Nevin's Data "Points"

As we close out 2012, and embark upon a new set of challenges in 2013, this week’s EBRIef offers a roundup of our 2012 research.  Best wishes for a Happy and Prosperous New Year! Share EBRIef with your friends and colleagues – and let them know they can sign up for their own copy HERE What’s New(s) – Health & Workforce “Findings from the 2012 EBRI/MGA Consumer Engagement in Health Care Survey”  MORE . "Views on Employment-Based Health Benefits: Findings from the 2012 Health Confidence Survey"   MORE.  “Self-Insured Health Plans: State Variation and Recent Trends by Firm Size”  MORE . 'Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News,' and 'IRA Asset Allocation, 2010'   MORE . Employment-Based Retiree Health Benefits: Trends in Access and Coverage, 1997-2010”   MORE.  “Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2...

Years ago ― when my kids were still kids ― we discovered an ingenious Web site 1 that purported to offer a real-time assessment of your “naughty or nice” status.   As parents, we rarely invoked the name of Santa to encourage good behavior, and for the very most part our children didn’t require much “redirection.” But no tone of voice or physical threat ever had the impact of that Web site ― if not on their behaviors (they were kids, after all), then certainly on the level of their concern about the consequences. In fact, in one of his final years as a “believer,” my son (who, it must be acknowledged, had been PARTICULARLY naughty that December) was on the verge of tears, worried that he’d find nothing under the Christmas tree but the coal and the bundle of switches he surely deserved.   One could argue that many participants still act as though some kind of benevolent elf will drop down their chimney with a bag full of cold cash from the North Pole, that somehow, ...

Sooner or later, at just about every retirement plan conference, you’ll hear someone—and generally more than just one someone—cite the statistic that “only about half of working Americans are covered by a workplace retirement plan.” It’s a data point that is widely and openly presented as fact—not only by those inclined to dismiss the current system as inadequate (or worse), but even by some of its most ardent champions, who see it as a call to action for expanded access to these programs. It’s drawn from the U.S. Census Bureau’s March 2012 Current Population Survey (CPS).(1) But does it tell the full story? A recent EBRI Issue Brief notes that in 2011, 78.5 million workers worked for an employer/union that did not sponsor a retirement plan. Looking specifically at those who did not work for an employer that sponsored a plan, the report notes that: 8.9 million were self-employed (and were thus barred from having a plan by their own inaction). 6.2 million were under the age of 2...

On December 13, EBRI will hold its 71st biannual policy forum, “’Post’ Script: What’s Next for Employment-Based Health Benefits?” It is a question that has been on the mind of employers, lawmakers and policymakers alike for some time now. It predates the time that the structure for the Patient Protection and Affordable Care Act (PPACA) was put in place, has evolved, but not been resolved, as regulations were, and continue to be issued subsequent to its passage. It has remained on the minds of employers, providers, and policymakers following the various courts’ assessment of the various challenges to the constitutionality of the law, and even as the nation went to the polls last month. Today we know more than we once did about certain aspects of the law, its provisions and applications.¹And yet there is much yet to know about its broader implementation: How the insurance exchanges might work,² for example, or how their presence might affect or influence cost, access, or employer pla...

A recent EBRI Issue Brief examined trends in employment-based retirement plan participation, noting that in 2011, the percentage of all workers participating in an employment-based retirement plan was essentially unchanged from the year before. More specifically, the percentage of all workers (including part-time and self-employed) participating in an employment-based retirement plan¹ stood at 39.7 percent in 2011, compared with 39.8 percent in 2010.² At the same time, the percentage of full-time, full-year wage and salary workers ages 21–64 (those most likely to be offered a retirement plan at work) saw a slight decline, slipping from 54.5 percent in 2010 to 53.7 percent in 2011. While those movements were very small, the increase in the number of workers participating in 2011 halted a three-year decline. Moreover, it’s not as though this gauge has shown a steady trend, even in recent history. When you take into account all workers, the percentage participating in an employment-bas...

