Social Security COLA ‘Click Bait’

Over the past couple of years, one of the most-clicked posts on NAPA-Net has been on a topic that is a bit of a head-scratcher.

I’m speaking, of course, of the (now-incessantly tracked), monthly projections of the (potential) cost of living adjustment (COLA) for Social Security. It started back when inflation emerged as a real consumer concern—and it was spurred by the efforts of a group called the Senior Citizens League in publishing—EVERY MONTH—a projected cost of living adjustment (COLA) for Social Security.[i] And our coverage of those projections has been, and continues to be, one of the most clicked-on stories[ii] (ditto other publications, apparently).  

Like many, perhaps most, of you, I was initially intrigued by the reporting. Let’s face it, after a couple of decades of relative economic slumber, inflation has reared its ugly head in a way that reminds some of us of the days of our youth when inflation was an actual scary economic reality, rather than an obscure concept. And, at a time when the soaring cost of—well, everything—has (re)garnered our attentions, the notion that those impacts for older workers might be muted by a positive adjustment in their monthly benefit (not to mention those prospective increases in contribution and benefit limits of qualified plans) was encouraging.

But every single month?        

Not that Social Security has always had a COLA. In fact, Congress enacted the COLA provision as part of the 1972 Social Security Amendments, and automatic annual COLAs didn’t begin until 1975. Prior to that, benefits were increased only when Congress enacted special legislation. As for its calculation, Social Security’s COLA is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase—and, believe it or not, that’s been the case in recent memory—there can be no COLA. That said, you can imagine that there tends to be something of a hue-and-cry from Social Security beneficiaries in those rare situations (most recently in 2016,[iii] though the increase in 2017 was just 0.3%). 

Of course, inflation measures often seem to be as much art as science—varying largely on what you spend your money on—and seniors do tend to spend money differently. In fact, one of the criticisms of the current formula is that it considers the purchases that current workers make, rather than retirees.[iv]  Another factor is the timing of the formula, which considers the period from September of one year to the next—while the government reports tend to reference the change from the PRIOR month, or in some cases from the same month a year earlier. 

That said, those on what are commonly referred to as “fixed incomes”[v] are understandably interested (and anxious) about potential increases (or lack thereof) in those finances. Let’s face it—retirement is not a profession that warrants merit increases, after all, nor are there typically opportunities for “promotion.” Purely from an SEO perspective, one can understand and appreciate the internet search engines cranking up to try and get a peek at what’s coming up in terms of potential benefit increases (and, to be sure, we do get significant traffic for those posts outside of our newsletter distribution). Still, and while those projections are based on the realities of the official inflation numbers reported by the federal government, they are merely point-in-time guestimates when it comes to knowing what the actual COLA number will be.

Not that I don’t “get” and appreciate the significance of the ACTUAL Social Security COLA—its impact on retirement projections, not to mention realities, is significant. That said, relentlessly tracking the POTENTIAL COLA based on interim monthly readings of inflation a year out from the actual establishment of the COLA have always struck me as a bit… obsessive. But clicks drive coverage these days and for the foreseeable future, and therefore, as long as you (all) keep clicking, we’ll keep covering…

Still, it should serve as a reminder to us all that planning for retirement should look beyond the income we happen to be drawing when we leave the workforce. After all, if the income we have at retirement isn’t enough to adjust to the costs of living in retirement—it might well cost us an “adjustment” in how, or how well, we live through retirement.

- Nevin E. Adams, JD

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[i] According to their website, they are a nonpartisan seniors group, and have been since 1992, though it wasn’t until the COLA adjustment reports that they crept onto my radar. And perhaps that, as much as anything else, explains the monthly COLA reports.

[ii] And by including “Social Security” in the title of this post, I’m shamelessly trolling for some additional SEO visibility, of course.

[iii] You can find a table of the COLA at https://www.ssa.gov/cola/

[iv] For more details, check out http://assets.aarp.org/rgcenter/ppi/econ-sec/fs160.pdf or https://www.aarp.org/retirement/social-security/info-2020/colas-history.html.

[v] And it’s not just retirees. Disabled workers and their dependents account for 19% of total benefits paid, according to the Social Security Administration (see http://www.socialsecurity.gov/pressoffice/basicfact.htm).

 

Regret Able

 A new survey once again highlighted a consistent regret among American workers. 

According to the survey by American Century Investments, they wish they had saved more for retirement. 

Now, only about a third shared that regret—but it was more than twice the number that had regrets about career, personal relationships, not doing enough to enjoy life—not to mention “not being a better person overall.”[i]

Now, we all have regrets about certain life decisions. There are regrets about that “Reply All” email that was perhaps a little too honest, the hours spent at work at the expense of family, perhaps the cessation of piano lessons, and even a (too) sedentary lifestyle and bad diet. Some we regret immediately—while some come only after the passage of time. Some we learn from—and vow never to repeat. And some—unfortunately—come too late to do anything but live with the consequences. And then there are those regrets—that could be remedied—but aren’t. 

Regrets about retirement savings tend to be in the latter category. People often talk about the retirement crisis in this country, but like a tropical storm still well out to sea, there are widely varying assessments as to just how big it is, and—to (continue to) borrow some hurricane terminology—when it will make “landfall,” and with what force. Most of the predictions are dire, of course—and while they often rely on arguably unreliable measures like uninformed levels of confidence (or lack thereof), self-reported financials and savings averages—it’s hard to escape a pervasive sense that as a nation we’re in for some rough weather, particularly in view of the objective data we do have—things like coverage statistics and retirement readiness projections based on actual participant data.

As we’ve certainly experienced anew over the past 18 months, life is full of uncertainty, and events and circumstances, as often as not, happen with little if any warning. Even though hurricanes are something 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 some (like Katrina)—the most devastating impact is what happens afterward. In theory, at least, that provides time to prepare—but, as the recent advent of COVID and the response—sometimes you don’t have as much time as you think you have, want or will need.

Doubtless—and as the recent survey findings suggest—a lot of retirement plan participants are going to look back at their working lives as they near the threshold of retirement with some regrets. They’ll perhaps remember the admonitions about (and their good intentions to) saving sooner, saving more, and the importance of regular, prudent reallocations of investment portfolios (they may even remember reading about surveys expressing those regrets). Thankfully—and surely because of the hard work of advisors and plan sponsors—many will have heeded those warnings in time. But others, just as surely—and particularly those without access to a retirement plan at work—may not.

