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EBRI Report Calls Out Pew, CRR on Retirement Conclusions

Seen those reports that Gen Xer retirements are looking to be even more bleak than that of Baby Boomers? Well, you might want to take another look.

A new report from the Employee Benefit Research Institute (EBRI) calls out two of those reports — one by the Center for Retirement Research at Boston College, the other from Pew Charitable Trusts — for ignoring some pretty basic assumptions in their analysis. In the case of the Center for Retirement Research report, they basically ignored the expansion of automatic enrollment plan designs that followed the passage of the Pension Protection Act of 2006. As for the Pew analysis, it ignored all future contributions, as well as the earnings on those contributions. 

So, how much difference does that make?

EBRI’s analysis concludes that ignoring decades of potential future contributions (as the Pew study does) exaggerates the percentage of Gen X workers simulated to run short of money in retirement by roughly 10 to 12 percentage points among all but the lowest-income group.

As for the CRR’s backward look at future plan designs, that led them to a conclusion that 44% of households ages 50?59 at that time were “at risk,” compared with 55% at risk among households ages 40?49 and nearly two-thirds (62%) for those ages 30?39. EBRI’s analysis, which includes the impact of future contributions AND the impact of current plan design trends on future accumulations, finds that the overall retirement income adequacy prospects for Gen Xers were approximately the same as Early Boomers and Late Boomers. 

Not that that is a call to relax. A previous EBRI publication used the 2014 version of RSPM to show that the RRRs for Baby Boomer and Gen Xer households ranged between 56.7% and 58.5%, depending on age cohort. That means that approximately 42-44% would be projected to run short of money in retirement.

But, according to the EBRI analysis, the CRR and Pew reports run short of reality. 

The full report, “Contributory “Negligence?” The Impact of Future Contributions to Defined Contribution Plans on Retirement Income Adequacy for Gen Xers” is available here