EBRI launched a major project to provide retirement income adequacy measurement in the late 1990s for three states concerned whether their residents would have sufficient income when they reached retirement age. After conducting studies for Oregon, Kansas, and Massachusetts, EBRI developed a national model in 2003—EBRI's Retirement Security Projection Model® (RSPM). It was updated in 2010 to incorporate several significant changes, including the impacts of defined benefit (DB) plan freezes, automatic-enrollment provisions for 401(k) plans, and the 2007-2009 crises in the financial and housing markets. Since then EBRI has continued to update RSPM® for changes in financial and real estate market conditions, as well as for underlying demographic changes and changes in 401(k) participant behavior (based on a database of the actual, anonymized account activity of tens of millions of 401(k) participants).
A primary objective of RSPM® is to simulate the percentage of the population at risk of not having retirement income adequate to cover average expenses and uninsured health care costs (including long-term-care costs) at retirement age – 65 or older – throughout retirement in specific income and age groupings. RSPM® also provides information on the distribution of the likely number of years before those at risk run short of money in retirement, as well as the percentage of preretirement compensation they would need in terms of additional savings in order to have a 50, 70, or 90 percent probability of retirement income adequacy.
In RSPM households are tracked through retirement age and their retirement income/wealth is simulated for the following components:
RSPM® produces two output metrics: the EBRI Retirement Readiness RatingTM (RRR) and the Retirement Savings Shortfall (RSS).