2024 DC Retirement at a Glance

1. BEST PENSIONS – The Netherlands, Iceland, Denmark and Israel ranked as the best out of 48 “retirement income systems” based on factors in the categories of adequacy, sustainability and integrity. South Africa, Türkiye, Philippines, Argentina and India all ranked lowest with “D” grades. The US received a C+ and was described as a system with “some good features” but also “has major risks.” (Source: Mercer)

2. TEN-BAGGER – Average retirement assets per US household have increased nearly 1,000% in the last 50 years on an inflation adjusted basis, rising from $30,800 in 1974 to $297,800. Policy reforms that enabled the rise of individual retirement accounts, 401(k)s and other similar plans have driven the increase. (Source: Investment Company Institute)

3. COLA FLATTENING – The cost-of-living adjustment (COLA) for social security retirement benefits will rise 2.5% in 2025, the smallest annual increase since 2021. Including the 2025 adjustment, the fouryear rate of change in social security payments is still up 21.8%, which is the largest increase since 1984. (Source: Social Security Administration)

4. MEDICAID LENDS A HAND – Medicaid has increasingly become a source of support for health care expenses of older Americans. In 2021, 10% of all Medicaid enrollees were 65 or older, and they accounted for 20% of the program’s total expenditures. (Source: Center for Retirement Research)

5. SOMETHING WE CAN ALL AGREE ON – 78% of Democrats and 81% of Republicans agree that America faces a retirement crisis. Americans also agree that political leaders don’t understand the difficulty of saving for retirement (86%+ for both parties). Americans disagree over Social Security. 63% of Democrats support an expansion of benefits compared to just 42% of Republicans.(Source: National Institute on Retirement Security)

6. SMALLER THAN THOUGHT – 401(k) plans which auto-enroll employees and autoescalate contributions each year increased annual savings by just 0.6% and 0.3% of income, respectively. These levels are an average of 72% less than the savings increases that researchers originally estimated these programs would yield. (Source: Yale School of Management)

7. Z AHEAD OF X – 53% of Gen X (age 44 to 59) will retire with a 100% funding ratio (% of forecast retirement needs saved) compared to 63% of Gen Z (12 to 27). However, there is a wide gap based on income. 89% of Gen X’s top income quartile (86% of Gen Z) are forecast to have a fully funded retirement compared to just 14% (34% of Gen Z) in the lowest income quartile. (Source: Morningstar)

8. GUESS NOT – When asked how much they will need to save before they can retire, the median response of women was $500,000 compared to $750,000 for men. 55% of women arrived at their retirement savings estimate by guessing compared to 41% of men.(Source: Transamerica Center for Retirement Studies)

9. CHECK YOUR CALCULATIONS – Arguments that target date funds (TDFs) underperform comparable US equity funds don’t account for TDFs’ exposure to international stocks. When not properly accounting for international factors, TDFs had a gross annual riskadjusted return of negative 2.2% from 2010 to 2020, but when properly accounted for, the risk-adjusted annual return of TDFs flips to positive 0.2%. (Source: Investment Company Institute)

QUESTION: According to the Wall Street Journal, US Presidents receive lifetime annual payments of $246,400 when they leave office. For a 65-year-old retiring private citizen, a lifetime annuity with an annual payment of $246,400 would cost how much?