The end of our working lives inevitably happens for different people at different times, in different ways, and to those in different states of readiness for that “event.” But we all know that it’s coming—and those who put off preparing for it are likely destined for a retirement full of regret. And that, not just for them, but for all of us, is… regrettable.

- Nevin E. Adams, JD

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[i] In fairness, it’s entirely possible that they’ve been more attentive and/or successful in those life avenues, and thus regrets weren’t required.

The ‘Storm’ of Your Lifetime

The tail end of hurricane season — and more specifically the disastrous flooding of Hurricane Florence — brings to mind my last serious brush with nature’s fury.

It was 2011, and we had just dropped our youngest off for his first semester of college in North Carolina, stopped off long enough in Washington, DC to check in with our daughters (both in college there at the time), and then sped home up the east coast to Connecticut with reports of Hurricane Irene’s potential destruction and probable landfall(s) close behind. We arrived home, unloaded in record time, and rushed 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 near our Connecticut home was relatively rare, we’d already had one narrow miss with an earlier hurricane and had then, as 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 we know, inertia is a powerful force, and reasoning that I had plenty of time to do so when it was more convenient, I simply (and repeatedly) postponed taking action. Thankfully my dear wife wasn’t inclined to remind me of that at the time, but the regrets loomed large in my mind.

Retirement Ratings?

People often talk about the retirement crisis in this country, but like a tropical storm still well out to sea, there are widely varying assessments as to just how big it is, and — to borrow some hurricane terminology — when it will make “landfall,” and with what force. Most of the predictions are dire, of course — and while they often rely on arguably unreliable measures like uninformed levels of confidence (or lack thereof), self-reported financials and savings averages — it’s hard to escape a pervasive sense that as a nation we’re in for some rough weather, particularly in view of the objective data we do have — things like coverage statistics and retirement readiness projections based on actual participant data.

Life is full of uncertainty, and events and circumstances, as often as not, happen with little if any warning. Even though hurricanes are something 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 some (like Florence) — the most devastating impact is what happens afterward. In theory, at least, that provides time to prepare — but, as I was reminded when Irene struck, sometimes you don’t have as much time as you think you have.

Doubtless, a lot of retirement plan participants are going to look back at their working lives as they near the threshold of retirement, the same way I thought about that generator. They’ll likely remember the admonitions about (and their good intentions to) saving sooner, saving more, and the importance of regular, prudent reallocations of investment portfolios. Thankfully — and surely because of the hard work of advisors and plan sponsors — many will have heeded those warnings in time. But others, surely — and particularly those without access to a retirement plan at work — may find those post-retirement years (if indeed they can retire) to be a time of regret.

As retirement advisors are well aware, the end of our working lives inevitably hits different people at different times, and in different states of readiness. But we all know that it’s a “landfall” for which we need to prepare while we still can.

- Nevin E. Adams, JD

4 Reasons Why Plan Sponsors Should Care About Outcomes

It’s obvious why participants have a vested interest (literally) in the retirement income — the outcome, really — of their retirement savings plans. Here are four reasons why plan sponsors should care about outcomes.

You want your employees to appreciate your benefit plan(s).

If you’re responsible for benefit plans in your organization, you have a very real interest in how your workforce (and management team) view those benefits. Plan sponsors have long used participation rate as the plan success metric — after all, what better measure of success in plan design, education and communication than the objective data as to how many employees have chosen to participate.

But in a time when a growing number of plans have adopted automatic enrollment — well, while credit is certainly due plan sponsors who have taken that step, the resulting bump in participation rates owe more to the inertia of human behavior than innovative plan design.

There is, however, little question that the better your plan performs on an individual basis — positive growth in account balances, a resulting more robust projection of retirement income — the better workers will feel about the benefit plans that helped provide that result.

You don’t want your employees worrying about their finances at work.

Any number of workplace surveys bear out the impact that external concerns — particularly external financial concerns — have on morale and productivity at work (see “Finance Distractions Take Toll on Productivity, Benefit Satisfaction”) and “Study Finds Link Between Financial and Physical Wellness.”) Those concerns don’t even touch on the vulnerability to theft and/or misuse of organizational resources that can tempt financially vulnerable workers.

A robust retirement savings balance at work isn’t a cure for all financial ills, of course, but it can be a source of solace, as well as a resource in time of true financial need.

You want your employees to retire on time.

Workers who think they can’t afford to retire are likely to try and extend their working career — potentially complicating succession planning and your ability to attract (and/or retain) new talent. Data from benefits consultant Mercer notes that each delay in retirement can block 5+ jobs, and that if 4% of your population is retirement eligible and half of those people choose to delay retirement, 10% of your employee population would experience promotion blockage.

As an employer, those trends can also result in higher labor costs, and safety and productive concerns (see “Plan Sponsors Waking up to Costs of Older Workers who Can’t Retire.”)

You want your plan to ‘work.’

There are employers who only offer a workplace retirement plan because everybody else does, who are willing to just “set it and forget it,” who, hearing that workers aren’t taking advantage of the benefit they worked so hard to set up, shrug and say “it’s up to them.”

But that’s not you. Is it?

- Nevin E. Adams, JD

Note: You can find some interesting perspectives on various aspects of plan and participant outcomes at our Participant Outcomes resource page.

The Impact of Assumptions on the Impact of Leakage

It has become something of an article of faith in our industry that “leakage,” the distribution of money from retirement accounts prior to retirement, is bad.

Bad, of course, in the sense that those “premature” withdrawals, via hardship withdrawals, loans or the so-called “deemed distributions” that result when a termination occurs when a loan is outstanding, reduce individual retirement savings.

So when the Center for Retirement Research at Boston College published a paper last week entitled “The Impact of Leakages on 401(k)/IRA Assets,” it really wasn’t a question of “if” there was an impact, it was a question of how much. The answer, according to the paper: a reduction in wealth at retirement of a jaw-dropping 25%.

Now by any measure, a 25% reduction in retirement wealth is a massive problem — and one that would, if valid, call for the kind of countermeasures touted by the Boston College researchers.

But consider the findings published recently by the non-partisan Employee Benefit Research Institute (EBRI) based on its massive participant database of actual participant balances and activity. Among participants with outstanding 401(k) loans at the end of 2013, the average unpaid balance was a mere $7,421, and the median loan balance outstanding was $3,973.

