Retirement in a Defined Contribution Era: Making the Money Last, 41 J. Marshall L. Rev. 1091 (2008)

NAT'L BUREAU OF ECON. RESEARCH (2007). 2008] The John Marshall Law Review XV. HOW DO CURRENT RETIREES FARE? 39% of elderly recipients, Social Security contributes more than 90% of their income, and for one-quarter of recipients, it is their only source of income.190 According to EBRI, individuals with highest amounts of pension or annuity income tend to fare better, but future retirees will be less likely to receive pension or annuity income (other than Social Security).191 In 1980, there were 30.1 million active participants in private sector defined benefit plans: by 2003, this had declined to 21.3 million. 192 A 2007 EBRI study found that most 65 to 75 year olds fared well between 1992 to 2004, but that those who were losing money were losing it fast. Among those who participated in study, 50% saw an average wealth decline of 5% from 1992-2004.193 However, those declines in wealth were not correlated with age. 194 By contrast another recent study found that elderly experienced an increase in wealth from years 1998-2004. 195 This is explained by a desire to accumulate funds to pay for rising medical costs and to bequeath assets to children. 196 The official poverty rate declined from over 33% of elderly people in 1960 to less than 10% today. 197 Poverty rates are higher among elderly women (12%), elderly African Americans (25%) and elderly Hispanics (20%).198 However, many scholars believe that official poverty statistics significantly underestimate numbers, because the poverty thresholds fail to capture growth since 1963 in housing, health, and other costs relative to food costs. For example, people today spend closer to one-sixth of their income on food rather than one-third.'199 The authors conclude that proposed Medicare reforms for increases in cost sharing should exclude poor elderly people. 200 190. Patrick Purcell, CRS Report for Congress: Income and Povety Among Older Americans in 2006, Summary Cong. Research Service (2006). 191. Craig Copeland, How Are New Retirees Doing Financially in Retirement, 302 EMP. BENEFIT RESEARCH INST. ISSUE BRIEF 1 (2007). 192. Purcell, supra note 190, at t.1. 193. Copeland, supra note 191, at 15. 194. Id. 195. David A. Love, et al., Finance and Economics Discusstion Series: The Trajectory of Wealth in Retirement, FED. RESERVE BD. (2008). 196. Id. 197. Purcell, supra note 190. 198. Id. at 9. 199. See Barbara A. Butrica et al., How Many Struggle to Get By in Retirement?, URBAN INST. 1, 3 (2008) (citing John Iceland, Measuring Poverty: Theoretical and Empirical Considerations, vol.3, iss.4 MEASUREMENT: INTERDISCIPLINARY RESEARCH & PERSPECTIVE 199 (2005)). 200. Barbara A. Butrica, et al., How Many Struggle To Get By In Retirement, 1134 [41:1091 Retirement in a Defined Contribution Era Even using official numbers, many older Americans are among near-poor: In 2006, while just 9.4% of people aged 65 and older had incomes below poverty thresholds of $9,669 for an individual and $12,186 for a couple, 22% of older Americans had family incomes below 150% of thresholds ($14,504 for an individual and $18,279 for a couple). Thirty-six percent of people 65 and older had incomes less than twice poverty thresholds ($19,338 for an individual and $24,372 for a couple). 20 1 In addition, it seems clear that things are likely to get much worse. According to EBRI-ERF Retirement Security Projection Model, in 2030, many American retirees would not be able to afford nursing homes or home health providers. The projected aggregate retirement income deficit in 2030 is at least $400 billion.

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