Last Friday, Slate.com, New America Foundation, and Arizona State University hosted a series of panels discussing the implications of increasing life expectancy on public policy, retirement, and family planning.
Savings defaults, auto-enrollment, and financial literacy were hot topics. Nudges, “guardrails,” and redefining “retirement” are discussed at length.
Life Expectancy Rate and Impact on Retirement (~40 minutes)
Yesterday, while the Senate as a whole was waiting out Senator Cruz during his negotiated “filibuster” to move forward the continuing resolution to fund the government past September 30th, the Senate Special Committee on Aging took a little more than an hour and half during the afternoon to reexamine the increasing concern among Baby Boomers that they won’t be able to retire at age 65, or if they do, not at the standard of living that they’ve grown accustomed to during their productive years.
Baby Boomers find themselves nearing the Social Security full-benefit retirement age much less financially prepared than they hoped they’d be. The percentage of Boomers carrying debt ages 51 to 62 has risen six percentage points to 70 percent since the early 1990s, and the average debt has risen four-fold to $28,300 — all while the changing landscape in company provided retirement benefits has left many unexpectedly working into years they’d previously set aside for leisure.
There was surprisingly little mention of the dire situation that the Social Security Trust Fund currently finds itself in, or that since the 1950s the average American worker is actually retiring earlier- now 62 years old compared to 68 y/old. Not to mention life-expectancy has risen from 72 y/old to early 80s for workers retiring now–meaning Baby Boomers are expecting to spend approximately a third of their adult life in retirement. Although the remedies offered up for securing Baby Boomers’ golden years were nothing new– greater financial literacy, mandatory life insurance plans, auto-enrollment in company sponsored savings plans, and modifications to Social Security– the discomfort in addressing our own notions of what retirement should be was obvious.
“We’re coming to some tough conclusions here… Work longer is one conclusion. That certainly wasn’t the way it was in the previous generation,” said Chairman Bill Nelson, Senator from Florida.
The National Institute on Retirement Security is hosting a webinar on the morning of Thursday, June 20 to discuss the findings of a new study on retirement security in America.
The study uses data from the Federal Reserve’s Survey of Consumer Finances to assess the retirement security of U.S. households aged 25 to 64, and will compare these results with industry benchmarks in an attempt to provide a fuller picture of retirement savings than has previously been offered.
The research will be available for review starting at 8:00 AM on June 20 at www.nirsonline.org.
Webinar to Review Research Findings of New Study:
The Retirement Savings Crisis: Is it Worse Than We Think?
The National Institute on Retirement Security
Thursday, June 20, 2013; 11:00 AM ET
Register here or at https://www2.gotomeeting.com/register/605030506
Diane Oakley, NIRS Executive Director
Nari Rhee, Report Author and NIRS Manager of Research
The Senate Health, Education, Labor and Pension (HELP) Committee held a hearing on Tuesday to investigate the causes, incentives, and possible remedies to workers’ withdraws and borrowing of retirement assets for non-retirement costs. There is a large percentage of American workers that are saving for retirement, but they don’t have savings for other milestone “purchases” (ie buying a home or paying for college). These non-retirement withdraws are called “leakage.”
Only two percent of savers withdraw for catastrophic need, this is “leakage”, but wouldn’t be considered as abuse of retirement savings by any reasonable measure. However, borrowing against retirement savings has a varied degree of “necessity,” and preventing the use of these accounts for non-essential borrowing should be a goal of any retirement policy. “Cash outs” during job transitions are the major culprit for mismanagement of retirement finances. Cash outs happen most often when retirement accounts have relatively small investments, leaving workers with frequent job change at a systematic disadvantage for retirement preparedness. Creating incentives to roll-over these accounts, or allowing “cashing in” these withdraws into a new retirement account should be a simple process to avoid liquidation and spending of retirement assets as a result of a job change. Continue reading
Join author and journalist Helaine Olen for a discussion of her new book, Pound Foolish, in which she critiques the nation’s personal finance institutions and offers ideas on what can be done to reform them.
The event will be held at the New America Foundation on Tuesday, March 19th from 12:15-1:30pm.
Click here for more info and to RSVP for this event.