Affluent families, Social Security for, 28–29
All-Roth system, 193–200
Alternative investments, 139, 153, 177
Alternative Minimum Tax, 194–195
Annuities, 13, 99, 121, 123–126, 175
Ariely, Dan, 76
Asset allocation, 83–86, 130, 137–140, 146–147, 175–179
Associative mating, 14
Australia, 39, 100, 131, 132, 136, 138, 143, 144, 155
Austria, 78
Automatic enrollment, 83, 85–86, 89–91, 104, 106–107
Automatic IRAs (Auto-IRAs), 77, 167–170, 213
Automaticity, 64–65, 67, 70–72, 77–79
Automatic plan design, 70, 87–90, 96 (See also Fully automatic plans)
Automatic savings escalation, 54, 65, 88, 90, 97, 105, 107
Baby accounts, 161
Bankruptcy, Social Security, 30
Behavioral economics (behavioral finance), 65–67, 71–72, 74–77, 194
Benartzi, Shlomo, 76
Bipartisan Policy Center, 32
Birthright retirement accounts, 179–182, 182f
Bounded rationality, 74
Brazil, 131
Brightwork Partners, 92
Budget Act of 1974, 110, 112, 189, 193
Budget costs, of retirement savings, 109–113, 111f, 186, 189, 192, 193
California, 168
Capital markets, 145–162
and banks, 151–152
conditions in, 11–12
and DC plans, 4–5, 44, 145–147
and economic growth, 154–157
and PPA, 72–74
trends in, 147–151
wealth inequality and, 160–162
and workplace savings, 153–154
and Workplace Savings 4.0, 157–160
Cash balance plans, 174
CEOs, 107
Chamber of Commerce, U.S., 158, 215–218
Children’s Savings Account, 198
Child tax credits, 161
Chile, 136
Choice architecture, 67, 70, 75, 76, 85, 96
Choice overload, 67
Clinton, Bill, 20–23
Congress, U.S.:
closing of coverage gap by, 113
DC plan recognition by, 45
pension reform by, 114–115
retirement savings scoring by, 109–113, 111f, 186, 189, 192, 193
and savings incentives, 183–184
and Social Security, 17, 19, 20, 25, 26, 32–34, 143
tax reforms by, 195, 197, 199–200
Connecticut, 168
Consumer Price Index (CPI), 9, 10f, 212
Consumer Price Index for Medical Care, 9, 10f
Contingent labor, 4, 56, 171–172
Contractors (see Contingent labor)
Coverage gap, 94–95, 94f, 113, 158, 197
“Dear 45” letter, 215–218
Default investment strategies, 65, 70–71, 87 (See also Qualified default investment options (QDIAs))
Deferred income annuities, 121, 175
Defined benefit (DB) plans:
and DC plans, 46–50, 105–106, 174–175
global use of, 133–134, 136, 144
income from, 120
interest rates and, 13
for military personnel, 173–174
and modern portfolio theory, 60–61
ownership in, 146
participation in, 11, 15, 44–46, 46f, 55
Defined contribution (DC) plans, ix, 41–58
access to, 56–58
and capital markets, 4–5, 145–147
critiques of, 136–137
and DB plans, 46–50, 53–55, 105–106
design shortfalls for, 88–89
financial literacy of investors in, 68
global use of, 133–134, 136–137, 144
growth of, 11, 15, 50–53, 61–62, 69–70, 103–105
and guaranteed income, 121, 174–175
legislation leading to, 41–44
lifetime income from, 119
for military personnel, 172–174
of millennials, 164
and modern portfolio theory, 61
ownership in, 146
pay-as-you-go plans vs., xiii
in U.S. retirement system, 39, 55–56
wealth transfer with, 166–167
in Workplace Savings 1.0, 44–46
(See also specific types)
Demographic trends, 6–8, 18–20, 49, 134–135
Denmark, 130
Department of Defense, U.S., 173
Diversification, 37–39, 38f, 207
Divorce rate, 14
Domenici, Pete, 32
Dow Jones Industrial Average, 69
Drucker, Peter, 147
Dynamic QDIA, 179
Economic growth, 112, 154–160, 199, 202–203
Economic Growth and Tax Reconciliation Act of 2001 (EGTRA), 45
Economies of scale, 169
Economy, 4, 114, 153, 160, 171–172
Education, investor, 64, 67, 86–88
EET (exempt-exempt-taxed) structure, 190–191
Efficient frontier, 60
Employee Benefit Research Institute (EBRI), 115–118, 157–158