Retirement planning is a complex and highly individualized process, but many people find it easier to start by focusing on a single, specific target number. For those interested in a single number for health care expenses in retirement, a recent EBRI report provides that. Among other things, the report noted that a 65-year-old man would need $70,000 in savings and a woman would need $93,000 in 2012 if each had a goal of having a 50 percent chance of having enough money saved to cover their projected health care expenses in retirement. A 65-year-old couple, both with median drug expenses, would need $163,000 in 2012 to have a 50 percent chance of having enough money to cover health care expenses. 1 Determining how much money is needed to cover health care expenses in retirement is complicated. It depends on retirement age, the length of life after retirement, the availability and source of health insurance coverage after retirement to supplement Medicare, the rate at which heal...

Even the best retirement planning requires a fair number of assumptions: the age at which you hope to retire, for one thing; the amount of income that living in retirement will require; the length of time over which your retirement will last; the rate of return on your savings prior to, and following, retirement; the sources of retirement income that will be available to you, and in what amount(s). Consider that in the 2012 Retirement Confidence Survey while worker confidence in having enough money to pay basic expenses in retirement wasn’t exactly high (only 26 percent were very confident), workers were noticeably less likely to feel very confident about their ability to pay for medical expenses after retirement (13 percent) and even less likely to feel very confident about paying for post-retirement long-term care expenses (9 percent) — levels that have remained statistically unchanged since 2010. Indeed, the lack of employment-based retiree health insurance may result in unanti...

Last week the Center for Retirement Research at Boston College provided an update on its National Retirement Risk Index (NRRI).¹ The impetus for the update was the triennial release of the Federal Reserve’s Survey of Consumer Finance (SCF), published in June, reflecting information as of December 2010. Now, many things have changed since 2007, and in the most recent iteration of the NRRI, the authors note five main changes: the replacement of households from the 2007 SCF with those from the 2010 SCF; the incorporation of 2010 data to predict financial and housing wealth at age 65; a change in the age groups (because a significant number of Baby Boomers have retired, according to the report authors); the impact of lower interest rates on the amounts provided by annuities; and changes in the Home Equity Conversion Mortgage (HECM) rules that lowered the percentage of house value that borrowers could receive in the form of a reverse mortgage at any given interest rate. And, when all ...

Our industry pays a lot of attention to the investment choices that retirement plan participants make; we fret about the type and number of choices on their investment menu, the efficacy of target-date funds, the utilization of active versus passive investment strategies, and the prudence of the asset allocation choices that individuals make—with or without the benefit of tools and/or professional guidance. Unfortunately, once they leave that part of our private retirement system, not so much. A significant percentage of that retirement plan money winds up in individual retirement accounts, or IRAs. In fact, today IRAs represent more than a quarter of all retirement assets in the U.S., according to a recent EBRI Issue Brief. But there remains a limited amount of knowledge about the investment behavior of individuals who own IRAs, alone or in combination with employment-based retirement plans. In order to fill this gap, EBRI has undertaken an initiative to study in depth this con...

Trying to figure out how much money an individual or couple needs to live on in retirement is, to put it mildly, a complicated business. Among other factors, it depends on the age at which he or she retires, where they live, and how they live. It can be affected by marital status, their health, and the markets, both before and after retirement. And, as a recent EBRI Notes article (see “Savings Needed for Health Expenses for People Eligible for Medicare: Some Rare Good News” ) explains, it can also be affected by the availability and source of health insurance coverage after retirement to supplement Medicare, and the rate at which health care costs increase. Additionally, public policy that changes any of the above factors will also affect spending on health care in retirement. Consequently, trying to hit that target can feel like aiming at a bulls-eye that is not only moving, but moving fast, and zig-zagging away from the bouncing, moving vehicle in which you find yourself. W...

Recently the Center for Retirement Research at Boston College released a paper titled “Can Retirees Base Wealth Withdrawals On the IRS’ Required Minimum Distributions?”¹ The answer to that question, according to CRR, is “yes.” A more complete response might be, “yes, or any number of other random withdrawal methodologies.” There are some advantages to a drawdown strategy based on the schedule provided by the Internal Revenue Service (IRS) for required minimum distributions, or RMDs.² First off, and as the CRR paper notes, it’s relatively straightforward. Secondly, it effectively defers initiating withdrawals until age 70-½, which also provides some additional accumulation opportunity. Perhaps most importantly, it helps avoid the stiff penalties the IRS imposes on those who don’t withdraw funds from these accounts at least as rapidly as the RMD schedule provides. The CRR paper cites as an advantage the reality that those drawdowns are based on the portfolio’s current market value, th...

