What Age Groups Are Most Retirement Ready?

November 29, 2012 (PLANSPONSOR.com) – An EBRI report uncovers what age groups are most likely to miss their retirement savings goal and by how much.

Nearly half of Generation X households will have enough to cover basic retirement costs and about one-third will fall short, but not by much, the Employee Benefit Research Institute study showed. About 20% are likely to be far off-target.

Past analysis using EBRI’s proprietary Retirement Security Projection Model (RSPM) found that roughly 44% of Baby Boomer and Gen X households are projected to be at-risk of running short of money in retirement, assuming they retire at age 65 and retain any net housing equity in retirement until other financial resources are depleted. However, that includes a wide range of personal circumstances, from individuals projected to run short by as little as a dollar to those projected to fall short by tens of thousands of dollars.

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EBRI’s new research looks more closely at where different types of people are likely to fall within the range of retirement income adequacy. Looking specifically at Gen X households, EBRI’s RSPM analysis found that:

  • Nearly one-half (49.1%) will have substantially more (at least 20% more) than the income threshold deemed adequate to afford basic retirement expenses and uninsured health care costs;
  • Approximately one-third (31.4%) will be close to the threshold for retirement adequacy (between 80% and 120% of the financial resources necessary to cover basic retirement expenses and uninsured health care costs); and
  • About one in five (19.4%) are projected to be substantially below (less than 80%) of what is needed.

EBRI also found that a worker’s future years of eligibility in a defined contribution (DC) retirement plan makes a huge difference in the likelihood of having enough money to cover basic retirement expenses and uninsured health care costs. Among Gen X single females simulated to have no future years of DC plan eligibility, nearly two-fifths (39%) are in the most vulnerable (less than 80%) category, although this shrinks to only 8% for those with 20 or more years of future eligibility in a defined contribution plan.

“One problem with simply classifying a household as ‘at risk’ or not is that some households may be missing the threshold by relatively small amounts,” said Jack VanDerhei, EBRI research director and author of the report. “Using this new classification to analyze the impact of future eligibility in a defined contribution plan on the percentage of households with less than 80% of the necessary resources for sufficiency shows a substantial impact for all family/gender categories, especially single females.”

Full results are published in the November 2012 EBRI Notes.

Most Women Lack Retirement Savings Goal

November 29, 2012 (PLANSPONSOR.com) – Most women lack a specific retirement savings goal, which may link to higher levels of financial stress.

A TD Ameritrade Holding Corp. survey revealed 75% of women have no specific retirement savings goal, and nearly one in four (22%) older than 23 have not started saving for retirement yet, compared with 13% of men.

The study also found 38% of women started saving for retirement after the age of 34. Furthermore, 30% of women anticipate they will be financially worse-off in retirement compared with their male counterparts (23%), and 48% of women said they are not looking forward to retirement.

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When female investors were asked what amount they wanted to have set aside for retirement, the average was $1.8 million while men said $1.3 million. In addition, women said they expect to need retirement income for nearly 20 years, which, assuming they retire in their early 60s, is on target with the U.S. Census Bureau’s average life expectancy for women of 80.5 years.

Starting young and saving regularly may alleviate stress, the study suggested. Women who began saving for retirement before age 30 and who contribute regularly to their retirement savings feel less anxious (28% vs. 43%), less frustrated (20% vs. 36%), less regretful (9% vs. 20%), and more positive (42% vs. 27%) and satisfied (33% vs. 16%) about retirement compared with those women who started saving after age 30 and who do not contribute regularly to retirement savings.

The online survey was conducted with 2,029 U.S. residents from March 27 to 28, 2012, by Head Research on behalf of TD Ameritrade Holding Corporation.

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