Mind Over Market

More than 40 percent American workers face the prospect of having too little income in retirement and are likely to run out of money, according to a new study by the Employee Benefit Research Institute (EBRI). The share of the population segment at risk for an inadequate retirement ranges from 70.3 percent of households with incomes in the lowest one-third of the population to 41.6 percent in the middle income group to 23.3 percent for the highest income group. Surprisingly, given the difficulties from the financial crisis and the recession, the results find workers better prepared for retirement than a similar study conducted seven years ago. In 2003, by comparison, 79.5 percent of households in the lowest one-third of income were at risk, falling to 47.3 percent for the middle income households and 39.6 percent of the highest income group. Defying the expected pattern, older worker are less prepared than some younger workers. For example, 47.2 percent of Early Baby Boomers may not ha...

The U.S. Government Accountability Office spent a year reviewing alternative retirement plan designs abroad and proposals for new plan designs in the United States to determine which features in these plans could potentially address retirement risks currently faced by American workers. GAO modeled the impact on retirement income potential from defined contribution plans in three scenarios: mandated universal access, automatic enrollment, and mandated employee participation. GAO found that universal access and mandated employee participation together would increase the share of workers with some defined contribution plan savings at retirement from a current 67 percent level to 97 percent. It would raise the equivalent annuity benefit from a baseline of $15,217 a year to $21,312 a year. In a scenario where there is mandated access and automatic enrollment, but no required employee participation, the results are almost as impressive: the share of workers with savings at retirement rises t...