“Believe” Able

By Nevin Adams, EBRI

Nevin Adams

Nevin Adams

In that holiday classic “Miracle on 34th Street,” a man named Kris Kringle (who claims to be “the one and only” Santa Claus) winds up having his sanity challenged in court. Ultimately, the judge dismisses charges that would have resulted in Kringle’s institutionalization—not because he actually is persuaded to believe by the evidence that Kris is the REAL Santa Claus, but because he finds it convenient to demur to the determinations of a higher authority (in this case, the US Postal Service).

While belief may not always be a portent of reality, it can be a powerful force, as any parent who has ever nurtured Santa’s existence well knows.

The 2013 EBRI/Greenwald & Associates Health and Voluntary Workplace Benefits Survey¹ (WBS) reveals that most workers believe their employers or unions will continue to provide health care insurance— although there have been employer surveys indicating that, at some point in the future, some may not. Not that workers fail to appreciate future uncertainties: While 46 percent of worker respondents to the WBS indicate they are extremely or very confident about their ability to get the treatments they need today, only 28 percent are confident about their ability to get needed treatments during the next 10 years.

Similarly, when it comes to retirement, the Retirement Confidence Survey² has, for nearly a quarter century now, shown a remarkable resilience in worker confidence regarding their financial future in retirement, belying the aggregate savings levels indicated in that same survey. Over the course of that survey, we’ve seen confidence wax stronger and then wane―and while we’ve seen distressingly low levels of preparation, more recently we’ve also seen a growing awareness of the need for those preparations. The RCS has also documented a consistent trend in workers believing they will be able to work, and to work for pay, longer than the experience of retiree respondents suggests will be a viable option.

Next month we’ll field the 24th annual version of that Retirement Confidence Survey, where we will (among other things) seek to gain a sense of American workers’ preparation for (and confidence about) retirement, as well as some idea as to how those already retired view the adequacy of their own preparations. Is a lack of worker confidence about retirement finances a troubling indicator? Or does it suggest that they have a greater appreciation for the need to prepare?

Later in the year the WBS will, as it has since 1998, probe sentiments about health care and voluntary benefits: Will workers sense a continued commitment by their employers and unions to provide health care coverage? If not, how might that affect their commitment to their work and their workplace? How might concerns about health coverage affect and influence retirement preparations?

In the cinematic “Miracle,” there seems to be a connection between believing something will happen and its reality. Little Susan Walker goes so far as to intone “I believe… I believe… It’s silly, but I believe!” even as she stumbles upon the home of her dreams.

In the real world, the linkage between belief and reality isn’t generally so convenient. And employers, providers, and policy makers alike, know that being able to anticipate those potential gaps between belief and a future reality can be critical.

In addition to providing financial support to two of the industry’s most highly regarded employee benefit surveys, underwriters of the RCS and WBS have access to special early briefings on the findings, in addition to a number of other benefits. If you’d like to know more, email Nevin Adams at nadams@ebri.org

You can find additional information about the RCS online here and information about the WBS (previously called the Health Confidence Survey) online here.


¹ See “2013 Health and Voluntary Workplace Benefits Survey: Nearly 90% of Workers Satisfied With Their Own Health Plan, But 55% Give Low Ratings to Health Care System,” online here.

² See “The 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many,” online here.

Sooner or Later?

By Nevin Adams, EBRI

AdamsLast week more than a hundred professionals gathered at the Fall 2013 ASEC Partners’ Meeting to discuss the obstacles to, and possible solutions for, retirement savings.  National Save for Retirement Week is upon us, and America Saves Week will be here before we know it.  So too, retirement – which seems far away to many, and IS far away for some – often seems to be a far off goal, something that can wait for another day, a more “convenient” time, when we have more free time, and perhaps fewer financial demands.

Indeed, it’s easy, in the normal press of life, to put off thinking about retirement, much less thinking about saving for a period of life many can hardly imagine. We all know we should do it—but some figure that it will take more time and energy than they can afford just now, some assume the process will provide a depressing, perhaps even insurmountable target, and others  – well many don’t even know how to get started.

Here are six reasons why you—or those you care about—should save – and specifically save for retirement – now:

Because you don’t want to work forever.

No matter how much you love your job – or love your job today – that might not always be the case, and you might want the flexibility to make a change on your terms; if not to retire, to cut back on your hours, or maybe even to pursue other interests.  The sooner you’ve made those financial preparations, the sooner that decision can be your choice, rather than one forced upon you.