Employee Retirement Income Security Act of 1974 (ERISA), 41–42, 49, 61, 168, 170
Employer contributions, 71–72
Employment, 11
Empower Retirement, ix, xi, 92, 108, 115
Endowments, 177
Enrollment, automatic (see Automatic enrollment)
Equity markets, 148, 155, 156f
Europe, 134, 135, 137, 138, 143, 150
Exempt-exempt-taxed (EET) structure, 190–191
Federal Insurance Contributions Act (FICA) taxes, 27, 29–30, 32, 33f, 38f
Federal Reserve, U.S., 12–13, 150, 181
Fiduciary risk, 126
Financial advisors, 95, 100–101
Financial literacy, 68, 74, 86
Fixed-income securities, 138–139
Foreign investment, 160
access to, 56–58
criticism of, xi–xii
fees with, 168
growth of, 61–62
investor behavior in, 51
and multiple employer plans, 170
as primary plan, 55–56, 73, 82
Starter, 198
typical savings in, 2
in Workplace Savings 4.0, 98
Framing bias, 66
Freelancers, 171–172
Fuller, Ida May, 25–26
Fully automatic plans, 89, 90, 106–108, 114, 159
Funded pension assets, 141–143
Gale, William, 76–77
Gingrich, Newt, 21–22
Global financial crisis (2008-2009), 12, 51–52, 147, 150, 165, 166, 201–202
Global retirement systems, 127–144
asset allocation in, 137–139
and capital markets, 155–156
and demographic trends, 134–135
finance architecture for, 133–134
funded pension assets in, 141–143
rate of change in, 135–137
sustainability issues with, 140–144
U.S. rankings among, 15–16, 127–133
Goldstein, Daniel, 77–78
Government policy, 12–13, 17, 30–34, 115–118 (See also Legislation)
Governments, 137–139
Great Recession (2008-2009), 171
Greenspan, Alan, 27
Gross domestic product (GDP), 155–157, 156f
Guaranteed income, 13, 104, 114–115, 119–121, 123–126, 169, 174–175, 207
Healthcare costs, 9–10, 118, 166
Health savings accounts (HSAs), 104, 191
“How to Fix Social Security” (Roosevelt & Reynolds), 30–31, 209–213
Illinois, 168
Immigration, 134
Income:
associative mating regarding, 14
in “Camp Draft” system, 196
and DC plan access, 56
diversification of, 37–39, 38f
and life expectancy, 34–36, 35f
lifetime, 13, 15, 99, 114, 118–121, 207
and retirement readiness, 3–4
and savings rate, 95–96
Social Security benefits and, 28–29
and workplace savings, 67
(See also Guaranteed income)
Income replacement ratio, 2–3, 56, 91–92
India, 131
Individual retirement accounts (IRAs), xii
boomers’, 166
in “Camp Draft” system, 195
contributions to, 45, 51–53, 82, 146
limits on, 170
Roth, 187–189, 191, 194, 195, 198
savings in, 2
Initial public offerings (IPOs), 152
Initial savings rate, 89–91, 96–97
Insurers and insurance, 118, 137–138, 205
Interest-rate risks, 138–139
Intergenerational wealth transfer, 164–167
Internal Revenue Code, 42
Investment risk, 177–178
Italy, 134
Iwry, Mark, 76–77
Japan, 131, 134, 136, 138, 144, 148, 149f, 157
John, David, 76–77
Johnson, Eric, 77–78
Kahneman, Daniel, 76
K-plans (see 401(k) plans)
Labor, contingent, 4, 56, 171–172
Laddered fixed-income securities, 138
Legislation, 41–44, 113–115 (See also Government policy)
Lewin, Roger, 76
Lewinsky, Monica, 22–23
Life-cycle funds, 83
Life expectancy, 6–8, 8f, 18, 19f, 29, 34–36, 35f
Lifetime income, 13, 15, 99, 114, 118–121, 207
Lifetime Income Score (LIS), 92–97
Lifetime Income Survey (LIS), xi, 2–3, 101
Loans, student, 9
Long-term care insurance, 118
Lump-sum payouts, 126, 146, 175
Madrian, Brigitte C., 75
Managed accounts, 176, 178–179
Markets (see Capital markets)
Market timing, 63
Markowitz, Harry, 60
Maryland, 168
Massachusetts, 168
Military personnel, U.S., 172–174
Mobile apps, 172
Modern portfolio theory (MPT), 39, 60–61
Money market investments, 90–91
Multiple employer plans (MEPs), 170, 198
Munnell, Alicia, 169
Mutual funds, 165
NASDAQ, 69
Netherlands, 78, 130, 136, 138, 144
New Zealand, 136
