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Plan Sponsors Ask...

Q: Are predictions about the retirement prospects of Americans as dire as the headlines would make them seem?

A: At least one industry expert, Nevin Adams, co-director of the EBRI’s Center for Research on Retirement Income, thinks not. Adams says these gloomy predictions likely overstate the situation. He cites estimates of retirement savings shortfalls from the Center for Retirement Research at Boston College and other authoritative sources. These and other researchers estimate a total shortfall of at least $6 trillion for those in the 55-to-64 age group.

Adams notes that data from an older Federal Reserve study have been used, along with assumptions about assets from defined benefit plans and target savings needs. Also, some estimates of shortfalls are based on other factors that don’t appear to be related to actual income or actual spending in retirement. These and other data used in predicting shortfalls may not be appropriate, he notes.

He reports that the EBRI’s latest projection regarding the gap between needs and available financial resources is only about two-thirds of other widely publicized gap estimates. While this is, of course, still a figure that should raise concern, Adams cautions that individual shortfall amounts are a combination of circumstances, preparation, financial needs, and access to help.

See Nevin Adams’ blog post at

Q: What is the latest estimate of how much money retirees will need to cover their health care expenses during retirement?

A: Fidelity Benefits Consulting, which has calculated this figure since 2002, reports that a 65-year-old couple who retired in 2013 will need about $220,000 to pay for health care costs throughout their retirement. This figure excludes nursing home care and applies to those with traditional Medicare coverage.

This represents an 8% decrease from the 2012 projection of $240,000. Fidelity noted that the decline is due to a reduction in utilization of health care services in an uncertain economy, smaller payment increases to health care providers, and demographic changes. It also anticipates smaller provider payment increases in coming years.

Fidelity points out that many people underestimate the savings they will need to cover health care in retirement. A recent survey of pre-retirees (those age 55 to 64) revealed that half of the respondents felt they would need only $50,000 for health care.

Visit to read Fidelity’s announcement.

Q: What concerns do Generation X members have about retirement?

A: The 2013 Employee Financial Wellness Survey conducted by PwC (PricewaterhouseCoopers) indicates that Generation X struggles with competing financial priorities long before retirement. They think it’s likely that they will have to take money out of their retirement savings for non-retirement spending. In fact, 30% reported already having done so.

Generation X (those born in the early 1960s to the early 1980s) has pressing financial concerns, according to survey results. Almost half (49%) have difficulty meeting household expenses on a timely basis each month, 58% maintain credit card balances on a consistent basis, and almost half have trouble making minimum payments on time each month.

This age group’s top five concerns about retirement were:

  • Running out of money (45%)
  • Health care expenses (38%)
  • Being unable to maintain current standard of living (26%)
  • Health concerns (25%)
  • Inability to handle monthly expenses (21%)

PwC’s survey report is at


Few 401(k) plan participants take loans, a pattern that has continued for 20 years. See the EBRI’s Fast Facts at

For plan sponsor use only, not for use with participants or the general public. This information is not intended as authoritative guidance or tax or legal advice. You should consult with your attorney or tax advisor for guidance on your specific situation.

Kmotion, Inc., P.O. Box 1456, Tualatin, OR 97062; 877-306-5055;

© 2014 Kmotion, Inc. This newsletter is a publication of Kmotion, Inc., whose role is solely that of publisher. The articles and opinions in this publication are for general information only and are not intended to provide tax or legal advice or recommendations for any particular situation or type of retirement plan. Nothing in this publication should be construed as legal or tax guidance; nor as the sole authority on any regulation, law or ruling as it applies to a specific plan or situation. Plan sponsors should consult the plan’s legal counsel or tax advisor for advice regarding plan-specific issues.