Because living in retirement isn’t free – and it might cost more than you think.

Many people assume that expenses will go down in retirement, and for some they may.  On the other hand, retirement often brings with it changes in how we spend, and on what – and that’s not necessarily less.  For example, research by the Employee Benefit Research Institute (EBRI) has found that health-related expenses are the second-largest component in the budget of older Americans, and a component that steadily increases with age.  Note also that long-term care (LTC) insurance is a growing area of concern for retirees and, according to government estimates, 12 million older Americans will need LTC by 2020. However, in most cases LTC is not covered by Medicare, and this care is expensive and can be indefinitely long or even permanent.

Because you may not be able to work as long as you think.

The Retirement Confidence Survey (RCS) has, over its 23 year history, consistently found that a large percentage of retirees leave the work force earlier than planned—47 percent in the 2013 RCS, in fact—and many retirees who retired earlier than planned cite negative reasons for doing so, including health problems or disabilities (55 percent); changes at their companies, such as downsizing or closure (20 percent); having to care for spouses or other family members (23 percent).

Some retirees do mention positive reasons for retiring early, such as being able to afford an earlier retirement (32 percent) or wanting to do something else (19 percent), but just 7 percent offer only positive reasons.

Because working longer may not be enough.

One of the more recent alternatives proposed is that of continuing to work longer which, if possible, would serve to both postpone the depletion of retirement income resources, and to provide additional time to save.  As noted above, this assumption might not prove to be a viable option for all, and even for those who can and do, EBRI research has found that even working until 70 by itself may not be sufficient for some individuals.

Because you don’t know how long you will live.

People are living longer and the longer your life, the longer your retirement could last, particularly if, as noted above, it begins sooner than you planned. Retiring at age 65 today? How big a chance do you want to take of outliving your money in old age?

Because the sooner you start, the easier it will be.

What are you waiting for? Sooner or later, you know you need to.  And the later you start, the harder it can be.

A good place to start – any time –  is the BallparkE$timate,® and with the other materials available at www.choosetosave.org, as well as www.americasavesweek.org.

For more information on retirement saving and spending, see also:

Income Composition, Income Trends, and Income Shortfalls of Older Households

How Does Household Income Change in the Ten Years Around Age 65?

Spending Adjustments Made By Older Americans to Save Money

Expenditure Patterns of Older Americans, 2001-2009

Thinking “Caps”

By Nevin Adams, EBRI



In this era of “reality” TV, where the “antics” (and worse) of the formerly rich and infamous are on display in ways that could not even have been imagined a decade ago, I seem to find myself increasingly shaking my head and muttering “what were they thinking?” The answer, as often as not, seems to be “they weren’t.”

And some, looking at the retirement savings behaviors and expectations of the American workforce over the years, might well wonder—and perhaps respond—the same way.

Whether you are an employer trying to motivate workers to avail themselves of a new benefit (or to better utilize an existing one), an advisor looking to improve their portfolio diversification, a provider interested in expanding acceptance of your product set, or a regulator trying to fine-tune (or overhaul) the current legal boundaries, sooner or later you find yourself wanting (perhaps NEEDING) to know “what are ‘they’ thinking?”

In just a few weeks, we’ll begin development of the 24th Retirement Confidence Survey, the longest-running annual retirement survey of its kind in the nation. As you might expect, the survey contains a core set of questions that is asked annually, allowing key attitudes and self-reported behavior patterns to be tracked over time. We ask both workers and retirees about their confidence in their retirement income prospects, including Social Security and Medicare; how much money have they saved for their future and where they are putting their money; who they turn to for retirement investment information and advice; and seek insights on why they are not saving more and what would motivate them to do so. The survey also allows us to gain the perspective on those issues from those already in retirement, providing an invaluable reality “check” between active workers and current retirees on expectations such as retirement age, spending, and retirement financial needs.

We’ve also asked forward-looking questions, tried to gauge worker interest in using technology, social media, and various investment products to manage their retirement accounts, and gotten valuable insights on how specific regulatory and legislative changes might affect their future savings behavior—insights that we’ve been able to incorporate with our extensive databases and modeling capabilities to quantify the potential impact on overall retirement savings and security.

In a very real sense, the Retirement Confidence Survey provides a unique window through which we can both examine long-term trends and sentiments, and still glean a sense of the future—an appreciation both for what has been, and for what might yet be.

It’s a chance to find out not only “what are they thinking?” but uncover the actions that could influence, if not drive better behaviors in the future.

