Retirement Readiness Surges with Focus Shift to Actual Data

  “Sure, it will probably be more work, and generate fewer clicks,” commented one industry source, “but it’s the right thing to do.”

Yes, after years of relying on uninformed “guesses” from individuals ignorant of their financial needs and situation, the retirement industry, major media outlets, and a large number of academics have made a commitment to focus on actual data, rather than hypothetical extrapolations from incomplete datasets.

Another explained, “we always thought that exaggerating the depth of the retirement crisis would encourage people to save more — but that turns out not to be the case.” Those projections affixed labels like “magic” to those extrapolated numbers based on surveys of uninformed workers, which not only ignored real differences in incomes, location and age, but were typically also averaged to further obscure accurate results. Likely fueled by previous reports of needed retirement savings, surveys of individuals routinely exaggerated the real needs of retirement finances — fueling future projections as well. 

“While self-assessment can be a critical foundation for retirement needs planning, we are committed to sharing real-world perspectives on actual retirement needs,” noted one industry expert. We’re ready to call “bs” on inflated, uneducated and unrealistic “estimates.”     

Part and parcel of this previous approach — and reinforcing its messages — were academic studies that mixed results of those who participated in a workplace retirement plan with those who never had, and individuals within five years of retirement with those who had just started working. All breathless reported by a media then-clamoring for click-bait ready headlines.     

An academic noted that, “I’m not sure what people expected since we routinely built our projections on the projections of others, who were — as it turned out — based on survey data from — well, questionable sources. No wonder we kept coming up with the same results.”

Indeed, new research, published by the Oxford Newfound Institute of Nihilism (ONION), finds that workers — no longer persuaded by “retirement crisis” headlines that there wasn’t any point in trying — now are taking proactive steps to understand their situation, often with the help of trained advisors. Previous research had shown that fewer than half of workers had made even a single attempt to assess their retirement needs, and many of those had simply … guessed.

Ironically, despite this newfound and dramatic increase in confidence, the new retirement savings goals were not only more likely to produce a successful outcome, they were generally higher than the goals previously set by workers who had gone through the process.

In fact, some of the most dramatic impacts were recorded by participants in plans where employers had not only provided for automatic enrollment immediately upon hire, but who applied automatic enrollment retroactively to existing hires as well. “All these years, I just assumed my employer thought it was too late for me to start saving,” said one long-time worker who had just been automatically enrolled under such a program. 

A separate, plan sponsor-focused report found that the renewed focus and confidence translated into tangible workforce management benefits as well. “We found that a growing number of older workers were simply hanging on to their old jobs, afraid to retire because they had no idea how much they would need to have in retirement,” observed one. “Now, for the first time in a long time, we’re seeing workers actively plan for their retirement date with confidence. We should have done this years ago!”

No foolin’.

• Nevin E. Adams, JD

Note: Sure, it's April Fool’s, but while the post above has a certain tongue-in-cheek character, the implications are not as fictional as you might think. In fact, they are well within the realm of a very potential reality for millions more — with a little help from plan advisors, their plan sponsor clients and the cooperation of plan participants. Not holding my breath on the shift in focus by the media, academia, or — sadly — even the retirement industry itself.

‘Scare’ Tactics

 Could someone please explain to me why the retirement industry keeps publishing ridiculous, uninformed and often ludicrous notions of retirement income needs?

Honestly, I have no earthly idea what value any rational thinking person would attach to the guesses that an uninformed public makes about retirement income needs. But then why any credible source would take those guesses and then AVERAGE them (cause you know how much more accurate an average is[i]) for publication is — well, it’s the kind of thing that makes my head hurt (particularly after repeated banging of my head on a table after reading another).

The latest I stumbled across came from BlackRock, which — based on a survey of “1,000 national registered voters in the United States” — declared that $2.191 million is the “average expected amount of savings needed for retirement.”

Seriously?

No wonder among that same group just 22% were deemed to be “extremely or very confident they will have enough money to live on throughout their retirement years.” I’m surprised it was that high.

Speaking of high, take just a second and apply the 4% drawdown “rule” to that wild-eyed estimate, and you’d find that produces $87,640 in annual income — on top of Social Security! Think people could muddle by on THAT?

Sadly, the sponsors of this survey have the ability to shrug, and say “well, that’s what people think.” But shouldn’t knowledgeable people in this industry have a responsibility to call “BS” on that kind of crazy assumption? 

