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Life is Full of Surprises, Life is Unpredictable*

By Jack Towarnicky

Retirement planning projections are difficult – particularly if you limit savings to only those monies you will need for retirement.

As a corporate, consulting and compliance benefits professional, I had the privilege of working personally with thousands of workers – particularly when it came to planning for retirement.2  In addition to pre-retirement seminars, we would also conduct at hire, one-year of service, and five year of service sessions – using service anniversaries as well as eligibility and vesting milestones to re-engage with workers.  Over time, I stopped talking about retirement preparation at those sessions for “short” service workers.  Most attendees were in their 20’s, 30’s or 40’s and did not have retirement preparation as a priority.  For many, retirement seemed remote, distant, perhaps unattainable given their current financial status.  Planning for retirement meant assessing risks3 and estimating needs and projecting retirement benefit accumulations (see below) – all seemingly beyond most workers’ financial capabilities (even when we provided tools, education and assistance).  Other workers didn’t need to hear me repeat the purpose of our 401(k) plan.  So, instead, I shifted my focus to encouraging workers to get out of debt and to accumulate wealth “Will you be a 401(k) middle class millionaire, someday?”4

As a plan sponsor, I encourage you to consider the difficulty workers have in retirement planning and preparation:

  • Have You/Can You Project Your Retirement Income Needs?
    Just 41% of surveyed workers report they and/or a spouse have ever tried to calculate how much money they need to save.  
  • Projecting Retirement Age is Difficult
    Few Americans can accurately predict when they will cease working.  Workers expect a median retirement age of 65 but retirees report a median retirement age of 62.  48% confirm they stopped employment earlier than planned!6   Workers increasingly plan to work past age 70 (38%); however, only 4% of surveyed retirees confirm they retired after age 70.      
  • Projecting How Your Employer-Sponsored Retirement Savings Plan Account Balance Will Grow is Difficult
    An accurate projection would require knowledge of many variables for all future periods of employment and unemployment:    compensation, retirement plan access/participation/employee and employer contributions/investment returns and pre-retirement leakage.  For the past 40 years, the median tenure of American workers has consistently been ~5 years.  Median means middle – at any one time, half of all workers have tenure of more than 5 years and half have less than 5 years.  Of course, everyone who is unemployed or who has left the workforce also has tenure of less than 5 years.  
  • Projecting What Lifetime Income an Account Balance Will Create is Difficult
    Even if you could accurately project what your account balance would be at a specific age, estimating future monthly income would still be difficult.  Two workers with the same account balance at the same retirement age could end up with dramatically different monthly incomes.  Much depends on mortality and interest rates when purchasing the annuity.  Today, an age 65 individual with $100,000 in savings could expect to receive ~$525/month as a single life annuity.  In the early 1980’s, an age 65 individual might have received ~$877/month – 2/3rds more! (Author’s Calculations)
  • Projecting Sources of Retirement Income is Difficult
    Workers are far more likely to expect to work for pay in retirement (79%) than retirees have actually reported working in retirement (29%).8  While 88% of retiree responses confirm that Social Security will be a major or minor income source, only 37% of workers and only 52% of retirees are very or somewhat confident in Social Security’s future.  Finally, 54% of workers say they expect to receive benefits from a defined benefit pension plan in retirement, but only 39% report that they and/or their spouse currently have an accrued pension benefit with a current or previous employer.
  • What to Do?  
    Go ahead and encourage workers to attempt to estimate income needs, account balances, retirement age, lifetime income and income sources.  Encourage them to update their estimates annually.  And, encourage them to take them with a grain of salt.  Because of all the variables, the estimates may be more misleading than informative – but they will likely become more accurate as a worker approaches retirement.   

Given all of the unknowns, encourage workers to save more than they believe they can afford to earmark for retirement. To facilitate that, you should recognize that their 401(k)/403(b) savings will be needed to address in-service needs other than retirement – which should prompt you to reconsider your plan’s liquidity provisions.10 

*Condoleezza Rice, “Life is full of surprises and serendipity. Being open to unexpected turns in the road is an important part of success. If you try to plan every step, you may miss those wonderful twists and turns. Just find your next adventure-do it well, enjoy it-and then, not now, think about what comes next.”
2. Jack Towarnicky, The “Other” Retirement Planning Model (First of a Series), 3/30/18, Accessed 3/30/18 at:  
3. Jack Towarnicky, Risky Business - Retirement Risk Taxonomy, 03/21/18, Accessed 3/30/18 at:   
4. Jack Towarnicky, Financial Wellness Via Your 401(k), 11/7/17, Accessed 3/30/18 at:  
5. Lisa Greenwald, Craig Copeland, Jack VanDerhei, 2017 Retirement Confidence Survey:  Many Workers Lack Retirement Confidence and Feel Stressed about Retirement Preparations, Greenwald & Associates and the Employee Benefits Research Institute, Issue Brief No. 431, 3/21/17.  Accessed 3/30/18 at:  
6. Ibid. 
7. Craig Copeland, Employee Tenure Trends, 1983–2016, Employee Benefits Research Institute, September 2017, Accessed 3/30/18 at: 
8. Note 2, Supra. 
9. Note 4, Supra 
10. Jack Towarnicky, Embracing Liquidity in Your Savings Plan, It May Be Time To Update Your Plan Loan Program, Defined Contribution Insights Magazine, Spring 2016  Accessed 3/30/18 at:; See also: Towarnicky, Hardship Withdrawals – An Attractive Nuisance Becomes More Attractive, 2/9/18.  Accessed on 3/30/18 at: 

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