Talking About My Generation: Comparing the Financial Wellness of Baby Boomers, Gen Xers and Millennials

In a recent discussion of environmental, social, and governance (ESG) investments with EBRI members, we considered how social concerns of prior generations of Americans in their twenties aligned with those of twenty-somethings today. Being a late Baby Boomer, I was dubious: The 1980s were the era of “Wall Street” and Gordon Gekko, after all — not social consciousness. Yet at the same time, early Baby Boomers who came of age in the 1960s and 1970s were of a different mindset still.

While we didn’t come to any definitive answer about social awareness across generations on the call, EBRI does have some definitive data on financial preparedness across generations. In a recent Issue Brief, EBRI used Survey of Consumer Finances (SCF) data to compare the financial wellbeing of Baby Boom, Generation X, and Millennial families of the same age. The findings were not encouraging.    

Overall, Generation X families were less likely to own a home or have any retirement plan than were Baby Boom families at the same ages. Further, the share of families having any retirement plan was lower among Generation X families than among Baby Boom families at the same ages across most race/ethnicity categories.

For Millennial families, things look even worse. According to the SCF data, homeownership rates are lower for Millennials than for Generation X families at the same ages. Further, the median net worth of Millennial families was lower than for Generation X families of the same ages, driven by the much lower net worth of those in the highest income quartile.

The one overriding financial indicator that was universally higher for the Millennial families compared with the Generation X families is not a good one: Millennials’ median debt levels are higher, led by substantially higher incidence and amounts of student loan debt. Further, Black and lower-income Millennials were particularly impacted by increased student loan debt. Black Millennials have also particularly experienced higher median debt-to-asset ratios compared with their Generation X peers as a result.

According to EBRI’s Employer Financial Wellbeing survey, employers are taking steps to understand the financial wellbeing needs of diverse workers, including surveying employees and holding focus groups. They are also adding diversity, equity, and inclusion efforts to their financial wellness strategy, such as offering communication and education materials in multiple languages (40 percent), ensuring that the look and feel of communications/solutions is diverse (39 percent), and ensuring that financial counselors or coaches are diverse in terms of race and ethnicity (36 percent). This latter effort dovetails with the fact that, according to the 2022 Retirement Confidence Survey, Hispanic and Black Americans are more likely to say that a connection or commonality between them and the advisor is important. This includes a preference for working with an advisor who has had a similar upbringing or similar life experiences to them, working with an advisor who is affiliated with their employer, working with an advisor who has a similar racial/ethnic background to them, and working with an advisor who is the same gender as them. Black and Hispanic workers were also more likely to say that one-onone, personalized education would be a valuable potential improvement to workplace retirement savings plans.

Why Patients Aren’t Cost-Conscious Consumers of Health Care

When I was the head of retirement research at Hewitt Associates in the early 2000s, the concept of consumer-driven health care was just beginning to gain traction. My initial take was: We’ve come to realize in the retirement space that it’s asking too much of people to make sophisticated savings and investment decisions. That’s why we’ve gone in the opposite direction by implementing auto features in 401(k) plans (automatic enrollment, target-date funds, etc.). How are health care decisions easier?

My view hasn’t changed: When people need health care, they think like patients, not consumers. And I recently experienced that myself when I broke my leg in Iceland. Sitting at the admissions desk in the emergency room, I was told that my insurance wouldn’t be accepted. I could hand over my credit card or leave. My leg was broken in three places, I was 5 ½ hours from Reykjavik, and I was in excruciating pain. I didn’t even ask how much it would cost. I gave them the credit card. Later, I was asked if I wanted surgery to repair my leg or to be released to somehow make my way home to get surgery in the United States. Again, all I could think about is how much worse my injury would be if I tried to move (my broken bone was a fraction of an inch from piercing my skin). I didn’t ask how much surgery would cost. I told them to go ahead.

In his research in pricing differential by site of treatment, Paul Fronstin, EBRI’s Director of the Health Research and Education Program, fortunately shows that not every health care cost management solution must rely on the patient/consumer. In his Location, Location, Location series, Paul employs the IBM® Marketscan® Commercial Claims and Encounters Database to examine how site of treatment impacts price for health care services. Specifically, he finds that when it comes to cost differences between obtaining certain treatments as hospital outpatient departments vs. obtaining the exact same treatment at physician offices, hospitals charge:

  • 81 percent more for oncology medications than physician offices, controlling for drug mix and treatment intensity.[1]
  • A median of 91 percent more for certain lab, imaging, and selected specialty medications than physician offices.[2]
  • An average of 200 percent more per unit price for physician-administered outpatient drugs.[3]

In his newest Fast Fact, Paul offers three possible ways that employers can help overcome these price differentials:

  • Engage patients through increased price transparency.
  • Remove hospital outpatient departments from their network.
  • Exert pressure on hospitals to shift their pricing. 