Unfortunately, there’s not even a footnote here to suggest anything other than the perceived need is real — juxtaposed, I should add by the numbers this same (likely equally misinformed) group puts forth as the amount of savings they have.    

Look, BlackRock is not the only — and probably not the last — to put forth this kind of nonsense. Northwestern Mutual did so last April — even having the temerity to label it a “magic” number (though they “only” said it was $1.46 million). This being an annual “event” of theirs, I’m sure an “update” is forthcoming. More’s the pity. 

One assumes that the purveyors of these data points see it as a “wake up” call to folks, a motivation. But I think this “scare tactic” — there’s really no other word for it — is more likely just another sign to regular folks that they’ll NEVER manage to reach it — and surely some, perhaps most, just give up, or don’t even try in the first place. Not to mention the encouragement it doubtless provides to those who want to proclaim the system is “broken.”

What people think they’ll need is one thing — but I would argue that we have a responsibility to help them understand what they really need. 

And it’s not exaggerated, uninformed “scare tactic” guesses.

• Nevin E. Adams, JD

 

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[i] Averages are easy math — but misleading. In this case that average tells us nothing about the relative breakdown on age brackets, incomes, where they live, their health, etc.  What someone needs (or thinks they need) living in New York City is (or should be) considerably different from the projections of someone living in Dubuque, Iowa.   

(Back to) The Way We Were

  It’s hard to believe that it’s now been five years ago that many of us went into our places of work, packed up, and went home for what most thought would be a week, maybe two — and wound up being a lot more than that.

I was reminded of just how long it had been at a meeting last week — a group that first gathered a little more than five years ago. Honestly, until it came up in discussions, I hadn’t realized how long it had been — and how much has changed since.

In March 2020, my wife and I had just returned from a funeral in the Boston area. While the worst of what we would come to learn about COVID was — well, yet to be learned — we knew that cautions were in order. So we drove, rather than flew to the event — which wound up being full of strangers (many of whom were in what would come to be acknowledged as “vulnerable” health categories).

In hindsight, what might have been a “super spreader” event didn’t turn out to be one —even though less than 48 hours later the governor of the Commonwealth was putting in place lockdowns and restrictions that would have precluded our trip. We’ve not regretted that trip for a moment over the past five years, though on more than one occasion since I’ve thought to myself just how remarkable that was. It could have been life-changing.   

Back to ‘Normal’

Of course, by some, perhaps most, measures — we’re now back to “normal.” Oh, I know there are still debates about returning to the office, and there are doubtless more Zoom/Team calls today than pre-COVID (though almost certainly less than there were in the middle of it). That said, one rarely sees a mask in public these days, even in the most crowded airports. Indeed, what some might call resilience, others term complacency — and there’s little doubt in my mind that, for ill or better, should another pandemic emerge, we’ll likely respond differently than we did for COVID.   

That said, while COVID, or the response to COVID, has affected us all in some ways — and continues to do so — the impact was … uneven. Some industries — ours included — pretty much packed up one night, went home — and continued to do what we do every day (with modest adjustments). Some — notably schools — tried to pivot to remote learning overnight with what were deemed necessary, but arguably unsatisfying results. At some point, we should have learned (admitted?) that viruses don’t respect bar curfews, and that religious gatherings are no more (or less?) hazardous than gathering in bars or restaurants (except perhaps, to the economy). 

And then there were some — and here one can’t help but acknowledge the bravery, commitment and sacrifice of healthcare and long-term care workers — who not only “couldn’t,” but were required to put their very lives at risk in the service of others. Indeed, I’ve walked away from this experience convinced that (1) most of the jobs that can’t be done from home are probably worth more than they’re paid; (2) many likely live further from work than we’d prefer; and (3) many of us live further from the ones we love than we realize.

All that said, five years ago who could have imagined how much our lives — and our very way of existence could change … overnight. While there were many dark and uncertain days in between then and now, I’m in awe of the resilience with which we’ve recovered, the degree to which we have returned — more or less — to “normal.” That said, I hope we never lose our collective memory of what it was like to open our mail outdoors, to feel the ache of not being able to gather with loved ones, or worse — to be precluded from being with them at life’s end.       

With all the sadness and uncertainty that came with COVID, I’m thankful for its renewed appreciation for life, family, and friends — for the time it gave to think about what’s really important in life. For the reminder it provided of the impact and importance our physical health brings to our focus on financial preparations, and yet the critical role that our financial preparations provide in and for our lives. 

