APP Solution

By Nevin Adams


A couple of weeks back, I was on one of Virginia’s Civil War battlefields, looking to join one of the local park ranger tours. This particular one was scheduled to start deep within the park itself, and while I left home certain that I knew where I was heading, when I got there, I quickly discovered otherwise.

Fortunately, or so I thought at the time, there were about a half dozen other individuals also looking to find the same tour. We quickly convened around a shared map, looked for landmarks, and—based on the collective sense of the group—headed off in what seemed to be the right direction.

Five minutes later I began to suspect we were not heading in the right direction, and 15minutes later I was sure of it. Then I remembered that I had recently downloaded a smartphone “app” for this particular battlefield—one that not only contained a map, but also a GPS feature that allowed me to not only find where I was but to visualize where I needed to be. With that, we could begin heading in the right direction.

Smartphones are an increasingly important part of our lives, in no small part because of the “apps” (short for applications) that they bring to us. These days, apps make it possible to order a pizza, identify that song playing on the radio (and order and/or download your own copy), scan price codes and comparison shop without leaving the store.

While many of today’s “apps” offer much in the way of entertainment and informational value, a great many of them also make it easy to spend , rather than save, money. In fact, the 2012 Retirement Confidence Survey by the Employee Benefit Research Institute and Mathew Greenwald & Associates, Inc., found that the use of technology, such as smart phones and tablet computers to help manage finances was still relatively rare.¹

But now there’s a new app designed to make it easier to know where you are in your retirement savings: the EBRI Ballpark E$timate,® developed by Matrix Group International, Inc., and the research team at EBRI, and provided by Choose to Save.®

As a web-based tool, and as a hardcopy reference, the EBRI Ballpark E$timate® (as well as other tools and information available at www.choosetosave.org²) has long helped millions of Americans do a better job of planning for their financial future.

Now the EBRI Ballpark E$timate® “app” (like that smartphone GPS) can help Americans do a better job of knowing where they are—so they can make sure they are headed in the right direction, too.

The EBRI Ballpark E$timate® is currently available as a free download from the iPhone store. More information is online here.


¹ “The 2012 Retirement Confidence Survey: Job Insecurity, Debt Weigh on Retirement Confidence, Savings,” is online here. 

² In addition to the Ballpark E$timate,® you will find a wide variety of free tools and innovative resources, including free videos that can be used to share key savings messages with participants available at

“Storm” Warnings

By Nevin Adams, EBRI


Amidst the recent coverage of Hurricane Isaac, I was reminded that it was only a year ago that Hurricane Irene came barreling up the East Coast. We had just deposited my youngest off for his first semester of college, and then spent the drive home up the East Coast with Irene (and the reports of her potential destruction and probable landfalls) close behind. We arrived home, unloaded in record time, and went straight to the local hardware store to stock up for the coming storm.

We weren’t the only ones to do so, of course. And what we had most hoped to acquire (a generator) was not to be found—there, or at that moment, apparently anywhere in the state.

What made that situation all the more infuriating was that, while the prospect of a hurricane landfall was relatively unique, we had, on several prior occasions, been without power, and for extended periods. After each I had told myself that we really needed to invest in a generator—but, as human beings are inclined to do, thinking that I had time to do so when it was more convenient, I simply (and repeatedly) postponed taking action.

Life is full of uncertainty, and events and circumstances, as often as not, happen with little, if any warning. However, hurricanes you can see coming a long way off. There’s always the chance that they will peter out sooner than expected, that landfall will result in a dramatic shift in course and/or intensity, or that, as with Hurricane Katrina, the real impact is what happens afterward. In theory, at least, that provides time to prepare—but, as I was reminded a year ago, sometimes you don’t have time enough.

I suppose a lot of retirement plan participants are going to look back at their working lives that way as they near the threshold of retirement. They’ll likely remember the admonitions about saving sooner, saving more, and the importance of regular, prudent reallocations of investment portfolios. The Retirement Confidence Survey (RCS) has, for years now, chronicled not only the current state of retirement unpreparedness of many, but their awareness of the need to be more attentive to those preparations. Sure, you can find yourself forced suddenly into an unplanned retirement—in fact, retiree respondents to the RCS have long indicated that they stopped working sooner than they had planned.¹ But most of us have plenty of time, both to see that day coming, and to do something about it.

