EBRI’s Retirement Readiness Rating: Retirement Income Preparation and Future Prospects — July 13, 2010

EBRI today published ground-breaking research on retirement income adequacy, in the July 2010 EBRI Issue Brief.

With Americans living longer in retirement, the 2010 EBRI Retirement Readiness Rating™ shows dramatically high percentages of Americans—even in the upper-income categories—are likely to run short of money after 10 or 20 years of retirement. The new analysis by EBRI finds that almost two-thirds (64 percent) of Americans in the two lowest preretirement income levels will be running short after 10 years in retirement. However, the EBRI study also finds that after 20 years of retirement, almost a third (29 percent) of those in the next-to-highest income level will run short of money, as will more than 1 in 10 (13 percent) of those in the highest-income level.

The full report is online here. The press release is online here. A full list of media articles covering the Retirement Readiness Rating™  report is online here; major-media coverage worth noting is listed below:

The July 13 Wall Street Journal write-up of the EBRI report is online here.

Today Show interview (July 13) with Jean Chatzky on the EBRI report is online here.

Washington Post story (July 13) is online here. The Post’s “Color of Money” personal finance column based on the EBRI report  (July 15) is online here.

USAToday (Associated Press) story, July 14, is online here.

CNN Money report on the EBRI analysis (July 14)  is online here.

The EBRI Retirement Readiness Rating™ is based on EBRI’s Retirement Security Projection Model® (RSPM), which the institute first used in 2003 to evaluate national retirement income adequacy. The newest version of the model factors in many new retirement plan changes, such as auto-enrollment and auto-escalation of contributions in 401(k) plans, as well as updates for financial market performance and employee behavior (based on a database of 24 million 401(k) participants).

This is the first time a national retirement model has been able to project when different cohorts of Americans, based on age and income, are likely to exhaust their retirement savings. In addition, it finds that nearly half of early Baby Boomers—those on the verge of retirement, currently ages 56 to 62—are at risk of not having sufficient income to pay for basic retirement expenditures and uninsured medical expenses, and nearly the same fraction of “Generation Xers” are in a similar position.

Among other things, the analysis provides the most detailed estimates yet published of how age, relative level of preretirement income, and eligibility for participation in a defined contribution plan (principally a 401(k) plan) affect the prospects of running short of money in retirement. It also shows how long early boomers’ resources are likely to last in retirement.

 

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President and CEO, EBRI

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