Regarding the first option, Paul notes that even recent public policy efforts to address pricing transparency have fallen short: Since the Hospital Price Transparency Final Rule went into effect this year, a third of hospitals have still not posted usable pricing data and another 12 percent posted data that fell well short of the requirements.

Another drawback is the challenge that patients/consumers may face in making decisions based on pricing. Again, this is well-trodden ground in the retirement space. In 2009, Beschears, Choi, Laibson, and Madrian explored whether the SEC’s Summary Prospectus simplifying mutual fund disclosure helped investors avoid costly sales loads. The researchers found that even with a one-month investment horizon, subjects did not avoid loads because they were confused, overlooked them, or believed their chosen portfolio was superior to a load-minimizing alternative.

An example of this latter type of misperception — let’s call it premium price bias, or the conviction that you get what you pay for — in the site of treatment space is that a cancer patient might mistakenly assume that it is worth paying more for treatment at a hospital facility. For example, they might believe that the hospital facility may have better access to emergency treatment in the event of an adverse reaction. They likely wouldn’t know that, in reality, it probably makes no difference; many hospital facilities are physician offices that were acquired by hospitals.

Paul notes that the second two solutions aren’t perfect, either. Regarding exerting pressure on hospitals, increasing consolidation of health care providers makes it difficult. As for removing the hospitals from their network, this may not work well in areas with limited provider choices or in areas where powerful hospital systems limit payers’ ability to exclude certain high-cost provider locations from their network.

Still, neither of these solutions rely on the patient to be cost-conscious when it comes to health care. And in my experience, that’s a good thing.




The Common Denominator: Understanding the Importance of Commonality When It Comes to Retirement Advice

In my recent testimony on “Gaps in Retirement Savings Based on Race, Ethnicity and Gender” for the U.S. Department of Labor Advisory Council on Employee Welfare and Pension Benefit Plans, one of the key discussion points was the importance of “commonality.” Specifically, “2021 Retirement Confidence Survey (RCS): A Closer Look at Black and Hispanic Americans” found that — when looking for an advisor — Black and Hispanic Americans were asked if “working with an advisor who has had a similar upbringing or life experience as you” was an important criterion: 61 percent of Black respondents and 57 percent of Hispanic respondents, vs. 41 percent for White respondents, said this criterion was important.

However, one cohort that expressed less interest in having an advisor with a similar upbringing or life experience was female workers, with 45 percent saying this was important. Also of less importance to female workers was whether the advisor was the same gender as them: Only 27 percent said this was important, compared with 39 percent of males.[1]

This may bear some further investigation. In “2020 Retirement Confidence Survey: Attitudes Toward Retirement by Women of Different Marital Statuses,” we examined responses of women by marital status and found that while married women workers listed a professional financial advisor as one of the top three sources of information they use for retirement planning, financial advisors were not among the top three listed for divorced or never-married women — who instead used family and friends, Google, or none of the above.

Part of this finding may owe to the fact that divorced and never-married women have substantially less assets than their married female counterparts: 38 percent of divorced and 42 of never-married women workers had less than $1,000 saved, compared with 14 percent of married women workers. The divorced women workers were markedly more likely to have smaller levels of assets, as 72 percent had less than $25,000 in assets vs. 54 percent for never-married women workers and 31 percent for married women workers. Not surprisingly, given their low levels of assets, divorced women workers expressed far more interest in access to emergency savings accounts or programs to help with near-term needs than long-term savings help. 

The 2022 Retirement Confidence Survey will continue to explore differences in savings and retirement by gender. We will also oversample LGBTQ+ workers and retirees to further understand how various cohorts are approaching saving for and living in retirement. Please consider partnering with EBRI on this important work and sponsoring the 2021 Retirement Confidence Survey: Focus on Gender, Marital Status, and the LGBTQ Community.  Contact

[1] From the 2021 RCS Funders Report, which is available only to sponsors of the RCS.

After the Pandemic: Getting Exhausted and Stressed Workers Back on Track

The Employee Benefit Research Institute (EBRI) recently asked its members to create a word cloud answering the question, “When you think of the impact the past 1+ years has had on you, what word comes to mind?” 

Of course, with word clouds, the more people that respond with a given word, the bigger that word becomes.  One word truly stood out in responses from members: exhausted.

These senior-level executives of health benefits, retirement, and financial services providers, associations, and plan sponsors described being over-worked, burned out, drained, anxious, stressed, and feeling adrift — among other things. Some did note positives, such as spending more time with family, learning to be a better leader, and getting in touch with what really matters. However, far more noted being stuck, feeling like they were in the movie Groundhog Day, and experiencing a lack of belonging and disconnection.