Here’s hoping, in other words, that while in many ways we are back to “the way we were” — that that “way” includes a renewed appreciation for what we have — and what we might yet lose.

• Nevin E. Adams, JD

'Springing' Forward?

 This past weekend most of America underwent a rather painful change — though it’s probably only just setting in.

I’m talking about the legally mandated move to Daylight Saving Time (for most of us[i]). That’s right, at 2:00 a.m. on March 9, clocks around the nation “sprang forward,” reversing course from last fall when the move was to “fall back” to standard time.

It’s a “movement” laid at the feet of none other than Benjamin Franklin who, in what’s been characterized as a “satirical” letter to the editor of The Journal of Paris in 1784 pitched “the economy of using sunshine instead of candles.” 

Mr. Franklin may have been satirical, but the economic rationale for this artificial time contrivance lingers on. It was certainly a factor in 1916 when Germany saw adjusting the time as helpful to its war effort. Great Britain embraced the same logic the following year, and by March 1918[ii] the (now at war) United States was on board — well, sort of. It only lasted till the end of that war, was picked up again (briefly) during WWII (when it was called “War Time”), though afterwards it was optional (that must have been fun)[iii] — and then pretty much faded from sight until the mid-1960s.      

This decision is often laid at the feet of agriculture (more specifically farmers, who generally speaking abhor it), but that business tends to be driven by the actual patterns of the sun, rather than the artificial constraints of a clock (as anyone who has pets that expect to be fed at certain times whatever the clock may show can attest). The reality is that the science on cost savings related to these shifts remains contradictory at best. In fact, there’s a better case to be made for the negative effects these shifts have on our body’s natural circadian rhythms, with studies suggesting it has led to increased traffic accidents and even heart attacks. 

What About Retirement?

Regardless of its origins, DST remains something of an artificial constraint, founded on one set of (arguably) archaic assumptions of (certainly now) questionable validity. It’s not entirely unique in that respect. Consider, for example, the idea of a starting contribution rate of 3% for automatic enrollment plans. Now, since the enactment of the Pension Protection Act of 2006, we’ve at least had a legislative “anchor” for an assumption that is, and has long been, almost uniformly seen as insufficient (not just to achieve retirement security, but in many cases to maximize the employer match). 

But for decades before that (harkening back to a time when some marketing genius labeled it “negative election”), 3% became a de facto default rate. Sure, there was some logic (rationalization?) that it was small enough to discourage participant opt-out (and, looking at the opt-out rates for state-run IRAs with a higher default, there’s perhaps some merit to that concern) — but mostly it anchored on long-standing practice — that was, in turn, anchored on an obscure reference in an example in an IRS bulletin.[iv] One that, as it turns out, was carried over into the automatic-enrollment requirement for new plans as part of the SECURE 2.0 Act of 2022.

We similarly have, though perhaps not as myopically, enthusiastically embraced the use of professionally managed target-date funds as a default investment — though most seem to have surreptitiously adopted a “through” retirement glidepath that may, or may not, align with participant expectations. Managed accounts, ostensibly with a more personalized focus, stand to enhance and improve participant investment allocations — provided the fees are commensurate with the promised value. 

We seem to be stuck with DST and its implications for yet another season, despite what appears to be annual legislative attempts (promises?) to undo it. And so, probably for the rest of this week at least, most of us will be a bit “discombobulated.” 

It is worth remembering, however, that we aren’t “stuck” with the traditional defaults — that we can “spring” forward, regardless of the season — and there are plenty of good reasons — and options — to do so.

Nevin E. Adams, JD 

 

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[i]  I’m looking at you, Arizona, Hawaii, and… Daylight Savings 2025: The US States Where Clocks Don't Change - Newsweek

[ii] Fun fact: In 1920, The Washington Post reported that golf ball sales in 1918 — the first year of daylight saving — increased by 20%.

[iii] Daylight saving time didn't become standard in the U.S. until the passage of the Uniform Time Act of 1966, which mandated standard time across the country within established time zones. It stated that clocks would advance one hour at 2 a.m. on the last Sunday in April and turn back one hour at 2 a.m. on the last Sunday in October. States could still exempt themselves from daylight saving time, as long as the entire state did so. In the 1970s, due to the 1973 oil embargo, Congress enacted a trial period of year-round daylight-saving time from January 1974 to April 1975…in order to conserve energy.

