simulated retirement expenses are paid. * Measured as quartile of present value at age 65 per capita stochastic health care costs in 2014 dollars.