The experience of EBRI members corresponds to findings by author Jennifer Moss, who surveyed more than 1,500 people from 46 countries in various sectors, roles, and seniority levels. She found that in response to COVID-19, respondents overwhelmingly reported that their work life was getting worse, that their well-being had declined, and that they were struggling to manage their workloads and had experienced burnout “often” or “extremely often” in the previous three months.

One antidote to workplace burnout, of course, is engagement. But how do employers re-engage a work force that has been isolated, financially stressed, and emotionally drained? And what benefits are available and effective to facilitate this? These are questions the EBRI will explore in the remainder of 2021 and beyond.

Physical, Emotional, and Financial Health

For example, EBRI is currently working with Greenwald Research and a dozen sponsors to design the 2021 Workplace Wellness Survey (WWS).[1] The survey will garner worker perceptions on how well employers are helping them navigate the challenges they are facing when it comes to physical, emotional, and financial health considerations. For example, the WWS will delve into how telework has impacted workers’ financial well-being, mental health, and physical well-being and health. It will also explore how workers value caregiving and paid time-off benefits. Also, this year for the first time, the survey will explore differences among diverse populations when it comes to workplace wellbeing — including Hispanic and Black Americans’ experiences in these areas.

In a separate employer survey through EBRI’s Financial Wellbeing Research Center,[2] EBRI will query employers about how they are changing their focus when it comes to financial wellness benefits in light of the current environment. Areas of exploration will include: Are emergency savings vehicles becoming more central to financial wellness benefits, and if so, what do they look like? Are employers increasing their efforts to financially support caregivers? How are furloughed or laid-off workers being accommodated as they re-enter the workplace?

Mental Health and Stress

Through EBRI’s health benefits research, we’ll explore how COVID-19 may have contributed to the demand for mental health services, including spending on mental health as well as use and spending among those with mental health conditions.

The 2021 Consumer Engagement in Health Care Survey[3] will specifically focus on employee stress: the amount of stress workers are experiencing, the causes of stress, and the use of behavioral health and mental health services to combat this stress.

The Impact of Policymaking

Clearly, policymakers can also play a role in getting exhausted and stressed workers back on track. Last month, I testified at a Senate HELP Committee hearing that, among other things, sought to understand the role of the employer and emergency savings. Responses to the Workplace Wellness Survey have shown that workers not only want but expect their employers’ support when it comes to physical, mental, and financial wellness.[4] But EBRI analysis also shows the limitations of relying on existing workplace savings vehicles to support such needs as emergency savings.[5] Instead, the testimony contemplated the impact of alternatives, such as dedicated workplace emergency savings accounts. As policymaking evolves in these areas, EBRI will continue to seek to provide needed education on these topics.

Join Us in Being Part of the Solution

EBRI is always looking for partners to work with us as we explore research topics. If you or your organization are interested in the topic of workplace stress and mental health, let us know. The more thought leadership we have around these issues, the better we will be able to successfully navigate our way out the other end of this pandemic.






Getting the “S” Right: It Stands for Spending in FSAs and Saving in HSAs

On a vintage “Weekend Update” segment on Saturday Night Live, Emily Litella expresses outrage about trying to limit violins on television: “Why don’t parents want their children to see violins on television?” Litella says. “I say there should be more violins on television.” It’s up to Chevy Chase to gently explain to her that the concern is not violins, but violence, on television. “Oh, that’s different.” Litella concludes.

As the Employee Benefit Research Institute (EBRI) rolls out its new FSA Database, we hearken back to this skit for a reason: Much like Litella confused violins and violence, people have long confused FSAs and HSAs.

Image courtesy of

HSAs, or health savings accounts, are savings vehicles. Balances can accrue in HSAs over time, allowing owners to use them as a type of retirement vehicle if they so choose. In contrast, FSAs — or flexible spending accounts — are a type of benefits cafeteria plan. They are meant to be spent down every year, and, in fact, monies not used to pay out-of-pocket health care expenses each year from FSAs are forfeited.[i]

The reason many believe that “optimal” HSA usage involves maximizing HSA wealth at retirement is because HSAs benefit from a triple tax benefit: Employee contributions to the account are deductible from taxable income, any interest or other earnings on assets in the account build up tax free, and distributions for qualified medical expenses are excluded from taxable income to the employee. For years, however, EBRI’s database has suggested “sub-optimal” utilization of HSAs — possibly, in part, because of the HSA/FSA confusion.

The EBRI HSA Database was started in 2014 and contains 10.5 million accounts accounting for $28.1 billion in assets, or 40 percent of the HSA universe as of 2019. The database allows EBRI to examine individual and employer HSA contributions, balances, distributions, transfers, and investments.