[iv] Page 8 — an example regarding "negative election" used 3%... https://www.irs.gov/pub/irs-irbs/irb98-25.pdf

4 Tips From My 'Retirement'

  Two years into “retirement,” I feel like I have learned some things worth passing along — to you, or those of your acquaintance who may be considering taking the retirement “plunge.”

I’ve taken a lot of good-natured ribbing over the past two years as to how I “suck” at retirement. That said, I’ve noticed that most of the folks telling you what retirement “should” be haven’t actually experienced it. Consequently, I’ve learned to take that counsel with a grain of salt. 

Here’s some stuff that I have learned on my “journey”… 

Make Sure You’re Retiring TO Something

Someone has said that retirement is when you get to “stop living at work and start working at living.” A long time ago I was counseled that you should never run from a job you don’t like, but rather head towards one you do — the concern being that if you’re in the former category, you’re likely to trade the proverbial frying pan for the fire. 

I think the same thing is true when it comes to retirement. Granted, it’s hard to imagine what that will be like until you’re living (in) it — which is why concepts like a “phased” retirement — a winding down of current responsibilities and time in the office — can be helpful — if you can manage it. 

For me, the COVID years working from home was my trial run (though I didn’t know it then), with my time focused more on things I liked doing (was it just me, or were there a LOT fewer meetings then?), the elimination of a rough commute — and more importantly, being at home with my dear wife 24 hours a day (more precisely her having me around 24 hours a day).          

Set Aside Time for Fun/Pleasure

I know it sounds oxymoronic, but it’s way too easy to put off for another day things that you enjoy doing — and when you’re retired, there’s always “another day.” It doesn’t have to be big things — in fact, it shouldn’t be. My wife and I had a “small” bucket list of things — day trips, really — stuff that we’d always talked about doing, but they weren’t big enough to warrant a big plan — but were just a little too far for us to just pick up and do them spur of the moment. So, we set aside a day each week to do them — and it worked!

We got a little off-track when we decided it would be a good time to pick up and move to a different state (and it was a good idea). And I’ve recently acquired both a hiking and driving guide to the nearby Great Smoky Mountains, and a Tennessee State Park “adventure book.”  Trust me, we’ve got a plan.  

Make It a Point to Stay in Touch

Let’s face it — we spend a huge amount of our day at work, and it’s only natural that our social circle tends to be pretty work-centric. That said, a recent LinkedIn post by my now-retired friend Jeanne Thompson reminds me/us that there’s a difference between friends you work with and “work friends” — specifically, if you don’t have their cell phone number, haven’t gone out with them socially (outside of work-related events), haven’t met their families, or aren’t connected with them on Facebook (yeah, I know it’s for “old” people)… well, once you lose that work connection, there’s a pretty good chance that you’ll lose that “friend” as well.

It's tough to stay in touch with folks who are still working — but even if you have to reschedule (or cancel) regular check-ins, you’ll both benefit from the effort.

Don’t Be Shy About Hanging Out Your ‘Shingle’

There wouldn’t be much point in retiring if you just turned around and started working again. That said, it can be hard to go from running at 120 mph to 0 — sort of like when you miss that moving sidewalk end point. Trust me, at some point during that first year you’ll go from being happy you aren’t getting those weekend calls to worrying that you never get any calls at all. 

Beyond that, there will likely come a point when you are interested/willing to — for pay or not[i] — contribute your expertise/insight. If you’re interested in those kinds of endeavors, it’s worthwhile to let folks know. 

And folks, if you see someone you respect/admire retiring, it’s always nice to be asked…

• Nevin E. Adams, JD

p.s., you might also enjoy checking out the “retirement minds” podcast about my retirement “process” at: https://creators.spotify.com/pod/show/nevin-adams5/episodes/Season-1--Episode-3-Nevin-E--Adams--JD-e2ouquf/a-abi5pcl

Or online at: The Minds. . . Retirement Minds

 

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[i] On a cautionary note, Uncle Sam, courtesy not only of income tax but the dreaded self-employment tax (where you pay both the employer AND employee FICA taxes, even as you’re collecting Social Security) will take a large amount of your 1099 Income — and that may well impact your Medicare premiums. Make sure it’s worth your “while.”  

Less Than You’d Think

 “Larry Fink Knows Less About Retirement Than You’d Think an Investment Billionaire Would.”

That’s the provocative title of a recent Substack column by Andrew Biggs, a senior fellow at the American Enterprise Institute.[i] Not that Biggs offered a truly harsh criticism. Rather, he equated the comments of Larry Finks with that of “someone who reads the newspaper, the same as you or me.” 