Ultimately, of course, what matters isn’t the time you have, it’s what you do² with it.


¹ Twenty-five percent of workers in the 2012 Retirement Confidence Survey say the age at which they expect to retire has changed in the past year. In 1991, 11 percent of workers said they expected to retire after age 65, and by 2012 that more than tripled, to 37 percent. Those expectations notwithstanding, half of current retirees surveyed say they left the work force unexpectedly due to health problems, disability, or changes at their employer, such as downsizing or closure (see “The 2012 Retirement Confidence Survey: Job Insecurity, Debt Weigh on Retirement Confidence, Savings,” online here).

² A great place to start those preparations is to figure out what you’ll need, as millions of Americans have with the BallparkE$timate,® developed by the research team at the Employee Benefit Research Institute, and available online here.

Additionally, a wide variety of free tools and innovative resources, including free videos that can be used to share key savings messages with participants, is available here.

Different Mindsets

By Nevin Adams, EBRI


Last week Beloit College released the Beloit College Mindset List, as it has each August since 1998. Originally created as a reminder to faculty to be aware of dated references, the list provides a “look at the cultural touchstones that shape the lives of students entering college.”

For example, this year’s freshman class, born in 1994, have never known a time when history didn’t have its own channel, when there were tan M&Ms (or when there weren’t blue ones), or when “It’s A Wonderful Life” was shown more than twice during the holidays. They grew up talking about “who shot Mr. Burns?” not “Who Shot J.R.?” and while for them there’s always been an NFL franchise in Jacksonville, they’ve never known one in Los Angeles. That floppy disk icon for “save” in the word processing document is as anachronistic to them as the “CC” reference to “carbon copy” likely was to their parents’ email. And, perhaps most significantly, they have never lived in a world without the World Wide Web.¹

Despite those differences, the class of 2016 will one day soon be faced with the same challenges of preparing for retirement as the rest of us. They’ll have to work through how much to save, how to invest those savings, what role Social Security will play, and—eventually—how and how fast to draw down those savings.

Those fortunate enough to have access to a work place retirement savings plan at least stand to have some advantages their parents didn’t. They’ll have a better shot at joining those programs immediately, rather than waiting a year, as was once the norm. There’s a growing chance that they will be enrolled in those plans automatically,¹and with the option to increase that initial contribution automatically as well. The expanding availability of qualified default investment alternatives, like target-date funds, should make their investment choices easier and better diversified, and some will likely benefit from the counsel of a growing number of expert advisors. As for help in figuring out how best to draw down those savings in retirement, more choices and alternatives come to market every year.

However, they also have another big advantage (and one that helps make all those other advantages all the better): They’ll have the advantage of time, a full career to save and build, to save at better rates, to invest more efficiently and effectively.

It’s more than just a shift in mindset—and it could give retirement saving a whole new perspective.


¹ The full 2016 Mindset List (and links to prior years’ lists) is online here.

² EBRI has recently quantified the impact of eligibility for participation in a 401(k) plan on retirement readiness for Gen Xers. See this report online here.  See also “Retirement Income Adequacy for Boomers and Gen Xers: Evidence from the 2012 EBRI Retirement Security Projection Model,” online here.

Sums of Substance

By Nevin Adams, EBRI

An acquaintance of mine recently described to me the challenges of trying to help a family member rebalance their retirement portfolio, which at the moment was split between a 401(k), 403(b), and an IRA.

Curious, I asked him how the funds in the IRA were invested. He laughed and said, “Which one?”

