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Tomorrow’s Retirement: Alarming or Amazing?

By Jack Towarnicky

The best way to predict the future is to invent it.1 As a plan sponsor, what are you working on to invent the future of retirement?

Join Jack VanDerhei, research director at the Employee Benefit Research Institute, at PSCA’s 2019 National Conference, April 30-May 1 in Tampa, FL as he explores “Alternative Realities: Possible Futures for the 401(k) and The Impact on America's Retirements.” Jack will evaluate the impact of proposed changes for the 401(k) – elimination, a coverage mandate, automatic features, Artificial Intelligence, and more.

The 401(k)’s past is not its’ future – even if the current statutes and regulations remain in place.2

Because the 401(k) has evolved3, baby boomers and future generations will be more successful in retirement than the greatest generation and its predecessors.

I recently read an interesting study about future retirees4. The author reviewed a large number of studies and projected earnings, employment and retirement for those age 35-54 in 2020 who will be ages 65-84 in 2050. She concluded that:
“Projections suggest they will find it difficult to maintain or improve their economic circumstances between their work and retirement years. Although Generation X and early millennial retirees are expected to be better off than current retirees on absolute measures ofincome, they are expected to be worse off than current retirees on relative measures of inequality, poverty and replacement rates.”

And, I learned a new term: relative poverty. The author offers three different poverty measures:

  1. The U.S. Census Bureau (or official government) poverty rate: where household income is below an arbitrary threshold, 
  2. Relative #1: People are “poor” when income is less than 50% of median income for all ages, and  
  3. Relative #2: Same as Relative #1, but including imputed rent and excluding income from co-residing individuals. 

Not surprisingly, she predicts a decline in Census poverty rates by half from 10 percent at ages 35-54 in 2020 to only 5 percent at ages 65-84 in 2050. However, she predicts relative poverty rates will increase from 21 to 25 percent. (Relative #1) and from 21 to 28 percent (Relative #2). With respect to Relative #2, she predicts two-thirds (65 percent) of Gen Xers and early millennials will avoid poverty both in 2020 and 2050, but that 13 percent will be relatively poor in both years.

Finally, she predicts that Gen X and early millennial retirees are projected to have retirement incomes that are less likely to replace at least 75 percent of their pre-retirement earnings:v

The modest incomes are consistent with her coverage and participation assumptions regarding employer-sponsored plans.6

Plan sponsors can favorably impact workers’ retirement preparation. Retirement income is highly correlated with consistent contributions and investment of retirement savings. So, the time for plan sponsors to take action is now: today.

What actions and innovations are you pursuing?7 

1Alan Kay, American computer scientist, 1971.
2J. Towarnicky, 401(k) Trends - Where We’ve Been … Where We May be Headed – Part 1 and Part 2, 4/18/18 and 4/23/18, Accessed 4/13/19 at: and
3J. Towarnicky, Retirement in America – A Life of Poverty? 6/29/18, Accessed 4/13/19 at:; See also: Retirement in America - Individual Account Retirement Savings Plans ARE Good Enough! 7/5/18, Accessed 4/13/19 at:; See also: Can ≠ Will: Yesterday’s 401(k) ≠ Tomorrow’s 401(k) Part Three of a Three-Part Series, 7/9/18, Accessed 4/13/19 at:
4Barbara Butrica, Retirement Security in 2050, Future Outcomes for GenX and Early Millennial Retirees, Urban Institute, March 2019, Accessed 4/13/19 at:
5Ibid, Note iv.
6Ibid, Note iv
7J. Towarnicky, Financial Independence is the Greatest Civil Liberty! 4/10/19, Accessed 4/13/19 at:

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