PLANSPONSOR - October 2017 - 18

Upfront
Older
Workers
Not Saving
Enough
ACCORDING to a study published by
the Schwartz Center for Economic Policy
Analysis, the outlook for older workers
saving in defined contribution (DC)
plans, defined benefit (DB) plans and
individual retirement accounts (IRAs) is
not bright. The median account balance
for older workers with at least one of
these accounts is $92,000. Based on this
finding, the Schwartz Center projects
that income from retirement savings will
replace a median 14% of pre-retirement
income for those workers, which, the organization
says, is " insufficient to maintain
pre-retirement living standards. "
The study notes, " The small minority
that also has DB pension coverage is better
prepared with a median 20% replacement
rate from their retirement savings. "
The median account balance for
workers with at least a DC plan and earning
less than $40,000 a year is $35,000. But
even among the top 10% of earners, the
account balance is only $250,000.
Income seems to play a role in access
to retirement savings vehicles. The study
found that 50% of older workers earning
less than $40,000 have no savings. That
rate drops to 20% for workers making
between $40,000 and $115,000. Still,
15% of high-earners, making more than
$115,000, have no retirement savings or
pension.
However, the study also factors in
Social Security earnings projections.
The organization notes that targets
are typically lower for higher earners,
because Social Security replaces less of
their pre-retirement earnings. In this
sense, " The study assumes a replacement
rate target of 85% for workers earning
below $40,000, a 75% target for workers
earning between $40,000 and $115,000,
and a 65% target for workers earning
more than $115,000. "
Still, the study stresses, " Without
retirement savings, workers below
median income will be almost entirely
dependent on Social Security and will
be at high risk of not only downward
mobility in retirement, but also falling
into poverty. The picture is not much
different for the small minority that has
retirement savings. " -Javier Simon
Median Projected Income Replacement Rate for Workers Ages 55-64,
By Income and Plan Type
n Workers with DC or IRA only n Workers with DC or IRA, with DB n All workers with DC
n All workers, including those with no plan
24%
20%
14%
15%
0%
Bottom 50%
<$40,000
Middle 40%
$40,000-$115,000
Top 10%
>$115,000
Source: Schwartz Center for Economic Policy Analysis, based on data from the 2014 Survey of Income and Program Participation (SIPP)
All
15%
16%
14%
12%
10%
11%
4%
14%
13%
20%
20%
18 PLANSPONSOR.com October 2017
Art by Vinnie Neuberg

http://www.PLANSPONSOR.com

PLANSPONSOR - October 2017

Table of Contents for the Digital Edition of PLANSPONSOR - October 2017

Moving Money
403(b) / 457 Buyer's Guide
Best Practices for the IPS
The Middle Ground
Questions, Answered
Navigating RMDs
PLANSPONSOR - October 2017 - Cover1
PLANSPONSOR - October 2017 - Cover2
PLANSPONSOR - October 2017 - 1
PLANSPONSOR - October 2017 - 2
PLANSPONSOR - October 2017 - 3
PLANSPONSOR - October 2017 - 4
PLANSPONSOR - October 2017 - 5
PLANSPONSOR - October 2017 - 6
PLANSPONSOR - October 2017 - 7
PLANSPONSOR - October 2017 - 8
PLANSPONSOR - October 2017 - 9
PLANSPONSOR - October 2017 - 10
PLANSPONSOR - October 2017 - 11
PLANSPONSOR - October 2017 - 12
PLANSPONSOR - October 2017 - 13
PLANSPONSOR - October 2017 - 14
PLANSPONSOR - October 2017 - 15
PLANSPONSOR - October 2017 - 16
PLANSPONSOR - October 2017 - 17
PLANSPONSOR - October 2017 - 18
PLANSPONSOR - October 2017 - 19
PLANSPONSOR - October 2017 - 20
PLANSPONSOR - October 2017 - 21
PLANSPONSOR - October 2017 - Moving Money
PLANSPONSOR - October 2017 - 23
PLANSPONSOR - October 2017 - 24
PLANSPONSOR - October 2017 - 25
PLANSPONSOR - October 2017 - 26
PLANSPONSOR - October 2017 - 27
PLANSPONSOR - October 2017 - 28
PLANSPONSOR - October 2017 - 29
PLANSPONSOR - October 2017 - 403(b) / 457 Buyer's Guide
PLANSPONSOR - October 2017 - 31
PLANSPONSOR - October 2017 - 32
PLANSPONSOR - October 2017 - 33
PLANSPONSOR - October 2017 - 34
PLANSPONSOR - October 2017 - 35
PLANSPONSOR - October 2017 - 36
PLANSPONSOR - October 2017 - 37
PLANSPONSOR - October 2017 - Best Practices for the IPS
PLANSPONSOR - October 2017 - 39
PLANSPONSOR - October 2017 - The Middle Ground
PLANSPONSOR - October 2017 - 41
PLANSPONSOR - October 2017 - Questions, Answered
PLANSPONSOR - October 2017 - 43
PLANSPONSOR - October 2017 - Navigating RMDs
PLANSPONSOR - October 2017 - 45
PLANSPONSOR - October 2017 - 46
PLANSPONSOR - October 2017 - 47
PLANSPONSOR - October 2017 - 48
PLANSPONSOR - October 2017 - Cover3
PLANSPONSOR - October 2017 - Cover4
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