The data suggest that my friend’s family member isn’t alone in that regard; the average IRA balance is about a third higher and the median (mid-point) balance almost 42 percent larger when multiple individual retirement accounts (IRAs) owned by an individual are taken into account, according to a recent Employee Benefit Research Institute (EBRI) analysis based on its unique EBRI IRA Database.™1

In fact, according to a recent EBRI report2, in 2010 the average IRA individual balance (all accounts from the same person combined) was $91,864, while the median balance was $25,296. By comparison, the average and median account balance of all IRAs was $67,438 and $17,863, respectively. Compared with 2008, the average and median individual balances are up 32 and 26 percent, respectively.

Individual retirement accounts (IRAs) are a vital component of U.S. retirement savings, holding more than 25 percent of all retirement assets in the nation.  Moreover, a substantial portion of these IRA assets originated in other tax-qualified retirement plans, such as defined benefit plans (pensions) and 401(k) plans, and were moved to IRAs through rollovers from those plans.

Keeping up with, and managing, retirement savings accounts remains both a challenge and an opportunity for individuals, all the more so when those savings are held in multiple accounts and locations.  Similarly, an understanding and appreciation of the complete picture offers the best perspective for crafting effective retirement savings policies.

Sometimes you can’t see the forest for the trees – but, as the data suggest, it’s important to remember that the “forest” is the sum of all the trees.


1The EBRI IRA Database™ is an ongoing project that collects data from IRA plan administrators. For year-end 2010, it contains information on 14.85 million accounts for 11.1 million unique individuals with total assets of $1.002 trillion.  A unique aspect of the EBRI IRA Database™ is the ability to link the balances of individuals with more than one account in the database, providing a more complete picture of their IRA-based retirement savings.  For more information, see Individual Retirement Account Balances, Contributions, and Rollovers, 2010: The EBRI IRA Database TM here.

2Individual Retirement Account Balances, Contributions, and Rollovers, 2010: The EBRI IRA Database TM  

Nursing Home Entry Rates Rise, Weigh on Wealth Levels

As more American senior citizens are entering nursing homes they face the likelihood that their household wealth will be quickly depleted, according to new research by EBRI.

The EBRI research notes that nursing home stays among older Americans have increased steadily during the past decade: Nursing home stays increased from 6 percent of those age 65 and older in 2000 to 8.5 percent in 2010.

Seniors face a number of retirement planning uncertainties like longevity risk, inflation risk, and investment risk, but perhaps none as critical to their retirement security as health risk. EBRI’s research also shows dramatic differences in wealth levels between those who enter a nursing home and those who do not, based on data from the Health and Retirement Study (HRS).

For instance, after respondents’ first entries into a nursing home, total household wealth fell steadily over a six-year period. By comparison, household wealth increased steadily over the survey periods for those who never entered a nursing home. The EBRI report notes that the average cost for a semi-private nursing home room in the United States is $207 a day (or $75,555 a year) and between 10–20 percent of those who enter a nursing home will stay there for more than five years.

“Given the potentially catastrophic expenditure shock associated with nursing home stays, it is very important to examine how those who entered nursing homes in the past or those who are still living in those facilities manage their portfolios following a nursing home entry,” said Sudipto Banerjee, EBRI research associate and author of the report. “Almost all types of assets decline fast and steadily for those who enter nursing homes. In contrast, similarly aged people who never enter nursing homes experience a steady increase in their assets.”

The full report is published in the June 2012 EBRI Issue Brief, “Effects of Nursing Home Stays on Household Portfolios,” online here. The press release is online here.

State “Capital”

By Nevin Adams, EBRI


This past week I had the opportunity to attend the National Financial Capability Study Roundtable, where a variety of researchers (including EBRI’s Sudipto Banerjee) presented, discussed, and challenged a variety of research papers on topics ranging from financial literacy and retirement planning to financial advice, and from financial literacy and financial behavior to “Prohibition, Price Caps and Disclosure.” Taken as a whole, the day’s discussions focused on ways to better understand and measure the factors that appear to influence individual behaviors regarding their finances.

Simply stated, financial literacy is generally described as the ability to understand finance. More recently, some have begun to focus on financial capability.¹ Research has shown that people with higher levels of financial literacy approach retirement with much higher levels of wealth. However, a growing body of research also suggests that most Americans have limited knowledge about concepts such as inflation, compound interest, and risk diversification at a time when they face an increasingly complex financial planning process alongside an expanding set of saving, investment, and decumulation options.