Nondiscrimination testing, 72
OASDI program, 19–20 (See also Social Security)
Obama, Barack, 21
Oldest elders, 2
O’Neill, Thomas “Tip,” 211
1/N allocations, 68
Organ donation, 77–79
Organization of Economic Cooperation and Development (OECD), 148, 149f, 190–192
Orwell, George, xi
Ownership, 146, 160–162, 166, 206
Participant contributions, 72, 84–86, 168, 198
Participation rates, 67, 84, 86
Pay-as-you-go (PAYGO) systems, xii–xiii, 24–30, 131–133, 144, 155
Payroll deduction plans (see Workplace savings)
Pension architecture, 130
Pension assets, 51, 52, 141–143, 142t, 157
Pension Benefit Guaranty Corporation (PBGC), 42, 49, 174
Pension liabilities, 49, 131–133, 132f, 141–143
Pension Protection Act of 2006 (PPA), ix, 59–79
and automaticity, 77–79
and behavioral economics, 71–72, 74–77
in Congress, 57
and coverage gap, 167
and financial literacy of investors, 68
and growth of DC plans, 45–46, 61–62
market consensus on, 72–74
and modern portfolio theory, 60–61
and target date funds, 69–71, 176
and Workplace Savings 1.0, 62–65
and Workplace Savings 2.0, 65–67
and Workplace Savings 3.0, 81–84, 97
and Workplace Savings 4.0, 114
workplace savings since, xi, 98
Pensions, 42–44, 53–55, 119, 138–139, 177 (See also Defined benefit (DB) plans)
Personal pensions, 119
Personal savings rate, 159
Poterba, James, 36
Poverty rates, 18
Private sector DB plans, 48–49
Productivity, wages and, 10–11
Public sector DB plans, 48–50, 120
Putnam Investments, ix, xi, 92
Qualified default investment options (QDIAs), 72, 176, 179
Reagan, Ronald, 211
Reality-based budgeting, 113
The Reformer (tool), 31
Required minimum distribution rules (RMDs), 198
Retirees, ratio of workers to, 18, 19f, 131
Retirement, length of, 7
Retirement finance architecture, 15–16, 133–134
Retirement market assets, 51–52, 52f
Retirement readiness, 3–5, 91–93, 93f
Retirement savings:
Congressional scoring for, 109–113, 111f, 186, 189, 192, 193
deficit in, 2
tax incentives for, 185–189
and tax reform, 184–192
Retirement security, 53–55, 106–115, 205–207
Retirement Security Project Model®, 115
Retirement system, U.S., 1–16
challenge mindset for deficits in, 14–16
competitive advantage of, xii–xiii
current conditions, 1–3
DC plans in, 55–56
and demographics of workers/retirees, 6–8
driving forces of outcomes in, 5–6
and education costs, 8–9
funded pension assets in, 141–143, 142t
global ranking of, 127–133
and government policy, 12–13
and healthcare costs, 9–10
and market conditions, 11–12
migration of, 137
and retirement readiness levels, 3–5
Social Security in, 36–40
and social trends, 13–14
sustainability of, 140
tax code and savings in, 185–186
and wages, 10–11
(See also Global retirement systems)
Retirement system emerging trends, 163–182
in asset allocation, 175–179
birthright retirement accounts, 179–182
closing of coverage gap, 167–170
contingent labor and gig economy growth, 171–172
DC plan for military personnel, 172–174
DC plans with guaranteed income provisions, 174–175
intergenerational wealth transfer to millennials, 164–167
Revenue Act of 1978, 42
Reynolds, Robert L., 30–31, 209–213
Risk aversion, 63
Rivlin, Alice, 32
Roosevelt, Franklin D., 27
Roosevelt, James, 30–31, 209–213
Roth, William V., 185
Roth IRAs, 187–189, 191, 194, 195, 198
Roth 401(k) plans, 45, 187–189, 191
Roth savings accounts, 185, 193–200
Savers Credit, 198
Savings accounts, 104, 161, 185, 191, 193–200
Savings escalation (see Automatic savings escalation)
Savings fund, emergency, 206
and “Camp Draft” hybrid system, 196
with financial advisor, 100–101
improving, 179–182
personal, 159
tax reform to increase, 199
Section 401(k), of Internal Revenue Code, 42
