New EBRI Research: American Retirement System Challenged by Changes; Some Fear Future Inadequate Postwork Income

4/2/2003

From: Jim Jaffe of the Employee Benefit Research Institute, 202-775-6353 or jaffe@ebri.org

WASHINGTON, April 2 -- A series of changes stressing America's retirement system is raising questions about whether future retirees will have income adequate to support the comfortable life they anticipate. Many of these concerns, which were discussed at a December conference, are discussed in the April issue of Notes from the Employee Benefit Research Institute.

While new research suggests that workers who have career-long access to a 401(k) plan and take full advantage of it will enjoy a comfortable income, there's growing concern about the cost of medical care in retirement, particularly because employers are cutting back on this benefit that will ultimately be available to a very small segment of retirees. Projections for several individual states show an aggregate deficit exceeding a billion dollars in each state if seniors are provided with income adequate to pay for an adequate style of living and needed medical care. The problem is particularly acute for never-married women and those who need lengthy nursing home care.

Some see a need to extend Medicaid programs to pay for more of such care while others note that states are having difficulty funding the narrower menu of benefits now offered. Other concerns include:

-- Whether workers who take their retirement savings in a lump sum risk outliving their income

-- How to provide income adequacy for workers who lack access to retirement savings plans or fail to participate in them.

The Notes article summarizes a policy forum sponsored by EBRI's Education and Research Fund.

"We know that tomorrow's retirement system will look very different than today's," said EBRI President and CEO Dallas Salisbury, "the question now is whether the changes we're now witnessing will have a positive impact."