Drawing on data from the National Financial Capability Study (NFCS),² designed by the FINRA Investor Education Foundation (an ASEC-member firm), Dr. Banerjee’s report³ noted that the chances of having a bad financial behavior decreases with age, and that the chances of exhibiting a bad financial behavior go down with education and income. Interestingly enough, full-time and part-time workers, homemakers, sick or disabled, and unemployed or laid-off individuals were all more likely to have bad financial behavior than self-employed people.

That said, the report specifically examined the role of where you live—specifically the state in which individuals live—in explaining financial literacy and behavior. It also ranked all U.S. states in terms of financial literacy and financial behavior of its residents.

Financial literacy and financial behavior are strongly associated with an individual’s age, income, education and other demographic characteristics. The study shows that, after controlling for the effect of these individual demographic characteristics, most bottom-ranked states had a statistically significant effect on their residents’ financial literacy and almost all states have a statistically significant effect on their residents’ financial behavior. However, the chance of exhibiting “worse” financial behavior increased as the financial behavior ranking dropped.

According to the report, this suggests that there might be factors shaping individual financial literacy and behavior other than individual demographic characteristics–and they might be influenced by the state in which people live.


¹ The National Financial Capability Study identifies four key components of financial capability as (1) making ends meet, (2) planning ahead, (3) managing financial products, and (4) financial knowledge and decision-making. The report is online here.

² The National Financial Capability Study is available online here.

³ Banerjee’s paper, including the state rankings, is online here.  See also “How Do Financial Literacy and Financial Behavior Vary by State?” in EBRI Notes, November 2011, online here.

Planning Ahead

By Nevin Adams, EBRI


April is Financial Literacy Month, and National Retirement Planning Week, sponsored by the National Retirement Planning Coalition (of which EBRI’s America Savings Education Council (ASEC) is a member) is April 9–13. Both events serve to remind us all of the importance not only of saving, but of establishing specific goals for saving.

I was pleased, therefore, this past month to help one daughter set up her first SEP-IRA—and even more pleased to about the same time learn that my other daughter was, of her own volition, making a conscious effort to set aside what seemed to her father to be a fairly substantial portion of her modest income in savings. These are things I knew to do when I was their age, of course, but things I must admit took me a few years to act on.

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 we can afford just now, some assume the process will provide a depressing, perhaps even insurmountable target, while others don’t even know how to get started (see Goals Tending, online here).

Here are five reasons why you—or those you care about—should save for retirement now:

Because you don’t want to work forever.

If you want to stop working one day, you are going to have to think about how much income you will need to live after you are no longer working for a paycheck.

Because living in retirement isn’t free.

Many people assume that expenses will go down in retirement—and, in fact, a recent EBRI Issue Brief noted “With the age 65 expenditure as a benchmark, household expenditure are lower by 19 percent by age 75, and 34 percent by age 85….” On the other hand, there are changes in how we spend in retirement as well—and they aren’t always less. That same EBRI report notes that health-related expenses are the second-largest component in the budget of older Americans, and a component that steadily increases with age. “Health care expenses capture around 10 percent of the budget for those between 50–64, but increase to about 20 percent for those age 85 and over.” And those spending shifts don’t take into account the possibility of a need or desire to provide financial support to parents and/or children.

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

Twenty-five percent of workers in the 2012 Retirement Confidence Survey say the age at which they expect to retire has changed in the past year. In 1991, 11 percent of workers said they expected to retire after age 65, and by 2012 that has more than tripled, to 37 percent. Those expectations notwithstanding, half of current retirees surveyed say they left the work force unexpectedly due to health problems, disability, or changes at their employer, such as downsizing or closure (see “The 2012 Retirement Confidence Survey: Job Insecurity, Debt Weigh on Retirement Confidence, Savings”).