Moreover, the report notes — as it has for a number of years examining trend analysis in that database — that overall, loans from 401(k) plans tended to be small, with a sizable majority of 401(k) participants in all age groups having no loan outstanding at all: 88% of participants in their 20s, 73% of participants in their 40s, and 86% of participants in their 60s had no loans outstanding at year-end 2013.

So, how did the Boston College researchers manage to come up with a 25% reduction in retirement wealth? Quite simply, they started by deriving an estimate based on a “host of simplifying assumptions” — their words, not mine.

What are those simplifying assumptions? It starts with a hypothetical participant who initially makes $40,000/year, gets a 1.1% annual pay increase in real terms, assumes that he/she defers 6% of pay, is matched at a rate of 50 cents on the dollar, and whose investments gain a 4.5% real annual return. But the key assumption — and the one that arguably creates the conclusion of the paper — is their further assumption that 1.5% of assets leak out each year!

Under these assumptions, the leakages result in accumulated 401(k) wealth of $203,000 at age 60 compared with $272,000 with no leakage. So their math (and assumptions) lead to a conclusion that these leakages reduce 401(k) wealth by 25%. To “prove” the point, they provide a simple chart of the numbers they just produced, and direct the reader to it as though it provides some sort of independent corroboration.

They go on to clarify: “This estimate represents the overall impact for the whole population, averaged across both those who tap their savings before retirement and those who do not.” That’s right — averaged across everyone, not just those who actually dip into those savings prior to retirement.

Now at that point, it’s arguably just math, not so much a quantification of the impact of leakages as the mathematical impact of a series of simplifying assumptions. As for the so-called impact of leakages? It might more accurately be described as the impact of assumptions.

- Nevin E. Adams, JD

That’s not to say that leakages don’t have an impact on retirement accumulations, and doubtless for some, that impact is significant. EBRI’s analysis found that among loan defaults, hardships and cashouts at job change, cashouts were found to have a much more serious impact on 401(k) accumulation than either plan loan defaults or hardship withdrawals (even with the impact of a six-month suspension of contributions included). The leakages from cashouts resulted in a decrease in the probability of reaching an 80% real replacement rate of 5.9 percentage points for the lowest-income quartile and 4.5 percentage points for those in the highest-income quartile. In fact, the effect from cashouts (by themselves) — not loans or hardship withdrawals — turns out to be approximately two-thirds of the leakage impact.  

It’s also worth noting that it’s one thing to quantify the impact of not allowing early access to these funds — and something else altogether to assume that participants and plan sponsors would not respond in any way to those changes, perhaps by reducing their contribution levels, or by either deciding to continue to participate or to participate in the first place.

First Things First

This may be the time of year when thoughts turn to stockings hung by the chimney with care, but it’s also the time of year when parents have to deal with assembling some of the things in those packages. And while Santa may have elves on staff to undertake the construction of a tricycle, dollhouse or Little Tykes airplane seesaw, in our house, that "elf" was named “Dad.”

A painful lesson learned over those years was the importance of following the instructions. No matter how self-evident the process appeared at the outset, or how much I thought I remembered assembling something similar in the not-too-distant past, lurching ahead and tackling things in the order I thought made most sense was inevitably a formula for disaster. And then there was the year some miscreant had apparently “liberated” the assembly instructions from the package. Since it was Christmas Eve by the time I discovered this, all I had to go by was common sense and the picture of the finished product on the package.

Debates about the best way to achieve retirement security often seem to resemble an assembly without a set of directions — frequently without even the benefit of an agreed-upon “picture” of what the finished product is supposed to look like.

A recent hearing held by the Bipartisan Policy Commission focused on three key threats to retirement security: longevity (the risk of outliving your resources), leakage (the distribution of retirement funds prior to retirement) and the costs associated with long-term care (LTC).

Jack VanDerhei, research director for the nonpartisan Employee Benefit Research Institute (EBRI), demonstrated the impact that each of these three events can have on retirement security. With regard to leakage, he explained that more than one in five of the middle 50% who are simulated to run short of money in retirement with leakages present would have sufficient funds if leakages were completely prevented. Unlike many who tout this as a solution, however, he took pains to acknowledge that that assumed no response from participants (such as individuals deciding to contribute less (or not at all) if they knew that they wouldn’t have access to those funds prior to retirement.

Of course, once you have attained retirement, longevity risk — the risk of outliving your resources — becomes a factor. VanDerhei noted that while nearly two-thirds (62%) of the middle 50% are simulated to have sufficient retirement income, those in the longest relative longevity quartile — who would live the longest — only had a 33% chance.

One potential solution —a qualifying longevity annuity contract, or QLAC — didn’t help much. Modeling the impact of a 25% QLAC on retirement readiness, and even among those projected to live longest, VanDerhei found increases in retirement readiness of only 6.6% for early Boomers and 9.6% for Gen-Xers. Overall — that is, with no filter for longevity — this option actually reduced retirement readiness, due to the expense of these arrangements.

As for LTC expenses, while this won’t be an issue for everyone, it can have an enormous impact on the retirement security of those who are affected. VanDerhei explained that only 17% of the middle 50% of those in the top LTC quartile (those most likely to incur those expenses) will have sufficient retirement income.

Ultimately, while each of the three highlighted elements (leakage, longevity and LTC) had an impact on retirement readiness, EBRI’s numbers indicate that a bigger threat is simply not being eligible for a workplace retirement plan. How big a difference? Well, looking at the second and third income quartiles (the “middle 50%”) of Gen-Xers, the probability of not running short of money in retirement soars from 51% to 80% when you compare those with no future years of eligibility in a DC plan to those with 20 or more years.

Put another way, regardless of which solutions are put forth to deal with issues like leakage, longevity and long-term care, they’ll be of little value to those who lack access to a workplace retirement plan.

It’s not just a matter of priority — it’s all about putting the “first thing” first.

- Nevin E. Adams, JD

When You Assume...

The use of assumptions was the focus of a recent report from the Employee Benefit Research Institute (EBRI), which not only highlighted the assumptions used in two separate retirement studies, but illustrated a real problem with their results.

