retirement readiness: a framework and prospects for future improvement

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Retirement Readiness: A Framework and Prospects for

Future Improvement

Don EzraASEC Fellow

October 20, 2010

ASEC Partners Meeting

ASEC General Partners MeetingOctober 20, 2010

Don Ezra

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Endowed zone

Bequest zone

Lifestyle zone

Essentials zone

Pre-annuitized wealth

Think of several “wealth zones”

Continue to accumulate

Enough to annuitize or support lifestyle

Enough to annuitize or support essentials

EBRI findings for the Essentials Zone

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Early Baby Boomers: 47% won’t attain the ceiling

Late Baby Boomers: 44%Gen Xers: 44%

An improvement of 12 percentage points in seven years

Lowest one-third by income: 70%Middle one-third: 42%Top one-third: 23%

How much will it help to save more?

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Early Baby Boomers, lowest income group: more than 25% of pay needs to be added to annual saving, to bring failure rate down to 50%

Above-median income groups: additional 10% of pay saved would raise success rate above 90%

And some don’t need to save any more at allAuto-enrollment and auto-escalation features in

DC plans are enormously powerful, particularly for those with 30-40 years of future saving

Lower-income: reaching post-retirement target of 80% of pre-retirement income (preserved in real terms): 46% success improves to 79%

Higher income: 27% improves to 64%