What have we learned? In our report on 2019 HSA utilization, we found that nearly 40 percent of accountholders in EBRI’s HSA Database withdrew more than they contributed. Very few accountholders contributed the statutory maximum in 2019, and only 7 percent of accountholders held assets other than cash in their HSAs. These are not the behaviors of individuals seeking to maximize HSA wealth for retirement.

Of course, there are many reasons people may choose not to use HSAs as retirement vehicles, including the fact that they may not be able to afford to pay health expenses out of pocket without tapping their HSA. But the HSA data did lead us to conclude that there are opportunities to improve accountholder engagement with HSAs. For instance, because accounts with employer contributions tended to have higher total contributions and more frequently contained investments other than cash, we were able to conclude that employers can play a crucial role in fostering employee engagement with their HSAs.

So, what does the new FSA Database tell us so far? A representative repository of information about individual FSAs, the database includes 460,000 flexible spending accounts with $563 million in contributions. According to the inaugural Fast Fact from the database, the average worker contributed $1,179 to their FSA in 2019 — which is below the $2,700 limit. Nonetheless, 44 percent of workers forfeited part or all of their contributions in 2019. Among those forfeiting part or all of their contributions, the average forfeiture was $339 and the median forfeiture was $157. As such, one clear conclusion is that there are opportunities for employers to better educate and facilitate fully spending down FSA contributions and avoiding forfeitures.

It is EBRI’s hope that the new FSA Database, along with EBRI’s existing HSA Database, will allow us to continue to shed light on how these vastly different accounts are being utilized. This will allow plan sponsors, providers, and policymakers to better understand how these vehicles are providing benefits to employees — as well as identifying any Emily Litella-like mistakes that may be occurring in their utilization with a goal of improving outcomes.

[i] Employers can let workers roll over $500 of their FSA.  It is also worth noting that the December 2020 stimulus bill gives employers options to give workers more flexibility to get around the “use-it-or-lose-it” rule. 

Translating Motivation to Action: The True Challenge of Financial Wellness Initiatives

I’ll never forget my very first iPod: the Shuffle. I received it as a gift, and when I first tried to use it, I was perplexed. Where was the screen?  Where were all the buttons? How was I supposed to find the songs I wanted to listen to? How did you plug it in?

The iPod Shuffle’s elegant and minimalist design is now iconic. But the lesson from the creation of the iPod is even more impressive: Its designers had hit upon an amazing recipe to make customers embrace a product they didn’t know they wanted by effectively tapping into their psyche.

For employers offering financial wellness initiatives, such a recipe apparently remains elusive: despite a proliferation of such programs, the path to their adoption by workers is still a bit rocky. At least, that’s the message from a recent virtual American Savings Education Council (ASEC) meeting held by the Employee Benefit Research Institute (EBRI). The conversation started when EBRI Senior Research Associate Craig Copeland unveiled the results of EBRI’s 2020 Employer Financial Wellbeing Survey. According to the survey, which was fielded in July of this year, more than half of the employers currently offer financial wellness initiatives, with companies reporting currently offering an average of 4.9 benefits. Companies also said they were spending more money on financial wellness initiatives than in prior years: In 2020, 44 percent of companies said they spent more than $50 per employee annually. This was 33 percent in 2019.

However, employees aren’t necessarily getting the message about their employers’ commitment to workplace financial wellness. EBRI’s Director of the Health Research and Education Program Paul Fronstin showed that, in a Workplace Wellness Survey fielded in the very same timeframe, 7 in 10 employees agreed that they need their employer’s help in ensuring they are financially secure, and just over 6 in 10 said it is their employer’s responsibility to do so. However, only 4 in 10 employees rated their employer’s efforts to improve their financial well-being as very good or excellent.

Elizabeth Perry, Social Scientist with the Federal Thrift Retirement Board, suggested that the disconnect between how much effort employers are putting into workplace financial wellness and employees’ faint praise could be explained by cognitive overload. Original research on cognitive overload established that people can typically only hold seven thoughts in their head at any time. New thinking on this topic, Perry says, suggests it might actually be closer to four today. With so many benefits to choose from, in other words, people might simply be overwhelmed.

Creating a clear path between workers’ financial wellness needs, their desire for help, and the solutions available can help greatly. Perry demonstrated the importance of making it easy for people to take action on their intentions by citing a study that examined factors that drove students to get recommended tetanus shots.

According to the study, simply motivating students to get their recommended shots by explaining the nightmarish effects of tetanus was not enough. Showing photographs of bedridden patients motivated students and made them fearful. However, few got the shots until such photographs were combined with specific steps that needed to be taken. These included where to go to get the shot, the times the health center was open to provide the shot, and even how getting the shot could fit into students’ school schedule. In fact, 10 times as many students actually got a tetanus shot when the action steps were included vs. when they were left out.