The EBRI report examined two earlier  studies — one by Pew Trusts, the other by the Center for Retirement Research at Boston College — that purported to show that the retirement prospects for Gen Xers were worse than those of the Baby Boomers. The EBRI report not only highlighted the questionable assumptions, but took the time to quantify the impact (see “EBRI Report Calls Out Pew, CRR on Retirement Conclusions”). Such public criticisms are a rarity, as evidenced by the media coverage accompanying the release of the EBRI report.

As recently as a few years ago, I would have assumed that findings published by credentialed individuals associated with a reputable institution of higher learning could be taken at face value, if only because I assumed that if their methodologies were flawed, their findings would be taken to task by other similarly credentialed individuals.
Sadly, that does not seem to be the case.

The Pew report, though it went to some pains to determine appropriate rates of return to project out the future balances of both Boomers and Gen Xers, chose to completely ignore any future contributions.  Not so big a deal for those on the cusp of retirement perhaps, but what about those Gen Xers (defined as those Individuals born between 1965 and 1974) who are (just) 40? That’s at least a quarter century of contributions — and earnings on those contributions — completely disregarded by the Pew assumptions. Think that might tend to produce a lower retirement readiness conclusion about that demographic?

As for the report by CRR, the EBRI report explains how it relies on “wealth-to-income patterns by age group from the 1983–2010 Federal Reserve Surveys of Consumer Finances (SCF).” That certainly sounds like a credible source, but it also happens to be based on self-reported information and a perspective of 401(k)-plan designs and savings trends that pre-date the impact of automatic enrollment plan features that followed the passage of the Pension Protection Act of 2006. Not that you’ll find that acknowledged in the report, even in the footnotes. And yet data from the CRR’s NRRI are routinely cited in industry reports.

Projections about the future inevitably require some assumptions, and the EBRI report does as well. But it not only lays out its assumptions in great detail, it provides a wide range of findings associated with those various assumptions so that readers can draw their own conclusions based on the scenario(s) they think most likely to occur.

There’s an old adage that points out the inherent dangers in relying overly much on assumptions. It cautions that one should “never assume, because when you assume, you make an ‘ass’ of ‘u’ and ‘me.’”

That goes double for those who blindly rely on research findings drawn from assumptions poorly constructed and/or undisclosed.

Nevin E. Adams, JD

• See an earlier analysis of the Pew Trust report here.

• You can find a more comprehensive explanation of some of the issues associated with the CRR’s NRRI here.

The Status Quo

While the prospects for “comprehensive tax reform” may seem remote in this highly charged election year, the current tax preferences accorded employee benefits continue to be a focus of much discussion among policymakers and academics.

The most recent entry was a report by the Urban Institute which simulated the short- and long-term effect of three policy options for “flattening tax incentives and increasing retirement savings for low- and middle-income workers.”  The report concluded that “reducing 401(k) contribution limits increases taxes for high-income taxpayers; expanding the saver’s credit raises saving incentives and lowers taxes for low- and middle-income taxpayers; and replacing the exclusion for retirement saving contributions with a 25 percent refundable credit benefits primarily low- and middle-income taxpayers, and raises taxes and reduces retirement assets for high-income taxpayers.”

However, and to the authors’ credit, the report also noted that “the behavioral responses by both employers and employees will affect the final savings outcomes achieved under reform but are beyond the scope of our estimates[i].”

In previous posts, we’ve highlighted the dangers attendant with relying on simplistic retirement modeling assumptions, the application of dated plan design information to future accumulations, and the choice of adequacy thresholds that, while mathematically accurate, seem unlikely to provide a retirement lifestyle that would, in reality, feel “adequate.”

However, one of the more pervasive assumptions, particularly when it comes to modeling the impact of policy and/or tax reform changes, is that, regardless of the size and scope of the changes proposed, workers – and employers – will generally continue to do what they are currently doing, and at the current rate(s), for both contributions and/or plan offerings.  Consequently, there is talk of restricting participant access to their retirement savings until retirement, with little if any discussion as to how that might affect future contribution levels, by both workers and employers, and there are debate about modifying retirement plan tax preferences as though those changes would have no impact at all on the calculus of those making decisions to offer and support these programs with matching contributions.  Ultimately, these behavioral responses might not only impact the projected budget “savings” associated with the proposals, but the retirement savings accumulations themselves.

EBRI research has previously been able to leverage its extensive databases and survey data (including the long-running Retirement Confidence Survey) to both capture  potential responses to these types of proposals and, more significantly, to quantify their potential impact on retirement security today and over the extended time periods over which their influence extends.  In recent months, that research has provided insights on the full breadth of:

• A retirement savings cap[ii],
• The proportionality of savings account balances with incomes[iii], and
• The impact of permanently modifying the exclusion of employer and employee contributions for retirement savings from taxable income, among other proposals[iv].

While we can’t be certain what the future brings, considering the likely responses to policy changes is a critical element in any comprehensive impact assessment – not only because the status quo is rarely a dependable outcome, but because, after all, those who assume the status quo are generally looking to change it.

• Nevin E. Adams, JD

[i] From Urban Institute and Brookings Institution:  Flattening Tax Incentives for Retirement Saving:  “Our findings should be interpreted with caution. Actual legislation for flattening tax incentives requires more than the simple adjustments discussed here. For instance, if a credit-based approach is used, then the laws would need to ensure some recapture of those benefits for those who made contributions one year and withdrew them soon thereafter.

Additionally, the behavioral responses by both employers and employees will affect the final savings outcomes achieved under reform but are beyond the scope of our estimates. For instance, employees may save more in response to improved incentives, in which case the benefits to low lifetime income households would be greater than we find. On the other hand, employers might reduce their contributions in response to some of the policy changes outlined. In this case, the tax and savings benefits we find would be overstated.  While our policy simulations are illustrative, addressing these behavioral responses would be a chief concern in tailoring specific policies to create the best incentives.”

[ii] See “The Impact of a Retirement Savings Account Cap”
 
[iii] See “Upside” Potential
 
[iv] See “Tax Reform Options: Promoting Retirement Security”, and “Modifying the Federal Tax Treatment of 401(k) Plan Contributions: Projected Impact on Participant Account Balances”

Map "Quests"

I’ve been hooked on the convenience of GPS systems ever since the first time one was included in the price of a rental car on a family trip in unfamiliar territory. After all, it combines the opportunity to tinker with electronic gadgetry alongside the convenience of not having to do much in the way of pre-planning trip routes—not to mention avoiding the need to stop and ask for directions (that is frequently associated with not doing much in the way of pre-planning trip routes).

