Grant’s Go-To’s: The Latest Studies and Reports on the State of Retirement Security
Last month, the U.S. Senate unanimously passed a resolution declaring October as National Retirement Security Month. I decided to honor the resolution by compiling recent retirement security-related studies and reports that might be useful for those of you working on state-facilitated retirement initiatives.
Because keeping up with industry trends and current research can help to inform retirement program design decisions and advocacy efforts, I have sometimes used this space to share the latest with RSM readers. Over the past year, I’ve included studies on topics such as the impact of income inequality and the cost of retiree health care on retirement security, current research findings on retirement security and defined contribution trends.
What follows is a summary of key reports and studies released during the summer and fall of 2021.
Recent studies examine financial literacy, views on retirement
TIAA’s 2021 TIAA Institute-GFLEC Personal Finance Index report finds low levels of financial literacy are common among each generation of U.S. adults, but that pandemic-related economic uncertainty has heightened peoples’ desire to increase their financial literacy, which should be viewed as an opportunity for the financial services sector.
In a new report on generational views of retirement, the National Institute on Retirement Security (NIRS) finds Millennials and Gen X’ers are more worried about retirement than older generations. Despite the NIRS finding that somewhat younger workers are more worried about retirement, a survey by the Federal Reserve Bank of New York finds a smaller percentage of Americans plan to work past age 62.
How income inequality impacts retirement security
New research from PEW finds, perhaps unsurprisingly, that nontraditional workers are at a disadvantage when it comes to saving for retirement, but many would save if given the opportunity.
Recent work by the National Institute on Retirement Security NIRS highlights stark inequalities in retirement security that stem from financial asset ownership. NIRS concludes that making workplace retirement savings plans more accessible through state-facilitated retirement savings programs is a step in the right direction.
Lack of financial assets, the cost of long-term care and student debt identified as financial threats to retirement security
An infographic from the NIRS Stark Inequality report highlights the finding that middle class Millennials, Gen X’ers and Baby Boomers possess only a small percentage of their generations’ financial assets, and that the lack of financial assets puts them at risk of retirement insecurity.
A report from the Employee Benefits Research Institute (EBRI) and a recent Forbes article by Teresa Ghilarducci examine retirement security challenges posed by the cost of long-term care and student loan debt, respectively.
Financial service industry innovations aimed at serving a wider range of savers and increasing participation
In a paper authored by David C. John, Mark Iwry, Christopher Pulliam and William G. Gale, the Brookings Institution offers possible solutions for the financial services industry to address the problem of small accounts.
A new article in the journal “Organizational Behavior and Human Decision Processes” highlights research on the potential of “fresh starts” to increase participant contributions. The authors found that framing a future point in time as a “fresh start” (e.g., a birthday, the first day of spring, etc.) increased participants’ willingness to increase retirement savings contributions.
An October 18, 2021 article in Pensions & Investments reports DC plans are increasing customization of their plans and communications to address a wider range of participants with varying circumstances.
Recent Retirement Security Studies, Reports and Articles
For more detailed information on the work mentioned above, see the summaries below or click through the links to the actual studies and reports.
Survey research on financial literacy and Americans’ views of retirement
Financial literacy and well-being in a five generation America
”While some financial decisions that individuals face are life-stage dependent, others are not, and the need to make financial decisions never completely ends. How well individuals navigate financial decisions throughout their lifetime depends, at least in part, on their financial literacy. This report leverages the 2021 TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) to examine financial literacy and financial well-being across the five generations comprising the U.S. adult population (ages 18 and older). These five generations in turn cover multiple life and career stages.”
TIAA Institute – Oct. 2021
More Americans are looking to retire earlier
”Over the past several decades, Americans have been working well into their 60s. Now, fewer people are planning to do that. According to a new survey from the New York Federal Reserve, 50.1% of respondents expect to keep working past the age of 62, an almost 2% decline from the year before. Some older workers have the financial stability to retire early, but most do not.”
Marketplace.org – Sept. 8, 2021
Generational Views of Retirement in the U.S.
”A national survey finds that Millennials and Generation X are more worried about retirement as compared to older generations. Sixty-four percent of Millennials and 54 percent of Generation X are more concerned about their retirement security in the wake of the COVID-19 pandemic. The level of concern is at 42 percent for Baby Boomers and 25 percent for the Silent Generation.”
National Institute on Retirement Security Issue Brief – July 2021
Economic inequality and retirement security
Can Nontraditional Workers Improve Retirement Outlook by Coordinating with Spouse/Partner?
”Access to a workplace retirement savings plan through a spouse or partner’s job may allow some workers to save additional amounts, or even to save enough for a secure retirement. But this is likely not a viable strategy for most nontraditional workers, only 56.0% of whom are married or living with a partner. Overall access to a retirement plan increases by just 11.8%, looking across all nontraditional workers, coupled and uncoupled, when spousal or partner access is included. This finding is further evidence that nontraditional workers need a variety of solutions that provide retirement savings opportunities directly and efficiently to all workers. If given the opportunity, many workers will save.”