For the Thrift Savings Plan, Perry replicated the approach to increase savings rates by combining motivating messages such as “You’re Missing Out On Free Money” with a specific plan of action for participants concerning what they needed to do to increase plan contributions. Perry found that three months after the communication, savings increased for approximately a quarter of people receiving the communication.

Gary Mottola of FINRA echoed Perry’s observations at the ASEC meeting, noting that “the thing that makes the most difference is — is it easy to do … People can get lost, run out time.  The easier you can make it, that is great … It is tempting to overestimate how intuitive things are.  We’ll tell them just to go here and they can figure it out. A lot of times these systems are not intuitive.” 

This concept was central to the U.S. Financial Literacy and Education Commission’s (F­LEC) recently released “U.S. National Strategy for Financial Literacy, 2020.” In this report, the Treasury identified eight best practices for effective financial literacy and education programs. I’d like to highlight four of them that relate most specifically to our discussion at the ASEC meeting:

  1. Know the individuals and families to be served.
  2. Build on motivation.
  3. Make it easy to make good decisions and follow through.
  4. Evaluate for impact.

Often, as we saw with the tetanus example, a lot of effort goes into Best Practice Two — building motivation to take action — without factoring in Best Practice Three: the need to make that motivation actionable. This is done, according to the FLEC’s report, by “removing hassles and barriers, and adding supports [that] can help people bridge the gap between their intentions and what they actually do.” The FLEC report further notes that the best practice of making it easy to follow through “highlights that programs can be designed to make it easier for people to get financial education, for example, by integrating financial education into programs and places where people already are, like their job or a higher education institution.” In other words, success in behavior change relies not just on making sound financial wellness programs available but on integrating these programs effectively into individuals’ day-to-day environment.  In the tetanus shot experiment, a map was presented to the students of the campus with the university health building clearly circled. Also, a request was made that each student review their weekly schedule to locate a time when they would pass by the university health building so that they could stop in to be inoculated. Yes, evidently, this is level of detail needed in successful action plans for financial wellness initiatives.

And clearly, this level of detail around action steps can only be accomplished by knowing those being served: in other words, the FLEC’s Best Practice Number One. Simply put, if employers aren’t familiar with action steps that will resonate with their employees, they cannot provide employees with a valid plan that will translate motivations around financial wellness into action.

With this in mind, EBRI will be devoting both our 2021 Retirement Confidence Survey and our 2021 Workplace Wellness Survey to understanding the unique retirement, financial wellness, and health benefits considerations of African-American and Hispanic workers, along with their White counterparts. This is the type of knowledge that can help employers, providers, and policymakers better understand how to tailor solutions — and delivery — to these individuals and their families.

Finally, with respect to Best Practice Number Four — evaluating for impact — 2021 will also see the release of EBRI’s inaugural research that will measure the impact of financial wellness initiatives on workers’ retirement savings. By combining the EBRI/ICI 401(k) Database with EBRI’s financial wellness and consumer databases, we’ll be able to understand which financial wellness approaches — both the initiatives and their delivery — move the needle when it comes to improving retirement savings outcomes. That brings me back to the iPod Shuffle. The product was successful because it understood its consumers — perhaps better than they understood themselves. If you’d asked me if I cared about playing certain songs at certain times before the Shuffle, I probably would have said “yes.” But the reality is, I — and millions of consumers — actually preferred an elegant, inexpensive solution more. We were willing to adopt a surprising new product as a result.

Exploring the Effects of a Medicare Buy-In Policy

Recently, EBRI hosted a webinar exploring the potential ramifications of a Medicare buy-in policy on employers. Such policies have been periodically floated as a means to expand coverage and wrangle health care costs and may very well emerge as a palatable bipartisan reform of the health care industry. Essentially, a Medicare buy-in would allow older people under the age of 65 (proposals have ranged from those 62–64 to those 50–64) to enroll in Medicare. Such a system has the potential to transfer a good deal of spending from private employment-based insurance plans to Medicare. But exactly how much health care spending shifts critically depends on who ends up switching.

A Medicare buy-in policy has two likely outcomes, each with drastically different implications for employers. First, only workers who spend a lot on health care would switch. Since Medicare features lower payment rates for medical care than private insurance, high spenders could be tempted to switch to Medicare if their expenditures are minimized. Should that scenario play out, the impact on employer spending on health care could be large. The second likely outcome is if only workers who spend very little on health care switch; in this scenario, high spenders could prefer to remain in the employer-based plan in order to benefit from defined out-of-pocket spending maximums. Conversely, low spenders would not be concerned about Medicare’s lack of an out-of-pocket maximum. In that scenario, the impact on employer spending on health care would be quite small.