There are, of course, horror stories about drivers who have blindly followed GPS instructions without paying attention to the evidence of their eyes. My family still chuckles at the memory of a trip where we were running late to our plane, and the rental car GPS, based on what appeared to be an outdated address for the return office, kept directing us to an address that was not only miles from the real office, but a place from which I wondered if we might never return.

As a growing number of Americans near, and head into, retirement, policymakers, retirement plan sponsors, and individual workers alike increasingly wonder—will Americans have enough to live on when they retire? Unfortunately, as a recent EBRI publication[1] explains, the answers provided are as diverse, and sometimes disparate, as the projection models that produce those results.

While it is not always clear from their results, some of those models limit their analysis to households already retired, while others focus on households still working, but old enough that reasonably accurate projections regarding their future wages and prospects for accumulating retirement wealth are obtainable. Still others attempt to analyze the prospects for all working households, including those whose relative youth (and distance from retirement) makes accurate, long-term predictions somewhat problematic.

Moreover, there are varied definitions of retirement income adequacy. As the EBRI report explains, some either (1) model only the accumulation side of the equation and then rely on some type of preretirement income replacement rate measure as a threshold for success, or (2) make use of a so-called “life-cycle” model that attempts to smooth/spread some type of consumption-based utility over the decision-maker’s lifetime.

The problem with the former is that, since very few households annuitize all (or even most) of their individual accounts in retirement, a replacement-rate focus overlooks the potential risk of outliving their income (longevity risk). And while the annuity purchase price relied upon in a replacement-rate target does depend on an implicit assumption with respect to (at least some) future market returns, it does not typically account for the potential investment risk. Additionally, and as previous EBRI research has demonstrated, one of the biggest financial obstacles in terms of maintaining retirement income adequacy for households that might otherwise have sufficient financial resources at retirement age is the risk of long-term care costs for a prolonged period. In the real world, few retirees have long-term care insurance policies in place that would cover the potentially catastrophic financial impact of this exposure—and thus, simply adding the cost of long-term care insurance into a replacement-rate methodology will vastly underestimate the potential severity of this exposure.

As for the life-cycle smoothing model, the EBRI report notes that approach typically produces extraordinarily low levels of “optimal” savings for low-income individuals at retirement, and while some households may, in fact, have no choice but to subsist at those levels in retirement, from a public policy perspective EBRI chose instead to establish a threshold that would allow households to afford average expenditures (for retirees in the appropriate income category) throughout their retirement, while at the same time accounting for the potential impact of uninsured long-term care costs.

EBRI’s Retirement Security Projection Model^®[2] takes a different—arguably unique and more realistic—perspective. Rather than relying on an individual’s projected ability to achieve an arbitrarily designated percentage of his or her preretirement income as a proxy for retirement income adequacy, RSPM grew out of a multiyear project to analyze the future economic well-being of the retired population at the state level, focused on identifying the point at which individuals would run short of money and perhaps become a financial obligation of the state.

As valuable a resource as a GPS can be, it can quickly become a nuisance—or worse—if the input destination point is incorrect, or the mapping system is out of date. Similarly, those who want a financially secure retirement may find that relying on a model based on flawed assumptions or outdated “destinations” may find themselves short of their goal and with little time to do anything about it.

Nevin E. Adams, JD

[1] See ““’Short’ Falls: Who’s Most Likely to Come up Short in Retirement, and When?” online here.

[2] A brief description of EBRI’s Retirement Security Projection Model® can be found online here.

"Out" Takes

My first car wasn’t anything special, other than it was my first car. It was an older model Ford, ran reasonably well, with one small problem— it went through oil almost as quickly as it did gasoline. At first I attributed that to being a function of the car’s age, but as the leakage grew, I eventually dealt with it by keeping a couple of quarts of oil in the trunk “just in case.” Eventually, I took the car to a dealership—but by the time they finished estimating the cost of a head gasket repair, let’s just say that, even on my limited budget, I could buy a LOT of oil by the quart, over a long period of time, and still be ahead financially.

“Leakage”—the withdrawal of retirement savings via loan or distribution prior to retirement— is a matter of ongoing discussion among employers, regulators, and policy makers alike. In fact, EBRI Research Director Jack VanDerhei was recently asked to present findings on “The Impact of Leakages on 401(k) Accumulations at Retirement Age” to the ERISA Advisory Council in Washington.[1]

EBRI’s analysis considered the impact on young employees with more than 30 years of 401(k) eligibility by age 65 if cashouts at job turnover, hardship withdrawals (and the accompanying six-month suspension of contributions) and plan loan defaults were substantially reduced or eliminated. The analysis assumed automatic enrollment and (as explicitly noted) no behavioral response on the part of participants or plan sponsors if that access to plan balances was eliminated.

Looked at together, EBRI found that there was a decrease in the probability of reaching an 80 percent real income replacement rate (combining 401(k) accumulations and Social Security benefits) of 8.8 percentage points for the lowest-income quartile and 7.0 percentage points for those in the highest-income quartile. Said another way, 27.3 percent of those in the lowest-income quartile (and 15.2 percent of those in the highest-income quartile) who would have come up short of an 80 percent real replacement rate under current assumptions WOULD reach that level if no leakages are assumed.

The EBRI analysis also looked at the impact of the various types of “leakage” individually. Of loan defaults, hardships, and cashouts at job change, cashouts at job change were found to have a much more serious impact on 401(k) accumulation than either plan loan defaults or hardship withdrawals (even with the impact of a six-month suspension of contributions included). The leakages from cashouts resulted in a decrease in the probability of reaching an 80 percent real replacement rate of 5.9 percentage points for the lowest-income quartile and 4.5 percentage points for those in the highest-income quartile. That effect from cashouts—not loans or hardship withdrawals—turns out to be approximately two-thirds of the leakage impact.

However, and as the testimony makes clear, it’s one thing to quantify the impact of not allowing early access to these funds—and something else altogether to assume that participants and plan sponsors would not respond in any way to those changes, perhaps by reducing contributions,[2] potentially offsetting some or all of the prospective gains from restricting access to those funds.

Because ultimately, whether you’re dealing with an old car or your retirement savings account, what matters isn’t how much “leaks” out—it’s how much you put in, and how much you have to “run” on.