A recent EBRI Issue Brief ( Individual Account Retirement Plans: An Analysis of the 2010 Survey of Consumer Finances ) examined trends in individual account retirement plans. Analyzing the information from the Survey of Consumer Finances (SCF) 1 , it was not surprising to find that the median (midpoint) net worth of American families decreased by 38.8 percent from 2007 to 2010, and the median value of family income also decreased during that period (though at a much smaller rate of 7.7 percent). At the same time, defined contribution retirement plan balances came to represent a larger portion of families’ total financial assets among families with these plans; 61.4 percent in 2010, compared with 58.1 percent in 2007. Defined contribution and/or IRA/Keogh balances increased their share as well, from 64.1 percent of total family financial assets in 2007 to 65.7 percent in 2010. And, while regular IRAs account for the largest percentage of IRA ownership, it is perhaps not surprising...

Last week the Wall Street Journal reported that Sears and Darden Restaurants were planning a “radical change in the way they provide health benefits to their workers,” giving employees a fixed sum of money and allowing them to choose their medical coverage and insurer from an online marketplace, or exchange1. “It’s a fundamental change,” EBRI’s director of health research, Paul Fronstin, noted in the WSJ article . Indeed, this is the time of year when many American workers – and, by extension, most Americans – will find out the particulars of their health insurance coverage for the following year. For most, the changes are likely to be modest. And, based on the 2012 Health Confidence Survey (HCS), not only do most Americans seem to be confident in those future prospects, they would seem to be satisfied with that outcome. More than half of those with health insurance are extremely or very satisfied with their current plans, and a third are somewhat satisfied. Nearly three-quarters ...

Earlier this week, an EBRI research report quantified the financial impact of setting a higher starting point for 401(k) default contributions—and it can be significant. Most private-sector employers that automatically enroll their 401(k) participants do so at a default rate of 3 percent of pay,(1) a level consistent with the starting rate set out in the Pension Protection Act of 2006 as part of its automatic enrollment safe harbor provisions—but it’s a rate that many financial experts acknowledge is far too low to generate sufficient assets for a comfortable retirement. EBRI has previously modeled the impact of automatic enrollment(2) (see “The Impact of Automatic Enrollment in 401(k) Plans on Future Retirement Accumulations: A Simulation Study Based on Plan Design Modifications of Large Plan Sponsors,” online here ). In the most recent research, using EBRI’s proprietary Retirement Security Projection Model® (RSPM), the impact of raising the default contribution rate to 6 percent...

Next month we’ll enter the final full month of the 2012 election cycle with a series of presidential (and one vice presidential) debates. Pundits claim these don’t have much impact on the election’s outcome, but millions of Americans will likely tune in anyway, either to help them make a decision, to reinforce the one they made months ago, or perhaps just for the prospect of seeing a historic gaffe. The answers, of course, will receive the most scrutiny, though as any journalist (or pollster) will tell you, the art lies in asking the “right” question. In the not-too-distant future, EBRI will, in conjunction with Matt Greenwald & Associates, Inc., field the 2013 Retirement Confidence Survey.¹ Over its 23-year history, the RCS has examined the attitudes and behavior of American workers and retirees toward all aspects of saving, retirement planning, and long-term financial security. The survey itself—the longest-running survey of its kind in the nation—is meaningful both for the kin...

While many Americans seem to lack a definitive sense of what living in retirement will be like, how long it will last, or how much it will cost, their sense of when it will begin has been trending older. The 2012 Retirement Confidence Survey (RCS) noted that, whereas in 1991, just 11 percent of workers expected to retire after age 65, in 2012, more than three times as many (37 percent) report they expect to wait until after age 65 to retire—and most of those indicated an expected retirement age of 70 or older. 1 Those expecting to delay retirement perhaps found solace in a recent report by the Center for Retirement Research (CRR) at Boston College which concluded that by postponing retirement until age 70, the vast majority of households (86 percent) were “…projected to be prepared for retirement.” That sounds good – but what about the assumptions underlying that conclusion? In 2003, the Employee Benefit Research Institute (EBRI) constructed the EBRI-ERF Retirem...