Baby boomers and Generation X households improved their overall retirement income last year thanks to employer-sponsored 401(k)-type plans and gains from the financial and housing market, new data indicates.
The Employee Benefit Research Institute found that 2013s improved economic landscape help to push this age cohort to a steadier footing in terms of maintaining money in retirement.
The nonpartisan research organization notes that overall gains calculated from its Retirement Security Protection Model were between 0.51.6 percentage points. However, this increase in security varied due to different factors such as age, income and participation in employer-sponsored 401(k)-type plans.
Access to company retirement plans remains one of the most important factors for retirement income adequacy, the EBRI says in its Feb. 13 report.
When looking at Gen Xers with access to these retirement schemes, they are half as likely to run short of money despite having 20 or more or years of future eligibility than those who are approaching retirement. For the middle-income coterie, having a 401(k) increased their values by 21.1-30.3 percentage points in 2013.
It would appear that while retirement income adequacy depends to a large degree on the households relative wage level and future years of eligibility in a defined contribution plan, a great deal of the variability in these values could be mitigated by appropriate risk-management techniques at or near retirement age, says Jack VanDerhei, EBRI research director and author of the report.
Costs linked to long life and health care costs can have a detrimental impact on retirement incomes going forward. For those households categorized as risky, individuals could see a spread of 30 percentage points while this impact can range from 25 to 40 percentage points for lowest to highest income cohorts.
EBRI states that annuities and long-term care insurance can help with retirement income variability, but warns that Social Security decreases, projected to start in 2033, could drop Gen Xers retirement income from 20.9% to 10.3% in the lowest-income quartiles.
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