Nevin E. Adams, JD

[1] EBRI’s testimony for the ERISA Advisory Council, U.S. Department of Labor Hearing on Lifetime Participation in plans is available online here.  

[2] An EBRI/ICI analysis published in the October 2001 EBRI Issue Brief found that, “[o]n average, a participant in a plan offering loans appeared to contribute 0.6 percentage point more of his or her salary to the plan than a participant in a plan with no loan provision.” Testimony provided to the ERISA Advisory Council testimony notes that it’s likely that a similar relationship exists with respect to the availability of hardship withdrawals. See “Contribution Behavior of 401(k) Plan Participants,” online here.

"Short" Changed

My wife is fond of recounting one of our early dates when we ran out of gas.  Now, we were in the heart of a Chicago suburb at the time, not the middle of nowhere, and while the hour was late, I continue to maintain that it was a simple case of my misreading the gas gauge in a relatively new car with which I hadn’t yet gained a full appreciation for just how far I could push such things.  My wife, of course, has always accused me of a more “nefarious” purpose.

It would be more difficult to explain such an outcome these days.  We’ve gone from vehicles that simply had a floating gauge and a range of red at the 1/8 tank line, to those that have a solid and then a blinking yellow light, to ones that beep and flash and tell you how many miles you have left before you run out.

As inconvenient as running out of gas late at night can be, it surely pales in comparison to the prospects of running short of money in retirement.  EBRI has, for more than a decade now, used highly sophisticated modeling techniques to gauge the retirement readiness of baby boomers and Gen Xers.  One of the primary outputs of EBRI’s Retirement Security Projection Model (RSPM)[i] is the production of Retirement Readiness Ratings (RRRs), which represent the percentage of simulated life-paths that do not run short of money in retirement.  The 2014 version of RSPM found that over half of baby boomer and Gen Xer households would not run short of money in retirement.  However, when the results were analyzed by preretirement wage quartile, we found that while 86.4 percent of the highest income quartile were projected to not run short, just 16.8 percent of the lowest income quartile would not.

While it is useful, certainly from a public policy perspective, to know not only how many but also what types of individuals are projected to run short of money in retirement, it begs the question: when will they run short?

A recent EBRI Notes article[ii] provides new results showing how many years into retirement baby boomer and Gen Xer households are simulated to run short of money, by preretirement income quartile and for a variety of assumptions, as well as taking into account the impact of the potentially catastrophic expenses of nursing home and home health care expenses.  Not surprisingly, it finds that those in the lowest income brackets are most likely to run short.

Moreover, while some in all income brackets—including the highest—may run short at some point during their retirement, the EBRI analysis also found that, when nursing home and home health care expenses are factored in, the number of households in the lowest income quartile that are projected to run short of money within 20 years of retirement is considerably larger than those in the other three income quartiles combined.

The EBRI analysis provides valuable insights for policymakers, providers and employers alike because, whether you’re concerned about running out of gas short of your destination – or short of money in retirement – it’s important that your gauges be accurate, and appropriate to the vehicle in which you’re riding there.

• Nevin E. Adams, JD

[i] A Brief Description of EBRI’s Retirement Security Projection Model® is available here.

[ii] The June EBRI Notes article, ““Short” Falls: Who’s Most Likely to Come up Short in Retirement, and When?” is available online here.

Security "Blanket"

“How do they expect to retire on THAT?”

In the several days since the 2014 Retirement Confidence Survey(1)  hit the streets, I think I’ve heard that question more than any other. “That” in this case is the widely cited finding of the survey that 36% of respondents have less than $1,000 (aside from home equity and defined benefit plan) saved – and that’s up from 20 percent in that category in 2009 and 28 percent a year ago(2).

So, how does that group expect to retire?

We can’t know for certain, but there are several things that might offer a better understanding. First, many of those probably AREN’T expecting to retire on that, at least not any time soon; many are young (about half of the 25-34 age group are in this savings range).

Second, they may not be “expecting” to retire; about 16 percent of those with less than $15,000 set aside say they’ll “never” retire, compared with 7 percent of total respondents).

Most of the individuals in this group are, as you might expect, lower-income.  More than 60 percent reported household income of $25,000/year or less. 

Even if they are expecting to retire some day, they may have concerns about that reality. This group of low/non-savers, for the very most part, had NO retirement account – 80 percent of the 36 percent were in that category. Respondents with no retirement account not only tended to have much lower confidence levels, they were also more likely to think they needed to be saving 50 percent of their current paycheck to achieve a financially comfortable retirement – a perception that might be a reality for this group, based on their reported savings.

Finally, while the trend line for this particular group isn’t encouraging, it’s worth noting that Social Security was cited as a major source of income for nearly two-thirds of the current retiree respondents to the 2014 RCS (as it has been over the history of the RCS), even though current workers tended to have lower expectations for the primacy of Social Security benefits in their retirement income stream. One need only look to the replacement rates that Social Security is projected to provide to appreciate the significance of that program as a retirement income source for many, particularly low- and middle-income workers(3). In fact, a recent EBRI analysis of data from the HRS indicates that Social Security provides more than half the total household income for more than half those ages 65-74, as it does for roughly two-thirds of the households over that age (4).

Indeed, one might well wonder how people expect to live on savings of less than $1,000 in retirement. However, the data suggest that many – already are.

Nevin E. Adams, JD

(1) The 2014 Retirement Confidence Survey is available here.

(2) The RCS is, of course, a snapshot at a point in time. It’s important to keep in mind that the savings reported are not necessarily what those respondents will have a year from now, or certainly a decade hence. It’s also important that projections about future retirement security consider not just where things stand at a static point in time, but, as EBRI’s Retirement Savings Projection Model (RSPM) does, the impact of future events and changes in behavior.  More information on the RSPM is online here. 

(3) See “Annual Scheduled Benefit Amounts for Retired Workers With Various Pre-Retirement Earnings Patterns Based on Intermediate Assumptions, Calendar Years 1940-2090.”

(4) See “Income Composition, Income Trends, and Income Shortfalls of Older Households” online here.

Silver Linings

We all know people who manage to find the bright side of things, no matter how dire the situation—the folks who can spot a silver lining in every cloud. Then, of course, there are those who have an uncanny ability of discerning the cloud in every silver lining. In my experience, those in the former category know, and acknowledge, their inclination to accentuate the positive.  