EBRI built a simulation model to better understand which workers would be tempted to switch to Medicare and to quantify the impact on employers. In the model’s baseline simulation, we found that the median employer would experience about a 20 percent reduction in total health care spending. The workers who switched to Medicare tended to be lower spenders who did not bump up against their plan’s out-of-pocket maximum. We also found that more generous employment-based insurance plan design — that is, lower deductibles, lower premiums, and lower out-of-pocket maximums — tended to induce more buy-in-eligible workers to stay on their employment-based insurance, and vice versa.

Over the course of the presentation, we received many astute questions from the audience, sparking lively discussion. Alas, given time constraints we weren’t able to fully answer each question. One attendee asked us what might happen to the cost per health plan participant after eligible and interested workers switched to Medicare. Since our model indicated that switchers tended to be healthier, the result is that the cost per remaining plan participant increased, which could manifest in higher premiums. Of course, employers could divert some of the cost savings from workers who switched to Medicare to blunt those cost increases.

Another attendee asked us about what the impact might be on workers who decided to retire early. These workers would not be deciding based on the employer-sponsored plan but rather plans from the individual exchanges. [JA1] The calculation changes somewhat among this segment of the population, and the model in its current form does not specifically address this issue. However, a Medicare buy-in policy could be attractive to early retirees, depending on their situation. Subsidies are available for people earning less than 400 percent of the federal poverty limit and could make plans purchased from an individual exchange appealing compared with a Medicare buy-in. However, for people who are not otherwise eligible for subsidies, the Medicare buy-in would likely be a more appealing choice.

Additionally, we received useful feedback on the model, and if momentum behind a Medicare buy-in builds during a new legislative session, we will plan to continue iterating on the model. A Medicare buy-in has the potential to dramatically alter the health care market, particularly for employers, and understanding its costs and benefits is critical.

A replay of the webinar is available here.

Want to Become Financially Resilient? Hit the Financial Resources Gym

If Time Magazine had a word of the year, a good candidate in 2020 might be “resilience.”

This year has called upon many Americans to find the strength to bounce back from the health care effects of COVID-19 and the economic impact of job loss and financial duress, not to mention the emotional and mental toll of social distancing, isolation, and civil unrest. Many have. But among those that struggle to adapt, the toll can be high. According to Morneau Shepell’s Mental Health Index Report, people who report that they are undecided or feel that they are adapting poorly to changes in their personal, work, or financial lives have significantly lower mental health scores than those reporting adapting well.

What is the difference between those who adjust to adverse circumstances poorly vs. well? Psychology literature suggests that resilience is an intentional behavior that can be adopted and developed. In other words, rather than simply being a certain trait or characteristic that some people have and other don’t, resilience can be embraced — much like a healthy lifestyle of eating well and exercising.  

The healthy lifestyle analogy resonates with me. I started weightlifting more than two decades ago, and it was transformative. Not only does weightlifting make you stronger, but going to the gym several times a week creates discipline; watching the results and progress you make in lifting weights is emotionally rewarding and satisfying; and, perhaps most important of all, weightlifting is a commitment to health that permeates the rest of one’s lifestyle. Since I started weightlifting, I am inclined to spend more time on other physical activities such as kayaking, hiking, skiing, yoga, etc.

So what equipment do people need in order to adopt a lifestyle of financial resilience? This is the question EBRI explored as we redesigned the American Savings Education Council’s (ASEC’s) re-envisioned web site.

For those who are unfamiliar with ASEC, it is a program of EBRI that is dedicated to educating the public about all aspects of financial security. ASEC does so through a coalition of public- and private-sector partners that share ASEC’s mission of making saving and retirement planning a priority for all Americans. As we redesigned ASEC’s website, we realized that our partners are key; many of them have vast troves of financial wellness resources. By assembling them in one place — on ASEC’s website — we could create a financial resilience hub where people could find tools, information, education, and other resources that would help them achieve their goals, meet the financial needs of various life stages, and face the challenges of circumstances such as caregiving, disability, loss of partner/spouse, and supporting adult children or elders.

Given today’s environment, the website has an entire section devoted to COVID-19 resources such as coronavirus advice for consumers, information on why some communities of color have been hit so much harder by COVID-19, and how the Coronavirus Aid, Relief, and Economic Security (CARES) Act works. Meanwhile, our “Traps & Pitfalls” section covers a broad range of threats to overall financial wellness beyond the pandemic, including coronavirus scams, phishing ploys, predatory lending, and telemarketing fraud.

ASEC‘s website is not the only way EBRI is seeking to address financial resilience. In its upcoming virtual meeting on October 14, ASEC is featuring a session called “Views from the Front: Insights on Guiding Employees Through the Turbulence of the Current Environment.” We’ll hear from those in the trenches — from workers who are struggling with emotional and financial challenges to the employers and financial advisers who are helping them navigate both the financial and the emotional toll the pandemic has taken.

