Retirement Readiness: Consensus on a Course of Action
The Position Paper concludes that for many, target income replacement ratios should be higher than the 70-75% conventionally accepted as a rule of thumb. The higher ratio is to account for the projected cost of healthcare in retirement, and traditional financial planning concerns such as personal health, children education needs, and the cost of caring for elderly relatives. Regardless of target income ratio, the six panelists call for consistent contribution levels in the range of 10% to 16% of pay over a 30‐year or 40‐year career. To measure retirement readiness, the panelists suggest a two-prong approach: one measure based on income replacement ratios for younger participants with a decades‐long horizon to retirement, and a different set of measures for those with limited savings and a shorter timeframe. The Position Paper also touches on the type of tools most impactful on participant behavior. When it comes to automatic enrollment, the six panelists advocate for a default deferral election in the range of 6% to 10% that far exceeds the 2% to 3% many employers adopt out of fear of disruption, which experience suggest is unfounded.