Retirement Readiness Rating

The recently released 2010 EBRI Retirement Readiness Rating(TM) shows dramatically high percentages of Americans--even in the upper-income categories--are likely to run short of money after 10 or 20 years of retirement. The Employee Benefit Research Institute (EBRI) finds that almost two-thirds of Americans in the two lowest pre-retirement income levels will be short of funds after 10 years in retirement.

The EBRI study also finds that after 20 years of retirement, almost a third of those in the next-to-highest income level will run short of money, as will more than 10 percent of those in the highest-income level. While those with the highest income are at the lowest risk of running short of money. many in that highest income category may still be unable to pay basic expenses and uninsured medical expenses for the remainder of their lives.

Retirement Business at Bank of AmericaMerrill Lynch

Bank of AmericaMerrill Lynch has expanded its retirement services business. In the first six month of 2010, its retirement unit generated more than $13 billion in new business, more than it accumulated for all of 2009. As of March 31, the unit was responsible for $500 billion in client assets.

Pre- and Post-Retirement Asset Portfolios

The Filene Research Institute has released a study entitled "Pre- and Post-Retirement Asset Portfolios.”

Among findings:

• Households with less than $50,000 in total financial assets hold about 11% of those assets in stock. Those with total financial assets of more than $150,000 have a lower stock-holding rate after retirement than before. That dynamic may indicate those wealthy may be selling their assets to pay for retirement.
• A high school education matters in stock ownership. Those with less than a high school education are less likely than those with a high school education to own stocks after retirement.
• Households with higher mathematical ability tend to hold rather than sell stocks after retirement.
• Those with traditional pensions are more likely to directly hold stock than those with defined contributions plans because annuitized retirement plans allow their holders to take more risks elsewhere.

Encore Careers

Marc Freedman CEO and founder of Civic Ventures recently testified before the Senate Finance Committee on the subject of encore careers. He lauded encore careers as a way to enable and encourage people to work longer. Such careers hold the potential “to simultaneously increase personal financial security, help reduce the federal deficit, and deliver a windfall of talent to tackle urgent challenges.”

“In encore careers those people can help children succeed, keep people healthy, strengthen communities, heal the environment and meet other pressing social needs. Such continued work can have a dramatic impact on individual lifetime financial security - and the financial security of the nation. Continued participation in the labor force contributes to economic growth and productivity, enhances government revenues and reduces deficits, independent of any changes in tax rates or benefit levels.”

Skills that Improve with Age

The New York Times has reported that skill shortages are already developing in many fields even as the overall job market remains weak. Meanwhile, McKinsey & Co. estimates that 85 percent of the new jobs created in the United States in the past decade have involved analyzing information, problem solving, rendering judgment, and thinking creatively. All of these traits are skills that improve with age.

How to Wipe Out the Social Security Shortfall

A 2006 study by the Urban Institute found that the revenues generated if Americans worked five years longer would more than wipe out the projected Social Security shortfall primarily through continued payroll and income tax payments.

Skill Shortages in the Social Sector

The Bureau of Labor Statistics defines the social sector as health care, social assistance, educational services, the nonprofit community, religious organizations, the performing arts, museums, libraries and government. The Bureau of Labor Statistics projects a labor shortage that could leave vacant more than 2.4 million new social sector jobs by 2018. The result: too few workers to meet critical needs in education, government, health care and social services.

Empowered Reinventors

Doing more meaningful or satisfying work is very important to 43 percent of the already retired “empowered reinventors” identified by Ameriprise Financial. Merrill Lynch has found that “people want to stay active in retirement, which for most means continuing to work, but with a different work/leisure balance.”

401(k)s with Guaranteed Income

A new survey by Harris Interactive shows three-out-of-four U.S. adults support the concept of modifying the 401k retirement plan system to specify that employer contributions be used to provide a guaranteed stream of income. That change is part of a new public policy proposal made by Nationwide Financial Services, Inc. to government officials and members of Congress.

On May 3, Nationwide introduced the 401KIncome proposal in response to a Request for Information from the Department of Labor and Department of Treasury to obtain ideas on the subject of lifetime income options in retirement plans. Nationwide's proposal provides a strong incentive for employers with defined contribution plans to purchase a guaranteed stream of income by using fixed income deferred annuities as the investment option for the employer match.

Employees would still have control over and access to their own contributions, but the employer match would not be accessible for loans or early withdrawals. Employees could also choose to put their own deferrals in the defined benefit option.

The survey found that more than three-quarters (77 percent) of U.S. adults would support a 401k   retirement plan where the employer match is designated solely to generate guaranteed income for retirement. Younger adults (defined as 18 - 44 years of age) were even more likely (85 percent) to say they supported such a retirement plan.

Senior Labor Participation