If your organization would like to participate in the design of the 2014 Retirement Confidence as an underwriter, please contact me at nadams@ebri.org  Underwriters not only provide input on the survey questions, but have access to the raw data, are briefed on its findings prior to publication; have the ability to utilize the survey materials and findings for research, marketing, communications, and product-development purposes; and are acknowledged as underwriters in the final survey report.

More information about the Retirement Confidence Survey, as well as links to previous iterations of the RCS, are available at http://www.ebri.org/surveys/rcs/

“Lead” Times

By Nevin Adams, EBRI

AdamsThere’s an old saying that you can “lead a horse to water, but you can’t make him drink.” It’s a sentiment expressed by many a benefits manager who has devoted significant time and effort to plan design, only to find the adoption rate by individual workers to be “disappointing.” And yet, in the retirement savings context, there’s ample evidence that individuals who have access to a savings plan at work do, in large part, take advantage of that opportunity.

Consider that average participation rates in excess of 70 percent are commonly reported in industry surveys, and that’s for plans that don’t take advantage of automatic enrollment. Moreover, previous EBRI research has pointed out that merely having access to a defined contribution plan at work can have a significant positive impact on one’s retirement readiness rating, simply because it greatly enhances the likelihood that those individuals WILL participate (1).

Those who say that you can only “lead a horse to water” might well expect that a horse will drink when it’s thirsty, or when it needs water—but equine experts will tell you that many horses refuse to drink when they need to most, especially in times of competition, illness, travelling or stress. So, while you may not be able to make them drink, it’s generally important for their health and well-being to find ways to encourage them to do so—adding a little salt in their diet, for instance, or putting an apple in their water bucket.

Similarly, all workers don’t have access to retirement plans at work, and those who do don’t always take full advantage of it—with some saving below the employer match levels of their plan, many older workers failing to take advantage of catch-up contributions, and a number of automatically enrolled workers leaving those relatively low initial default contribution rates in place.

There are, however, steps employers can take to help: Prior EBRI research has documented the profound influence of plan design variables, as well as employee behavior in auto-enrollment 401(k) plans (2). Not only the impact that automatic enrollment can have on retirement readiness, but what setting that initial default rate at 6 percent, rather than the “traditional” 3 percent (now codified in the Pension Protection Act of 2006) could mean in terms of improving retirement readiness “success.(3)

For example, using actual plan-specific default contribution rates, and assuming an automatic annual deferral escalation of 1 percent of compensation; that employees opted out of auto-escalation at the self-reported rates from the 2007 Retirement Confidence Survey; and that they “started over” at the plan’s default rate when they changed jobs and began participation in a new plan; along with the assumption that the plan imposed a 15 percent cap on employee contributions, the EBRI analysis found that more than a quarter (25.6 percent) of those in the lowest-income quartile who had previously NOT been successful (under the actual default contribution rates) would then be successful (4) as a result of the change in deferral percentage.

As benefit plan professionals know, and as EBRI research has quantified, plan design can be effective at doing more than just leading workers to the opportunity to save for retirement—it can help them make decisions that improve their chances of success.


[1] See “’Retirement Income Adequacy for Today’s Workers: How Certain, How Much Will It Cost, and How Does Eligibility for Participation in a Defined Contribution Plan Help?” online here.  

[2] See “The Impact of Automatic Enrollment in 401(k) Plans on Future Retirement Accumulations: A Simulation Study Based on Plan Design Modifications of Large Plan Sponsors,” online here.  

[3] See “Increasing Default Deferral Rates in Automatic Enrollment 401(k) Plans: The Impact on Retirement Savings Success in Plans With Automatic Escalation,” online here.  

[4] In this case, success equals a real replacement rate of 80 percent or more when combined with Social Security.

The Long Haul

By Nevin Adams, EBRI


A recent long-distance family member move required that I rent a vehicle larger than the passenger cars that we generally rely on for transportation.  There were a number of considerations: cost, availability, the opportunity to drop off the vehicle on the other end, and the actual size of the vehicle.  I don’t really have much experience with such determinations; honestly, the carrying dimensions of the vehicle were posted, but I had no real idea how to equate what I needed to transport with those criteria.  I knew the individual pieces (certainly the large ones), but as you might imagine, they were of various shapes, sizes and weights, and worse, what needed to be carried was in multiple locations, which made it even more difficult to make a proper estimation. 