I’m excited about the contribution that ASEC — through such initiatives as its redesigned website and October meeting — can make to the topic of resiliency. Another thing I’ve learned from working out with weights is that muscles have memory. In other words, even those of us who feel that COVID-19 has challenged our resiliency can gain that resiliency back by taking advantage of the proliferation of resiliency resources that are available on ASEC’s website and elsewhere.

Getting to the Whys of Spending in Retirement

whyIt is one thing to understand how people spend their money in retirement; it is another thing to know why they do so.  For example, through its Retirement Security Research Center (RSRC), the Employee Benefit Research Institute found that retirees:

  • Are more often interested in preserving or even growing their retirement savings than spending them down.[1]
  • Often resort to required minimum distributions as their spending plan.[2]
  • Have widely varying spending patterns.[3]
  • Change their spending patterns over time.[4]

Regarding the last two observations, new work within the RSRC based on the Health and Retirement Study Consumption and Activities Mail Survey (HRS/CAMS) data shows that spending declines as people enter retirement and progress through it.  The data show that the average individual aged 55–64 spent $54,500 in 2017. By ages 65–74, spending had decreased on average to $50,300 however, and by ages 75–85 it came in at around $38,500.

But not only does the amount of money being spent decreases, the propensity for people to spend heavily in certain areas also changes. According to HRS/CAMS, the proportion of people who heavily spend on housing in retirement tends to decline over time: from 21 percent for those ages 55–64 to 17 percent for those 65 and older. In contrast, the proportion of those spending heavily on health care increases: from 10 percent at ages 55–64 to 20 percent for those ages 75–85. Interestingly, the proportion of people who do a lot of “discretionary spending” such as spending on entertainment and contributions increases with age: 13 percent of spenders fall into the category at ages 55–64 while 18 percent do for ages 65 and above. However, discretionary spending becomes proportionally more focused on gifts and contributions for the oldest age cohorts: Gifts and contributions make up about half of discretionary spending for people 55–64 but exceed 60 percent for those ages 75–85.

What we cannot understand from the data, however, is why people are changing their spending as they do. This is critically important in designing retirement spending strategies. For example, before my dad retired, he was a foodie. He always wanted to go to the fanciest restaurants and enjoyed dining lavishly. When he retired, his behavior began to change. The local diner ultimately because his favorite restaurant and fried calamari his favorite meal choice — not exactly upscale. I worried that dad wasn’t enjoying his retirement because, even though he had the money, he didn’t spend it on treats for himself. Was he worried about running out of money? Was he trying to leave a big nest egg to his children? Or was something else at work here? I asked Anna Rappaport of the Society of Actuaries’ Post-Retirement Needs and Risks Committee about it, and she had the following opinion: It was probably indeed something else. Some older people have a hard time hearing and/or lower stamina; they don’t like sitting in noisy restaurants for long periods of time.  Others find that what was exciting and fun a few years ago is no longer engaging. Some find that with changes in health and digestion, the foods that were exciting no longer work for them.  In other words, it may not have been about money at all.  Very possibly, my dad’s priorities and preferences had just changed.

But think about the implications when it comes to spending tools. Consider the possible differences in spending scenarios my dad faced at retirement:

A) He wanted to continue his current foodie lifestyle at first but then later realized he no longer enjoyed it or that his foodie group of friends had disappeared from his life.

B) He continued being a foodie at first, but ultimately other priorities emerged.

C) He wanted to continue to be a foodie but was fearful of spending too much and not having enough for high health care bills.

D) He wanted to continue to be a foodie but also wanted to leave an inheritance.

These are four dramatically different scenarios for my dad as he planned his spending approach in retirement. The first might require education. My dad might have thought at age 65 he would want to be a foodie throughout retirement, but the reality was different: His interest (and spending) waned. This could have been anticipated and planned for accordingly. The second scenario might necessitate a better understanding of what would replace being a foodie.  Perhaps it would be something equally or more costly such as travel.  Or perhaps my dad just wanted to stay at home with his book club (again, with lower spending).  Scenario C might raise the specter of solutions addressing my dad’s concerns about health care bills. Certainly, the least optimal approach would be to try and self-insure out of fear of high out-of-pocket costs. The last scenario might beg the question — if giving is so important, why not do it now as opposed to waiting until the end of retirement?

Clearly the “whys” of spending in retirement can make a large difference in the spending advice given.

With the generous support of the RRF Foundation for Aging and EBRI’s Retirement Security Research Center, we are embarking on a project to understand what drives retirees to spend the way they do.  Our research will include surveys and interviews to gain a better understanding of what drives retirement spending decisions and how to optimize them. Combined with data from our IRA database and HRS/CAMS, this research is intended to provide a holistic view of the whys of retirement spending. If you are interested in joining the RSRC, please reach out to Betsy Jaffe at to participate in this important initiative.


