Category Archives: Retirement

Savings Needed to Fund Health Insurance and Health Care Expenses in Retirement

Source: Paul Fronstin, Dallas Salisbury, Jack VanDerhei, EBRI Issue Brief, no. 317, May 2008

This Issue Brief examines the uncertainty of health care expenses in retirement by using a Monte Carlo simulation model to estimate the amount of savings needed to cover health insurance premiums and out-of-pocket health care expenses. This type of simulation is able to account for the uncertainty related to individual mortality and rates of return, and computes the present value of the savings needed to cover health insurance premiums and out-of-pocket expenses in retirement. These observations were used to determine asset targets for having adequate savings to cover retiree health costs 50, 75, and 90 percent of the time.

Why Not a “Super Simple” Saving Plan for the United States?

Source: Pamela Perun, C. Eugene Steuerle, Urban Institute, May 23, 2008

From the abstract:
Despite decades of significant tax subsidies for pensions and retirement accounts, most Americans retire with little or no pension saving. This paper suggests that it is possible to create a “Super Simple” saving plan that would provide a basic, low-cost, easily administrable plan with the potential to increase significantly the retirement assets available to moderate- and middle-income individuals. This plan follows the lead of a new system about to be implemented in the United Kingdom, which features automatic contribution for employees who do not opt out, a significant government match, and simplification of existing rules amongst other elements.

An Analysis of Federal Employee Retirement Data

Source: Office of Personnel Management, March 2008

This paper discusses Federal retirement statistics in order to gain a better understanding of the future makeup of the Federal workforce. A significant number of employees are eligible or will become eligible to retire in the near future, making a deeper analysis of the retirement of Federal civilians more timely and meaningful. The findings will hopefully provide valuable insight into workforce planning as the workforce ages and the needs of the Federal Government continue to evolve.

Included among the findings is the median number of years an employee stays with the Government after first becoming eligible to retire is four years. Nearly 25 percent remain for nine or more years.

Have People Delayed Claiming Retirement Benefits? Responses to Changes in Social Security Rules

Source: Jae Song, Joyce Manchester, Congressional Budget Office, Working Paper Series, 2008-4, May 2008

Two changes have been made recently to rules governing the Social Security program:

The retirement earnings test was eliminated in 2000 for people aged 65-69, and the full retirement age (FRA) for people born in 1938 or later was scheduled to gradually increase in two-month increments until reaching age 67.

This paper examines changes in the age at which people claim Social Security retirement benefits in response to those changes. Data comes from a 1 percent sample of administrative data from the Social Security Administration for 1997 to 2007.

401(k) Loans = Retirement Insecurity

Source: Robert Reeves and Pamela Villarreal, National Center For Policy Analysis, Brief Analysis No. 615 April 25, 2008

The popularity of 401(k) plans has grown in recent years. According to the Employee Benefits Research Institute, almost two-thirds of employers offer such plans and millions of employees now contribute to them. These defined contribution plans allow workers to set aside part of their earnings in tax-deferred retirement accounts that are invested in stock and bond funds. A worker can begin to withdraw funds from the account without penalty at age 59 and one-half. All contributions, as well as accumulated dividends and interest, are subject to income tax when the funds are withdrawn.

Pension Tension: Very few states hold all the assets they should for future retirement and health care benefits

Source: Ron Snell, State Legislatures, May 2008

… How well are states prepared to meet the retirement commitments they have made?

In some ways, very well. State and local governments are custodians of an enormous pool of assets safeguarded for future retirees–$3.24 trillion in cash and investments at the end of last October. In the fiscal year that ended on June 30, 2007, state and local governments and their employees contributed $91 billion to retirement funds, and the funds earned more than $265 billion on their investments. Funding levels generally have been improving in recent years, as investments have recovered from their post-2000 lows.

In other ways, states are not so well prepared. Very few states hold all the assets they should have on hand to prepare for future retirement benefits. All states invest in order to meet future obligations, but even allowing for future investment return, some state trust funds hold less than half what they should. And a substantial number are below the 80 percent figure that the public retirement community regards as adequate. The Pew Center on the States recently estimated that state pension systems (not including locally run systems) are about $360 billion short of the assets they should ideally hold for future retirees.

Full text

Who Will Pay the Cost of Government Employer Retiree Health Benefits?

Source: Harvey M. Katz, Labor Law Journal, Spring 2008

Who will pay the cost of government employer retiree health benefits? The short answer to that question is that the union worker will pay the cost in the form o decreased benefits, higher contributions, and/or fewer union jobs–unless they act now. This unequivocal statement may seem a bit extreme, however, thirty years of experience as a benefits attorney tells me that it is true. As explained below, my reasons for making such an extreme statement are sound and the cost of ignoring the impending crisis will be enormous.

Workers Show Record Drop in Retirement Confidence, Health Care and Economy Are Major Concerns

Source: Employee Benefit Research Institute

From the press release:
Reflecting the growing concern over health care costs and economic issues, American workers’ confidence in being able to afford a comfortable retirement decreased over the past year by a rate unmatched in the 18 years of the Retirement Confidence Survey(RCS), according to results released today.

The percentage of workers very confident about having enough money for a comfortable retirement decreased sharply, from 27 percent in 2007 to 18 percent in 2008, the biggest one-year drop in the 18-year history of the survey. Retiree confidence in having a financially secure retirement also decreased, from 41 percent to 29 percent, a drop of 12 percentage points. Decreases in confidence occurred across all age groups and income levels but was particularly acute among younger workers and those with lower income.
RCS results indicate health costs in particular have become a big concern for retirees: Among retirees who left the work force earlier than planned, more than half (54 percent) say they did so because of health problems or disability. Almost half of retirees (44 percent) say they have spent more than expected on health care expenses. More than half of retirees (54 per- cent) say they are now more concerned about their financial future than they were right after they retired, a 14 percentage- point increase from a year ago (40 percent in 2007).

“In the nearly two decades we have been conducting the RCS, this year’s results show a very dramatic reduction in the public’s confidence about having a comfortable retirement. The economy and health costs are major concerns,” said Dallas Salisbury, president of the nonpartisan Employee Benefit Research Institute (EBRI), which conducted the survey with Mathew Greenwald & Associates. “If there is abeing able to afford retirement.”

Full Issue Brief (PDF; 432 KB)

From Work to Retirement: Tracking Changes in Women’s Poverty Status

Source: Sunhwa Lee, Lois Shaw, AARP Policy & Research, Pub ID: 2008-03, February 2008

From press release:
Women are nearly twice as likely to be poor as men as they reach pre-retirement and retirement ages, according to a new report by AARP’s Public Policy Institute (PPI). The study, titled “From Work To Retirement: Tracking Changes in Women’s Poverty Status,” found that variables such as marital status, labor force participation, and health status affect the risk of poverty for women as they age.

Women’s longer life expectancies play a large role in determining their lifetime financial security. They are more likely to lose a spouse – nearly 40 percent of women 65 and older were unmarried and living alone compared to only 16 percent of men – and they are also more likely to encounter health related problems.
In Brief

Taking the Mystery Out of Retirement Planning

Source: U.S. Department of Labor, 2008

From the news release:
The U.S. Department of Labor today released a new online resource that makes it easier for Americans to prepare for a financially secure retirement. A series of interactive worksheets were developed as a companion to a 2006 publication entitled “Taking the Mystery Out of Retirement Planning.” Using the worksheets, individuals who are 10 to 15 years from retirement can calculate their income and savings as well as their projected expenses in retirement.