However, I’ve generally found that those in the latter category don’t view themselves as negative or pessimistic. Rather, they are inclined to see their perspective on the world as “realistic.” 

A recent EBRI analysis[1] found that current levels of Social Security benefits, coupled with at least 30 years of 401(k) savings eligibility, could provide most workers—between 83 and 86 percent of them, in fact—with an annual income of at least 60 percent of their preretirement pay on an inflation-adjusted basis. Even at an 80 percent replacement rate, 67 percent of the lowest-income quartile would still meet that threshold. Those projections improve even more when you assume automatic enrollment and an annual contribution acceleration of 1 percent in 401(k) plans.

A more recent analysis[2] using EBRI’s Retirement Security Projection Model^® (RSPM) found that, due to the increase in financial market and housing values during 2013, the probability that Baby Boomers and Generation Xers would NOT run short of money in retirement improved—slightly (between 0.5 and 1.6 percentage points, based on the EBRI Retirement Readiness Ratings (RRRs). For early Boomers (those on the brink of retirement), the analysis found that more than half (56.7 percent) were projected not to run short of the funds they need to cover projected retirement expenses. On the other hand, nearly half are projected to run short (though not “out” of money, since Social Security benefits would continue to be paid).

In 2012, EBRI estimated that the national aggregate retirement income deficit number, taking into account current Social Security retirement benefits and the assumption that net housing equity is utilized “as needed,” was $4.3 trillion for all Baby Boomers and Gen Xers.[3]

Now, certainly compared with some of the figures[4] one hears bandied about these days, those might be considered relatively encouraging numbers. Some might even consider them optimistic, a “silver lining” in a looming retirement “crisis”⁵ cloud.

What the EBRI data show is that, based on current trends and savings patterns, many individuals will fare better financially in retirement than the headlines suggest—and a large number will not. Despite the clarion calls for action, and some shifts in the underlying dynamics, this is not a new issue for America:. If a crisis looms, it is surely one of the most widely anticipated, long-standing, and debated issues of the past half-century.

EBRI data and modeling have previously quantified the kinds of plan design and policy changes that can help—and hinder—those results. The true “silver lining” is that there is yet time for many of those currently at risk of running short of funds to remedy that situation[6]. 

- Nevin E. Adams, JD

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[1] See “The Role of Social Security, Defined Benefits, and Private Retirement Accounts in the Face of the Retirement Crisis”  online here. http://www.ebri.org/pdf/notespdf/EBRI_Notes_01_Jan-14_SpslCvg-RetPlns1.pdf#page=8

 

[2] See “What Causes EBRI Retirement Readiness Ratings™ to Vary: Results from the 2014 Retirement Security Projection Model,^®” online here. http://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=5351

[3] See “Retirement Income Adequacy for Boomers and Gen Xers: Evidence from the 2012 EBRI Retirement Security Projection Model,” online here. http://www.ebri.org/pdf/notespdf/EBRI_Notes_05_May-12.RSPM-ER.Cvg1.pdf      

 

[4] See “Whether Forecasts” online here. https://ebriorg.wordpress.com/2014/01/03/whether-forecasts/

5 For some perspective on the existence of a retirement “crisis,” see Dallas Salisbury’s keynote address at the Pensions&Investments West Coast Defined Contribution Conference online here. http://www.youtube.com/watch?v=LbmcQa8sbss&feature=youtu.be 

6 Particularly those who Chooseto$ave®org for your future!  Check out the resources at www.choosetosave.org, including the Ballpark E$timate.                                                      

 

"Whether" Forecasts

This is the time of year where, in many parts of the county, the weather—and weather forecasters—dominate the nightly news coverage, certainly when the predictions are dire.  Indeed, having had the opportunity to live in several different parts of the country, I can assure you that the bigger the projected snowfall, the more hyped the coverage.

Several weeks back, the local meteorologists were all agog about an impending snowfall in the Washington, DC area—a snowfall  initially projected at 2–4 inches of accumulation, but that was quickly revised to 3–5 inches, and then to 4–7 inches.  The local mass transportation systems sprang into action, announcing alternative schedules, state officials advised those who didn’t need to be on the roads to stay home, non-emergency federal employees in the area were granted an excused absence, while others were directed to telecommute.

As it turned out, it did snow—but not much, and certainly not in the amounts that had garnered all the attention.  Afterwards, meteorologists were quick to point out that accumulations had matched projections in some areas, although those areas were relatively small and generally far removed from major metropolitan centers.  Ultimately, more were affected by the weather forecast than the weather itself.

Dire predictions are also common about the retirement prospects for Americans.  A recent headline proclaims “Americans Are $6.8 Trillion Short On Retirement Savings,” a figure that the article proceeds to tell us amounts to $113,000 per household “for those on the eve of retirement” —that is, those ages 55 to 64.

Actually, that $6.8 trillion is the low end of a range published by the National Institute on Retirement Security (NIRS) about six months ago,[1] and is close to the $6.6 trillion estimate of the Center for Retirement Research (CRR), which we have commented on previously (see “Rely-Able?”)  The NIRS projections were largely derived by looking at self-reported retirement account balances, financial assets and net worth from the Federal Reserve’s 2010 Survey of Consumer Finances, incorporating some assumptions about defined benefit assets, and extrapolating target retirement savings needs based on a set of age-based income multipliers—income multipliers, it should be noted, that have no apparent connection with actual income, or with actual spending needs in retirement.

For public policy purposes, EBRI has long defined adequate retirement income as having the financial resources to cover basic expenses plus uninsured medical costs in retirement. Working from that definition as a starting point, along with an assumption that retirement represents the cessation of paid employment and begins at age 65[2], we have projected that approximately 44 percent of Baby Boomer and Gen-Xer households are simulated to be at risk of running short of money in retirement, assuming they retain any net housing equity until other financial resources are depleted.  Our most recent assessment of that total aggregate gap between needs and available resources is $4.6 trillion, with an individual average of approximately $48,000.[3]

That is, of course, still a large gap, though one considerably smaller than that highlighted in the article.  While it represents a lot of households—it also includes a wide range of personal circumstances, from individuals projected to run short by as little as a dollar to those projected to fall short by tens of thousands of dollars.[4]  For those seeking to understand, and perhaps craft solutions for, the current projected shortfalls, this is an important distinction, and one given short shrift by a headline’s focus on the aggregate.

