news release from the Employee Benefit Research Institute (EBRI) about its 2010 EBRI Retirement Readiness Rating also indicated that after 20 years of retirement, 29% of those in the next-to-highest income level will run short of money, as will more than 13% of those in the highest-income level.
The highest income Americans are at the lowest risk of running short of money in retirement, but many in the highest income category still face significant risks of not being able to pay basic expenses and uninsured medical expenses for the remainder of their lives, EBRI said.
According to EBRI, nearly half of early Baby Boomers—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.
“As the private-sector retirement plan system evolves from a largely paternalistic one to a system in which workers must make their own decisions, policymakers need to understand what percentage of the population is likely to fail to achieve retirement security under current conditions,” said Jack VanDerhei, EBRI Research Director and principal author of the study, in the news release. “Even more important is to identify which of those households still have time to modify their behavior to achieve retirement security, and how they need to proceed.”
Effect of DC Eligibility
When the results of the analysis are classified by future eligibility in a defined contribution plan the differences in the “at-risk” percentages are quite large, EBRI said in the news release. For example, Gen Xers with no future years of eligibility have an “at-risk” level of 60%, compared with only 20% for those with 20 or more years of future eligibility.
The analysis also models how much additional savings would need to be contributed from 2010 until age 65 to achieve adequate retirement income 50%, 70%, and 90% of the time for each household.
The EBRI Retirement Readiness Rating is based on EBRI’s Retirement Security Projection Model
More about the study is here.
Key findings, according to the Employee Benefit Research Institute news release, about its 2010 EBRI Retirement Readiness Rating include:
How Long Money Will Be Enough in Retirement: The analysis shows how long early boomers’ retirement money will not fall short, by preretirement income quartiles, assuming retirement at age 65.
After 10 years of retirement:
- Lowest-income quartile: 41%
- Next-lowest quartile: 23%.
- Third income quartile: 13%.
- Highest-income quartile: 5%.
After 20 years of retirement:
- Lowest-income quartile: 57%
- Next-lowest quartile: 44%.
- Third quartile: 29%.
- Highest-income quartile: 13%.
Those “At Risk” of Running Short of Money, by Age: Includes 2010 and then 2003 figures for the percentage chance of being at risk.
- Early Boomers (ages 56–62): 47.2%, 59.2%
- Late Boomers (ages 46–55): 43.7%, 54.7%
- Generation Xers (ages 36–45): 44.5%, 57.4%