That said, I made my best guess – chose one that seemed big enough to handle the load but that was still small enough for me to handle comfortably – reserved the vehicle and waited for the pickup day to arrive.

The day before I was due to pick up the vehicle, I got an email from the rental company telling me that they had decided to upgrade my rental to a larger vehicle, at no additional cost to me.  Now, I’m sure they felt they had done me a big favor.  But what they had actually done, despite my very careful planning – and just 24 hours prior to the move – was to give me a vehicle that was not only larger than I needed, but one that was very likely beyond my driving capabilities, certainly over the distances I had to travel.

Planning for retirement is often compared to preparing for a big trip – trying to figure out what you’ll need for the journey, estimating the fuel you’ll need – but ultimately not being precisely sure at the outset how long the trip will last.  Those who sit down to make the calculation – and, according to the Retirement Confidence Survey1, many still haven’t – may find it hard to match the components of their retirement income with the needs of their retirement journey, certainly without the assistance of a retirement planning calculator (such as the Ballpark E$timate®2) or a professional advisor’s expertise.  Indeed, recent EBRI research indicates that individuals who take advantage of either resource set more adequate savings goals3.

Still, things change, and life has a way of throwing unexpected things in our path; even the well-laid plans of a few years ago are well-served by revisiting both the underlying assumptions and the projected needs.  Because, after all, you never know what you’ll have to deal with over the long haul.


1 Workers often guess how much they will need to accumulate (45 percent), rather than doing a systematic, retirement needs calculation, according to the RCS, while 18 percent indicated they did their own estimate, another 18 percent asked a financial advisor, 8 percent used an on-line calculator, and another 8 percent read or heard how much was needed.

2 A great place to start figuring out what you’ll need is the Ballpark E$timate®, available online at www.choosetosave.org.  Organizations interested in building/reinforcing a workplace savings campaign can find a variety of free resources there, courtesy of the American Savings Education Council (ASEC).  Choose to Save® is sponsored by the nonprofit, nonpartisan Employee Benefit Research Institute Education and Research Fund (EBRI-ERF) and one of its programs, the American Savings Education Council (ASEC). The website and materials development have been underwritten through generous grants and additional support from EBRI Members and ASEC Partner institutions.

3 See “A Little Help: The Impact of On-line Calculators and Financial Advisors on Setting Adequate Retirement-Savings Targets: Evidence from the 2013 Retirement Confidence Survey,” online here

The Bigger Picture

By Nevin Adams, EBRI

AdamsOver the weekend, my daughter shared with us an insurance quote she’d received.  It had been a while since I had focused on such things, but I was struck first by how much it was.  It was for insurance in a different state, so we worked through the particulars, trying to be certain that we understood what was covered, matched that against her needs.  Ultimately, while much of the quote made sense, there were a couple of items that seemed too high.

As we probed those items, my daughter explained that the agent had made an effort to match those levels against her current coverage.  A logical enough inquiry and starting point, but one that (apparently) failed to take into account that her current coverage – as part of our family policy – would be quite different from what she needed on her own.  The agent got an accurate response to the question he asked – but it wasn’t the right question.

Individual Retirement Accounts, or IRAs, hold more than 25 percent of all retirement assets in the United States, which makes them a vital component of the nation’s retirement savings.  In fact, as an account type, IRAs currently hold the largest single share of U.S. retirement plan assets.  There are, however, different types of IRAs, and, according to a recent EBRI analysis[i], they differ in a number of ways.

For example, in the EBRI IRA Database[ii], which contains data collected from various IRA plan administrators on 20.5 million accounts, with total assets of $1.456 trillion, most of the new IRA contributions go into Roth IRAs, but most of the assets are held in traditional IRAs, where, as noted above, the money frequently originated from a rollover from other tax-qualified retirement plans (such as 401(k) plans).  In fact, the latest report from the EBRI IRA Database finds that 26 percent of Roth IRA owners contributed to their accounts in 2011, compared with just 6 percent of traditional IRA owners.

On the other hand, individuals with a traditional IRA originating from rollovers had the highest average and median (mid-point) balances ($110,918 and $31,944, respectively, compared with Roth average and median balances at $25,228 and $11,344) – and in the 2011 EBRI IRA Database, almost 13 times the amount of dollars were added to IRAs through rollovers as from new contributions.