[1] Sudipto Banerjee, “Asset Decumulation or Asset Preservation? What Guides Retirement Spending?EBRI Issue Brief, no. 447 (Employee Benefit Research Institute, April 3, 2018).

[2] Craig Copeland, “Withdrawal Activity of Individuals Owning Both Traditional and Roth Individual Retirement Accounts,” EBRI Issue Brief, no. 503 (Employee Benefit Research Institute, March 26, 2020).

[3] Forthcoming EBRI Issue Brief.

[4] Zahra Ebrahimi, “How Do Retirees’ Spending Patterns Change Over Time?,” EBRI Issue Brief, no. 492 (Employee Benefit Research Institute, October 3, 2019).

The Future of Employment-Based Benefits — Hard Facts, and Some Bright Spots

The year 2020 will likely go down as one of the most challenging in recent American history: a pandemic, quarantines, rampant unemployment, civil unrest — it may be difficult for many people to find a silver lining right now.

But there are bright spots. On May 30th, the first American astronauts were launched into space from American soil on an American space shuttle since 2011. Even more amazing, it was the first time any private-sector company in the world had done so. The fact that companies like SpaceX can do great things even in the face of such turmoil reminds me of why I joined the Employee Benefit Research Institute (EBRI) more than two years ago. For American companies to succeed at such momentous endeavors, it takes motivated workers who are healthy and financially stable. Employee benefits can be a crucial part of that equation.

Yet, the availability of health, retirement, and financial wellness benefits may be at a crossroads. As a result of COVID-19’s impact, the American Retirement Association estimates that 42 percent of small businesses may be candidates for 401(k) plan terminations. Using the Retirement Security Projection Model,® Jack VanDerhei, EBRI’s Director of Research, found that if this were true, $31.24 billion would be added to the existing $3.68 trillion U.S. retirement deficit. [1] Further, according to the 2020 Retirement Confidence Survey, more than 6 in 10 workers without a retirement plan have less than $1,000 in savings (vs. just 8 percent of those with a plan).[2]

In that same survey, nearly half of workers reported that their level of debt is a problem, and 77 percent believe it would be helpful to have access to emergency savings accounts or programs. The “Emergency-Fund-Focused Employers: Goals, Motivations, and Challenges” Issue Brief found that — at least in 2019 — employers were stepping up. According to the research, more than 4 in 10 employers expressing at least some interest in offering financial wellness programs said they offer or plan to offer an emergency fund/employee hardship assistance as a financial wellness initiative.[3] Yet, this may be changing. Anecdotally, we are beginning to hear that such programs are being delayed in light of the current crisis. Indeed, we are even re-tooling our third annual Employer Financial Wellbeing Survey — to be fielded in late June and early July — to determine whether employers are actually moving away from programs that are already in place.

Similar concerns exist around health benefits. At a minimum, recent developments like the increased use of telemedicine could change the health benefits landscape, a topic which will be explored in EBRI’s upcoming Consumer Engagement in Health Care Survey. However, EBRI’s Director of the Health Research and Education Program Paul Fronstin—with support from Blue Cross Blue Shield—is also interviewing employers to understand if employer-sponsored health benefits may be on the wane. After all, we now face the first recession since the Affordable Care Act created a marketplace that workers can go to directly, without their employer acting as an intermediary. Could this be a catalyst for employers to reduce or even eliminate their health benefits?

But let’s get back to the idea of bright spots. This week, EBRI and J.P. Morgan Asset Management released a paper based on connecting consumer and 401(k) data on a large scale. The collaboration is intended to develop an understanding of workers’ full financial picture by pairing their 401(k) activity (savings, investments, etc.) with their spending behaviors.  The initial foray into the research collaboration — “The 3% difference: What leads to higher retirement savings rates?” — explores what is driving the savings behavior of 401(k) participants who contribute at low, moderate, or high rates to their plans. It finds that spending patterns do indeed differ among the three groups — most interestingly between low and moderate savers, whose wages are actually very similar. Low savers are more prone to spend on transportation, housing, and food than moderate savers — at the potential cost of being able to save more. But, of course, the question is why? Future research will examine this in greater detail and ideally contribute to greater retirement and overall financial security by adding to a constructive dialogue on the forces behind U.S. workers’ savings habits.

Yes, it’s been a challenging year. But one thing that’s been reinforced by all that is happening is the importance of facts, not just inferred data, when it comes to tackling the most difficult issues we face today. Without facts, we cannot understand how to quarantine and for what length of time. Without facts, we also cannot determine how we can get American companies — and the economy — back on sound footing. EBRI remains dedicated to data and facts. We hope you join us in upcoming webinars and our end-of-month virtual Policy Forum to learn more about what these facts are telling us about the future of employment-based benefits and what policymakers, employers, and providers can do to support the well-being of American workers.

For more about joining EBRI, click here.