Pew – Oct. 20, 2021
Stark and growing economic inequality fuels retirement insecurity
”A new analysis of the Federal Reserve’s Survey of Consumer Finances by the National Institute on Retirement Security details just how stark economic inequality is in America. The new analysis, Stark Inequality, also examines the role of race in financial asset ownership. A major step in the right direction would be increasing access to workplace retirement savings plans that will enable more workers to own financial assets. Fortunately, some states are establishing state-facilitated retirement savings plans like CalSavers, Illinois Secure Choice, and OregonSaves.”
Forbes – Sept. 1, 2021
These retirees are more likely to be ‘comfortable’ or ‘affluent,’ study finds
”Although every retirement looks different, those with guaranteed income, little debt, a clear spend-down strategy and employer-provided assistance are among the most satisfied. That’s according to a study from the Employee Benefit Research Institute’s Retirement Security Research Center, profiling five types of retirees. The study uncovered patterns among retirees who identify as “average,” “comfortable,” “affluent,” “just getting by” or “struggling.” “
CNBC – Aug. 4, 2021
Threats to retirement security
Retirement Security Imperiled by Low Assets and Savings Behavior, Studies Warn
”A paucity of financial assets among members of the middle class, and some saving behaviors, threaten many with retirement instability, two recent studies warn. The National Institute on Retirement Security has analyzed data from the Federal Reserve’s 2019 Survey of Consumer Finances and says that the middle class, which the study defines as those between the 30th and 70th quartiles of net worth, of three generations. The 2019 study says that the middle class of those generations—Millennials (born between 1981 and 1996), Generation X (born between 1965 and 1980) and Baby Boomers (born between 1946 and 1964)— possess only a small percentage of their generations’ financial assets.”
American Society of Pension Professionals and Actuaries – Oct. 20, 2021
The Other Retirement Security Challenge: Long-Term Care
”The possibility of needing long-term care—basically, needing to live in a nursing home or needing in-home nursing services—is a significant, and largely unpredictable, retirement security challenge. The Employee Benefit Research Institute (EBRI) projects a baseline estimate (assuming no change in the current retirement system) that 57.4% of US household headed by individuals between the ages of 35 and 64 will achieve retirement success (namely, they will not run short of money in retirement). If long-term care costs are suppressed/ignored this value increases to 75.5 percent.”
National Association of Plan Advisors – Oct. 20, 2021
Teresa Ghilarducci: Student Debt Weakens Retirement Security
”In the past, older households were more likely to retire debt free with a paid-off mortgage. Those days are over. Student loan debt for older adults, their children, and their grandchildren has been rising for decades. The Center for Retirement Research at Boston College finds monthly student loan payments reduce retirement plan contribution rates. In 2019, the median outstanding student loan debt for an older household was $24,000 which was a whopping 90 percent of median retirement savings of $30,500. In other words, 90 percent of retirement savings are needed to repay student loans. This does not leave a lot for everyday needs, let alone unexpected emergency expenses.”
Forbes – Sept. 26, 2021
Industry trends and innovations
Using fresh starts to nudge increased retirement savings
”Researchers conducted a field experiment to study the effect of framing future moments in time as new beginnings (or “fresh starts”). University employees (N = 6,082) received mailings with an opportunity to choose between increasing their contributions to a savings plan immediately or at a specified future time point. Framing the future time point in relation to a fresh start date (e.g., the recipient’s birthday, the first day of spring) increased the likelihood that the mailing recipient chose to increase contributions at that future time point without decreasing their likelihood of increasing contributions immediately. Overall, fresh start framing increased retirement plan contributions in the eight months following the mailing. Our findings represent the first experimental demonstration of the benefits of fresh start framing in a consequential field setting.”
Organizational Behavior and Human Decision Processes – Nov. 2021
Trends in DC: Focus on Retirement Income
”DC plans are addressing a wider range of participant circumstances via more customization, layered communications and programs that build financial resilience.”
Pensions & Investments – Oct. 18, 2021
Small retirement accounts: Issues and options
”The existence of accounts with small balances is an inevitable byproduct of retirement systems, like those in the United States and several other countries, where individualized, employer-based accounts and automatic enrollment provisions are widespread. Public policies that enable people to navigate the problems that small accounts create could help millions of households save more adequately for retirement. Increasing people’s retirement income by just $1,000 a year could also help states and the federal government save several billion dollars that they otherwise would have spent for retiree support programs.”
Brookings – Sept. 21, 2021
This piece was featured in the November 4, 2021 edition of Retirement Security Matters. For more fresh thinking on retirement savings innovation, check out the newsletter here.