Security, retirement (see Retirement security)
Self-directed investors, 87–88
Self-employed individuals, 4, 167, 170, 171, 206–207
Sequence-of-returns risk, 12, 121–125, 122f–124f
Shea, Dennis F., 75
Simpson-Bowles Commission, 32
Singapore, 136
Single-person households, 14
Small businesses, 88–89, 113, 168–170
Social justice, 204
achievements of, 17–18
for affluent families, 28–29
for contingent workers, 171
demographics and, 18–20
as pay-as-you-go system, 24–30
policy solutions for funding, 30–34
solvency of, 143
in U.S. retirement system, x, xii, 16, 36–40, 137
Social Security Act of 1935, 24–25
Social Security Administration (SSA), 23, 24, 181
Social Security Trust Funds, 23, 24, 27, 29–31
Social trends, 13–14
South Africa, 136
Standard & Poor’s 500, 37–39, 38f, 122–123, 152
Starter 401(k) plans, 198
Start-up companies, 151–152
State pension funds, 177
State-sponsored plans, 113–114, 168–169
Stock market capitalization, 154–155, 156f
Sunstein, Cass R., 75
Superannuation, 136
Sustainability, retirement system, 140–144
Systemic stress, 8
Target date funds (TDFs), 69–71, 84, 106, 175–179
Taxation, of retirement savings, 190–192
Tax credits, 172, 194, 197–199
Tax deferrals, 108, 110–113, 186–187, 186f, 189, 192
Taxed-exempt-exempt (TEE) structure, 191
Tax expenditures, 186–187, 192
Tax-free appreciation, 190
Tax incentives, 185–189, 197–199
Tax reform, 183–200
for “all-Roth” system, 193–200
Congressional scoring for budget costs of retirement savings, 193
effects of, 183–184
and 401(k) plans, 42
and income inequality, 161–162
and Pensions Outlook survey, 190–192
and retirement savings, 184–192
tax incentives for retirement savings, 185–189
for Workplace Savings 4.0, 108, 109
Tax Reform Act of 1986, 184
Tax Reform Act of 2014, 185 (See also “Camp Draft”)
Temporary workers (see Contingent labor)
10-year “window,” 110–111, 192, 193
Thaler, Richard H., 75
3 percent glitch, 89–91
Thrift Savings Plan (TSP), 172–174
Treasury, U.S., 23, 24, 29, 89, 99, 110–112, 189, 193–194, 200
United Kingdom, 100, 131, 136, 144
United States, 134–135, 135f, 147–149, 149f, 154–157, 156f, 202–203 (See also Retirement system, U.S.)
Universal child savings accounts, 161
Universal Roth IRA, 198
VanDerhei, Jack, 115
Venture investors, 151–152
Walker, Lina, 76–77
Wealth inequality, 160–162
Wealth transfers, 164–167
Wells Fargo, 69
Workers, ratio of retirees to, 18, 19f, 131
Workplace savings, x, xii, 58f, 153–154, 154f, 206–207
Workplace Savings 1.0, 44–46, 62–65, 70
Workplace Savings 2.0, 65–67, 70, 72
Workplace Savings 3.0, 81–101
asset allocation in, 84–86
financial advisors in, 100–101
investor education in, 86–88
and Lifetime Income Score, 92–97
millennials in, 164
plan design shortfalls in, 88–89
PPA’s effects on, 81–84
replacement ratio in, 91–92
3 percent glitch in, 89–91
and Workplace Savings 4.0, 97–99
Workplace Savings 4.0, 103–126, 109f, 116f, 117f, 163
annuities in, 125–126
and capital markets, 157–160
DB plan features in, 105–106
and growth of DC plans, 103–105
lifetime income as goal of, 118–121
pension asset funding in, 143
policy reforms for, 115–118
and retirement savings tax deferrals, 110–113
retirement security in, 106–115
“sequence of returns” risk in, 122–125
and superannuation, 136
and Workplace Savings 3.0, 97–99
Workplace savings plan design:
for contingent workers, 172
and financial literacy, 68
shortfalls in, 88–89
Workplace savings plans, xii
access to, 47, 56–58, 82, 94–95, 98, 167–170
automaticity’s effect on, 77–79
changes in, ix
as fuel for capital markets, 153–154
improving, xv
participation rates in, 67
and retirement readiness, 3–4
rise of, x–xi
and Social Security, 36–40
(See also specific types)