Roth IRAs had a higher percentage of younger individuals contribute to them: 23.8 percent of the Roth accounts receiving contributions were owned by individuals ages 25–34, compared with 8.9 percent for traditional IRAs.  Moreover, Roth IRA owners were both more likely to contribute to their IRA and more likely to contribute in subsequent years – and those who are younger and own a Roth IRA were more likely to contribute to it than older Roth IRA owners.

While they account for nearly one in five of the accounts in the EBRI IRA Database, Roth IRAs represented only 7 percent of the $1.456 trillion in assets at year-end 2011.  Still, it’s easy to imagine how the trend differences highlighted above could, over time, impact key trends in terms of contributions, asset allocation, and withdrawal patterns[iii].

Research sometimes suffers from a tendency to extrapolate big conclusions from remarkably small samples.

On the other hand, the EBRI IRA database, with millions of individual account records drawn from multiple account providers, allows us to see the big picture, as well as the details that underlie, and perhaps shape, the longer-term trends.


[ii] The EBRI IRA Database contains data collected from various IRA plan administrators on 20.5 million accounts owned by 16.6 million unique individuals with total assets of $1.456 trillion. EBRI is building a database that will allow it to track the flow of retirement assets saved in 401(k) plans and other tax-qualified plans and transferred to IRAs and spent in retirement as people leave the work force.

[iii] The EBRI IRA Database is also unique in its ability to track people who own multiple IRAs, providing a measure of individuals’ consolidated IRA holdings. For instance, it shows that the overall cumulative IRA average balance was 24 percent larger than the unique account balance, providing a far more accurate picture of the assets held in these accounts by individuals.




By Nevin Adams, EBRI

Generalizations are often misleading, but I think it’s fair to say that some people (specifically among those of the male gender) are notoriously reluctant to ask for directions—even when it’s painfully clear to everyone else traveling in their company that they are “lost.” If you’re not one of those people, I’ll bet you know someone (and probably more than one someone) who is.¹

The rationalizations offered by those refusing to seek help are as varied and variable as the individual circumstances that bring those hesitations to light: a shortage of time; certainty that, however lost they seem, they actually know where they are (or will be shortly); a lack of trust in the reliability of the instructions they might receive; the inconvenience of stopping…this despite the knowledge (frequently even among those reluctant to ask directions) that the modest investment of time to seek assistance will likely be far less than the time (and aggravation) that they will expend trying to find their own way.

When it comes to retirement planning, reluctance to seek help seems even more widespread. In fact, the 2013 Retirement Confidence Survey found that fewer than half of workers surveyed have ever tried to calculate what they need to save for a comfortable retirement (see “Guess Work?”)—and that’s not a new finding in a survey that now spans nearly a quarter-century.

The use of retirement planning “help,” in the form of on-line calculators and professional retirement advisors, has been linked to higher levels of retirement confidence—and with justification, according to new EBRI research.³ Turns out that the respondents to the 2013 Retirement Confidence Survey² in the lowest-income quartile who had sought the input of a financial advisor cited savings goals that, compared with those who did not, would reduce the risk of running short of money in retirement by anywhere from 9 to nearly 13 percentage points, depending on family status and gender. Those in the lowest-income quartile who used calculators chose savings targets that would, if they achieved those goals, decrease their probability of running short of money in retirement by anywhere from 14 to more than 18 percentage points.

Unfortunately, only about one-fourth of the sample studied (25.6 percent) used either of these two methods.

Why, then, have so few sought direction? Doubtless the reasons for not doing so mirror those above: a lack of time, a lack of confidence in the directions, or in the individual providing that assistance. Perhaps in the case of retirement projection calculators, the tools may be too hard to find, too complicated to use, or simply just one thing too much to do in an already too-busy day. This, it seems fair to say, despite the knowledge that seeking help would surely provide a better outcome.

What about those who didn’t seek help, who “guessed” at those retirement savings targets? Well, there were more in that category in the RCS sampling (44.6 percent)—and, perhaps not surprisingly, they tended to underestimate their savings needs—in effect, citing a goal that would leave them short of their projected financial needs in retirement.

Baseball great Yogi Berra once cautioned that “You’ve got to be very careful if you don’t know where you’re going, because you might not get there.” When it comes to retirement, the problem generally isn’t getting there—it’s getting there before you are ready.


¹ These individuals may be harder to spot these days with the widespread availability of GPS devices, but they can still be found.

² See the 2013 RCS, on-line here.

³ “A Little Help: The Impact of On-line Calculators and Financial Advisors on Setting Adequate Retirement-Savings Targets: Evidence from the 2013 Retirement Confidence Survey” on-line here.