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

People are living longer and the longer your life, the longer your potential retirement, particularly if it begins sooner than you think. Retiring at age 65 today? A man would have a 50 percent chance of still being alive at age 81 (and a woman at age 85); a 25 percent chance of living to nearly 90; a 10 percent chance of getting close to 100. 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? A good place to start is the BallparkE$timate,® and with the other materials available at 

More information about National Retirement Planning Week is available online here. 

Information about the Spring 2012 American Savings Education Council (ASEC) Partners Meeting, with a focus this year on retirement planning is available online here.

“Generation” Gaps

By Nevin Adams, EBRI


If you think it’s complicated trying to determine an individual’s retirement funding needs, imagine trying to do so for all American workers. That was the topic of a Senate Banking subcommittee hearing last week titled “Retirement (In)security: Examining the Retirement Savings Deficit,” at which EBRI Research Director Jack VanDerhei was asked to testify.(1)

When EBRI modeled the retirement savings gap of Baby Boomers and Gen Xers earlier this year, we found that between 43 and 44 percent of the households were projected to be at risk of not having adequate retirement income for BASIC retirement expenses plus uninsured health care costs—though that was 5–8 percentage points LOWER than what we found in 2003. That’s right: In terms of that retirement savings gap, American households are better off today than they were nine years ago—even after the financial and real estate market crises in 2008 and 2009.

Measuring retirement income adequacy is an extremely important and complex topic, and one that EBRI started to provide back as far as the late 1990s. Our recent projections indicate that the average individual deficit number (for those with a deficit) ranges from approximately:

• $70,000 for families, to

• $95,000 for single males, to

• $105,000 for single females.

Stated in aggregate terms, that would be $4.3 trillion for all Baby Boomers and Gen Xers in 2012. That’s a large number, to be sure, but still considerably smaller than some of the projections that have been put forth.

Here are four things that are sometimes overlooked that help explain the “gaps” in retirement projection gaps:

Some won’t have a retirement

The reality is that some people won’t make it to retirement. On an individual level, we may not know who they are, but in the aggregate we can project the impact with some precision.

You can’t ignore the impact of uniquely post-retirement expenditures.

Health care costs—and post-retirement health care costs particularly—remain a potential source of underplanning, both for retirement and retirement projections. The reality is that we spend differently in retirement than we do before retirement. Moreover, the costs of care, and particularly care such as nursing home and/or long-term care, loom large. And many won’t think or insure for that risk until it’s too late.

Tomorrow’s retirement will be funded differently.

Looking back, even only a few years, assuming that the income sources of current retirees will be available to future retirees glosses over the reality that a major shift in emphasis in retirement plan design has taken place. In the future, the proportion of retirees receiving traditional pension income will almost certainly decline, and the percentage relying on defined contribution savings (primarily 401(k)-type plans) as a primary source of post-retirement income is certain to increase. Projecting future retirement income flows based on the experience of today’s retirees is certain to miss the mark.

We’re already saving “better.”

Thanks to the growing popularity of automatic plan design trends—automatic deferrals, contribution acceleration, qualified default investment alternatives—many of today’s retirement plan participants are already saving earlier and investing more age-appropriately than ever before. There’s no reason to assume these trends won’t continue to extend and expand going forward. Projections based on pre-Pension Protection Act defined contribution trends are relying on yesterday’s news.


(1) Video of the hearing is available online here.

Dr. VanDerhei’s testimony is available online here.

EBRI Data in USA Today

The Feb. 21 USA Today article “Five Retirement Planning Mistakes to Avoid”  (“Dugas”) featured results from EBRI’s Feb 2011 EBRI Notes “Labor Force Participation Rates of the Population Age 55 and Older: What Did the Recession Do to the Trends?”

The article notes:

“Retirement planning is a whole new world when compared with the reliable three-legged stool that the World War II generation relied on.”

“They had Social Security, pension plans and personal savings,” says Robert Krakower, a financial planner and author of Redefining Retirement for a New Generation. “They would stop working and have guaranteed income.”

“Some people aren’t worried about their retirement savings because they plan to keep working for many years. Last year, the number of workers 55 and older was at the highest level in 35 years, according to new research by EBRI.”

The full USA Today article is online.

The full EBRI report is online here.