Data & Research July 8, 2010

Research Shows Retirement Income Adequacy Lacking at Large Firms

A study of 84 large employers from Hewitt Associates finds that employees who contribute to their savings plans over a full career are on track to have retirement resources of 13.3 times pay at retirement age.
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This is 15% short of their need of 15.7 times pay, according to Hewitt’s report. The shortfall grows to 32% when including both employees who contribute and those who do not.  

The study found about 18% of employees are expected to satisfy 100% of their needs at retirement, while about 19% are expected to have a shortfall of more than five times pay at retirement age. The differences are largely attributable to individual factors such as in which plans they participate, savings plan behaviors, and gender, the report says.  

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The average shortfall for employees with access to a defined benefit plan, whether frozen or not, is only 1.4 times pay at retirement age, compared to a shortfall of 4.3 times pay at retirement age for those with access to only a defined contribution plan.  

The study assumes retirees will have access only to group medical plans from their prior employers, without any company-provided subsidy.  If an employer provides a subsidy worth 50% of the plan cost, the percentage of retirement needs met for employees would increase from 85% to 94%, Hewitt found. 

Since females in the study tend to have lower pay and smaller retirement plan account balances, the shortfall for women is higher by 1.3 times pay at retirement. 

Hewitt notes that early retirement (age 62) significantly increases the shortfall for employees and late retirement (age 67) significantly improves retirement income adequacy.  

Not surprisingly, non-contributing employees are projected to have resources totaling only 43% of their retirement income needs.  

The Hewitt report, Retirement Income Adequacy at Large Companies: The Real Deal, is here.
Products July 8, 2010

Interactive Data Provides Analytics for Bulletshares Indices

Interactive Data Corporation has announced that it is providing end-of-day index values as well as analytics capabilities for ten of Accretive Asset Management, LLC’s Bulletshares USD Corporate Bond Indices.
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According to the announcement, the Bulletshares USD Corporate Bond Indices are based on Accretive’s Bulletshares indexing methodology and are designed to provide maturity-targeted exposure to the U.S. investment grade corporate bond market. Each index tracks a basket of bonds and is designed to have a cash flow profile similar to that of an individual held-to-maturity bond.   

Accretive utilizes proprietary independent fixed income evaluations, obtained through Interactive Data’s Basket Calculation Service, to obtain end-of-day index values for Bulletshares USD Corporate Bond Indices. Accretive also uses the Interactive Data Fixed Income Analytics BondEdge platform and indexing tools to help construct and manage the constituent securities and cash flows.   

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BondEdge provides fixed income security and index analytics on a daily basis to help Accretive determine the qualified list of fixed income security candidates and to support and maintain the Bulletshares Corporate Bond Indices.   

“These 10 new indices were designed to combine the best attributes of both bonds and bond funds so that financial advisers can use them as effective benchmarks for meeting their clients’ investment needs,” said Darrin DeCosta, Head of Product Development for Accretive, in the announcement. “Interactive Data provides us with critical data and analytics capabilities to support these indices and our innovative fixed income indexing methodology.”   

Performance and constituent data, along with others descriptive statistics for BulletShares USD Corporate Bond Indices are available at http://www.bulletshares.com.

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