Decisions, Decisions : Choices That Affect Retirement Income Adequacy - EBRI's 72nd Policy Forum

On May 9, 2013, the Employee Benefit Research Institute (EBRI) convened its 72nd biannual policy forum in Washington, DC, where a wide range of national experts on U.S. retirement policy offered the roughly 200 attendees insights on topics such as the impacts of a sustained low-interest-rate environment on retirement savings and retirement income, the influences of the employer match in 401(k) plans, and suggestions on how to help plans and participants optimize their distribution choices - in particular rollover, drawdown, and annuity options. This paper presents key findings discussed at the policy forum and include the following: (1) Roughly a quarter of Baby Boomers and Gen-Xers, who would have had adequate retirement income under historical averages, would end up running short of money in retirement if today’s rates are assumed to be a permanent condition, although there is likely to be little impact from low bond rates on the lowest-income group. (2) The current interest rate environment, and its duration, has implications for defined contribution plans in term of the type(s) of fixed-income offerings on the menu, as well as stable-value and target-date funds. (3) The level of the match seems to have an impact on contribution levels in voluntary enrollment 401(k) plans, less so with automatic enrollment plan designs. (4) There doesn’t appear to be any linkage between adopting automatic enrollment and changes to the employer contribution level/timing. (5) The vast majority of defined benefit (pension) plan participants who were not forced to take an annuity chose to take a lump-sum distribution. (6) Plan design matters, both in term of the savings decisions participants make, and the decisions they make post-retirement. The PDF for the above title, published in the July 2013 issue of EBRI Notes, also contains the fulltext of another July 2013 EBRI Notes article abstracted on SSRN: “Tracking Health Insurance Coverage by Month: Trends in Employment-Based Coverage Among Workers, and Access to Coverage Among Uninsured Workers, 1995-2012”