A lot of science goes into making weather projections, and yet a temperature difference of a mere degree or two can be the difference between a modest rainfall or a blizzard of epic proportion.  Beyond those reality variables, imprecise modeling assumptions can distort forecasts, producing their own disruptions.

When it comes to effective retirement policy, it is, of course, important to be able to quantify just how big the nation’s retirement savings shortfall is.  It is, however, perhaps even more important to remember that whether an individual shortfall exists will be a combination of individual circumstances, as well as varying degrees of preparation, access, and needs.

Nevin E. Adams, JD

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[1] The NIRS report, “The Retirement Savings Crisis: Is it Worse than We Think?” is available online here.

[2] EBRI has also performed analysis on retirement ages other than 65. 

[3] EBRI recently submitted congressional testimony on “The Role of Social Security, Defined Benefits, and Private Retirement Accounts in the Face of the Retirement Crisis.”  Included in that testimony was an analysis of the probabilities of successful retirement by income quartile for both voluntary and automatic enrollment 401(k) plans.   You can read it online here.   

[4] Nearly one-half (49.1 percent) of Gen Xers are projected to have at least 20 percent more than is simulated to be needed, for example, while about 1 in 5 (19.4 percent) are projected to have less than 80 percent of what is needed. See “All or Nothing? An Expanded Perspective on Retirement Readiness,” online here. 

Reserve Cause

When I was still a child, my parents owned a 1958 VW Beetle. I was pretty young, so I don’t remember much about that car, other than the color, and what struck me, even as a child, as the “odd” reversal of the trunk and engine. One thing I do remember is that it didn’t have a gas gauge. Instead, there was a reserve tank switch, and when the engine started sputtering, you opened the valve, and got enough “extra” gas to get to a gas station.

The trick was that you had to remember to leave that reserve open when you filled up―if you didn’t, well then, you had no reserve. As you might expect, the reason I remember that relatively obscure feature to this day is a trip that was “interrupted” when my family discovered the hard way that my father had forgotten to reset the reserve switch.

Retirement planning typically focuses on looking to ensure that your post-retirement income sources are adequate to replicate some percentage of your preretirement income level. Underlying that approach is the assumption that individuals incur roughly the same kinds of expenses in retirement, although the amount, and proportionate share, of those expenses can certainly shift, particularly in areas such as health care. Indeed, while EBRI’s Retirement Security Projection Model^®  (RSPM) and Retirement Readiness Rating have long incorporated the uninsured costs of post-retirement health care and long-term care, a few other  retirement projection models only recently acknowledge post-retirement health care costs as a discrete retirement savings need.

As a recent EBRI Notes article[1] explains, individuals should be concerned about saving for health insurance premiums and out-of-pocket expenses in retirement for a number of reasons. Medicare generally covers only about 60 percent of the cost of health care services for Medicare beneficiaries ages 65 and older, while out-of-pocket spending accounts for 12 percent.[2] The percentage of private-sector establishments offering retiree health benefits has been falling, and where benefits are offered, they are becoming less generous, even in the public sector.

While EBRI’s analysis indicates that savings targets for post-retirement health expenses (other than nursing home and home health care costs) declined between 6 percent and 11 percent between 2012 and 2013 for a person or couple age 65, there are a wide variety of possible outcomes, depending not only on the age at which an individual retires, but also the length of life after retirement, the availability and source of health insurance coverage after retirement to supplement Medicare, their health status and out-of-pocket expenses, the rate at which health care costs increase, the impact of interest rates and other rates of return on investments, as well as possible changes in public policy―not to mention the targeted probability of success of those targets.

Remember that while it is possible to come up with a single number that individuals can use to set retirement savings goals, a single number based on averages will be wrong for the vast majority of the population.

But, as with that old VW Beetle, those who set savings targets that fail to set aside any reserve for the eventuality might well wind up short of their destination.

Nevin E. Adams, JD

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[1] The EBRI Notes article, “Amount of Savings Needed for Health Expenses for People Eligible for Medicare: More Rare Good News” is online here.
 

[2] Note that many individuals will need more than the amounts cited in this report because this particular analysis does not factor in the savings needed to cover long-term care expenses, nor does it take into account the fact that many individuals retire prior to becoming eligible for Medicare. However, some workers will need to save less than what is reported if they choose to work during retirement, thereby postponing enrollment in Medicare Parts B and D if they receive health benefits as active workers.

Motive and Opportunity

At some point in just about every police drama, potential suspects are vetted against the following criteria: Did they have the motive to commit the crime, and did they have the opportunity? Those who lack either are generally quickly dismissed as suspects because it is assumed that, lacking those two essential elements, they simply couldn’t—or wouldn’t—have done the crime.

While it’s not generally couched in such terms, the focus on remedying retirement savings shortfalls often turns on those elements as well. Granted, most individuals would concede they have a motive for saving for retirement. After all, how many of us would consciously embrace the notion of a less-than-financially secure retirement, given a choice?

Opportunity is another matter. We know that, given the opportunity to save in a workplace retirement plan, most do. However, we also know that, outside those workplace programs—despite a wide-range of available alternatives—the vast majority do not.

Not surprisingly, this “coverage gap”—between those who have access to a retirement savings plan at work and those who don’t—has been a focus of regulators and policymakers, with some looking for ways to encourage more employers to provide access to such plans, and others looking to expand access through approaches like “automatic” IRAs.

When it comes to evaluating criminal suspects, there is a third criterion applied, and one that is often the final determinant in deciding whether to charge the individual: Did they have the MEANS to commit the crime? The rationale is simple: While one can have both the motive to injure someone and the opportunity to do so, if you lack the physical means to commit the crime—well, then, even if you had the inclination and the chance, you lacked the physical wherewithal to do so. And means is, of course, also a critical consideration in the calculus of retirement savings, certainly among lower-income workers.

You’ve got the motive and the means—take advantage of the opportunity.

- Nevin E. Adams, JD

The American Savings Education Council, or ASEC, is a national coalition of public- and private-sector institutions committed to making saving and retirement planning a priority for all Americans, which it does through resources such as the Ballpark E$timate. ASEC is a program of the Employee Benefit Research Institute Education and Research Fund (EBRI-ERF), a 501©(3) non-profit organization.  More information is available at www.asec.org