The Role of Social Security, Defined Benefits, and Private Retirement Accounts in the Face of the Retirement Crisis

Source: Jack VanDerhei, Employee Benefits Research Institute (EBRI), EBRI Notes, Vol. 35, no. 1, January 2014

From the summary:
- For years, EBRI research has documented and quantified the role of Social Security, defined benefit and private retirement accounts on retirement income adequacy for Baby Boomers and Gen Xers in the United States. This report summarizes that research and presents new evidence on the importance of 401(k) plans for workers currently entering the workforce.
- EBRI’s modeling shows a substantial improvement in in the probability of attaining a financially successful retirement if workers are eligible for automatic enrollment in a 401(k) plan, compared with voluntary enrollment.
- Assuming current Social Security benefits are not reduced, between 83 and 86 percent of workers with more than 30 years of eligibility in a voluntary enrollment 401(k) plan are simulated to have sufficient 401(k) accumulations that, combined with Social Security retirement benefits, will be able to replace at least 60 percent of their age-64 wages and salary on an inflation-adjusted basis. The same analysis under automatic enrollment shows the probability of success increases substantially: 88–94 percent would be successful.