Of course, and as yours truly has commented on any number of occasions — and what Biggs calls out — is that “much of what you read about retirement in the newspaper or online or even in so-called studies just isn’t correct.” To put it mildly.

In this recent column, Biggs offers a detailed account of what the actual data shows versus what Mr. Finks (and SO many others[ii]) have held out as reality.

Those with no retirement accounts don’t have retirement savings.

Fink is quoted as saying that 57 million Americans “don’t have any savings or retirement plan.” However, Biggs points out that “the Federal Reserve’s Survey of Household Economics and Decisionmaking acknowledges that many Americans save for retirement outside of an employer-sponsor plan.” That happens to be things like IRAs, an ordinary savings or investment account, real estate, a small business or farm. 

Biggs notes that Fed data show that 84% of non-retirees and 92% of retirees have retirement savings over and above Social Security. He puts the number with NO retirement savings as about 10% of 200 million American adults, or 20 million. Many of those are young enough that it shouldn’t be a problem (now), and others — Biggs notes that Fed data indicates that two-thirds of these non-savers make less than $50,000 — so no retirement savings makes economic sense (again, for now) — but Social Security stands to do a good job of replacing that level of income.

Those depending on Social Security alone will be living in poverty. 

Speaking of which, Finks also cautioned that those who have only Social Security as a resource will find themselves “living in poverty, below the poverty line.” Now, if you don’t know where the poverty line is these days — well, I’m sure you’re not alone. 

But for those interested in the actual numbers, Biggs cites Social Security Administration statistics that show that a middle-income two-earner couple retiring in 2023 would receive about $44,400 in Social Security benefits per year — which would be more than TWICE the official poverty threshold. Even if only one member of the couple worked, they still would receive around $33,300, about 1.8 times the poverty line, he notes.  It’s not a LOT of income, mind you — but it’s not below the poverty line.

Most Americans only used to live to age 67.

This by way of commenting that the current retirement system is outdated — designed for a time when people didn’t live as long as they do today — true enough — to a point. But as Biggs points out, there’s a difference between life expectancy at birth — and life expectancy in retirement. He explains that in 1940 — the first year in which Social Security paid retirement benefits — a 65-year-old man could expect to live an additional 13 years and a 65-year-old woman an additional 15 years (according to the Social Security Administration). In 2025, life expectancy as of age 65 has increased to 19 and 22 years for men and women. So, that’s more years — but not nearly the gap implied by data that includes life expectancy at birth.

You’re now “on your own” when it comes to retirement.

The implication here is that people didn’t used to be “on their own” — presumably because everybody had an employer-provided pension. This is one of the more persistent myths of our time because we have actual data that not only shows that the absolute peak of pension coverage in the private sector was 39%. Moreover, Biggs reminds us that a 1972 NBC News investigation revealed that “9-in-10 employees who nominally participated in a traditional pension never received a penny from it, thanks to strict vesting rules and the occasional corporate bankruptcy.” That’s right — nary a penny. 

And — as Biggs reminds us, “according to the Bureau of Labor Statistics, 72 percent of private sector employees in 2024 had access to a retirement plan at work, far more than ever were offered a traditional pension.” In a real sense, most of us have always been on our own, we just didn’t know it. And now, thanks to the 401(k), we’re ever so much more likely to retire with something to show for it.

The good news? 

Biggs closes by noting that “more Americans are participating in retirement plans than in the past, Americans and their employers are contributing more to retirement plans, and we’re working longer and delaying claiming Social Security. In short, pretty much everything experts say Americans should be doing, we already are doing.” Which, of course, (as Biggs notes), “helps explain why Congressional Budget Office data show the average over-65 household’s income in 2021 was over twice the average in 1979, even after accounting for inflation. And why retirees’ incomes have grown significantly faster than incomes for working-age Americans.”

The scary thing to me is that the comments like those above — made in public forums and in the headlines — are viewed as not only factual, but uncontroversial — even by retirement industry leaders.  

In this business we tend to see the challenge of helping Americans prepare for retirement as a glass that’s only half-full, rather than appreciating the amazing progress we’ve made — progress that might be less than you’d think… especially if it’s based on flawed assumptions. 

- Nevin E. Adams, JD

 

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[i] You can read the rest of his impressive bio at Andrew G. Biggs | American Enterprise Institute - AEI

[ii] Some of these are a “repeat”:  Talking Points: Facts Versus Factoids and Talking Points: A Retirement Crisis of Complicity.