1. © Employee Benefit Research Institute 2009 1 The Markets, Savers and Savings Plans Dallas L. Salisbury salisbury@ebri.org President & CEO Employee Benefit Research Institute Chairman, American Savings Education Council www.choosetosave.org

2. 2 Social Security Is Not Enough

3. © Employee Benefit Research Institute 2009 3 Replacement rate obtained from personal retirement account of worker who contributes 4 percent of his annual salary over a 40-year career Last year in worker’s career 100% stocks 89% (1999) 27% (2008) Source: Gary Burtless, Brookings Institution

4. © Employee Benefit Research Institute 2009 4 Replacement rate obtained from personal retirement account of worker who contributes 4 percent of his annual salary over a 40-year career Last year in worker’s career 100% bonds 50% stocks / 50% bonds 100% stocks Source: Gary Burtless, Brookings Institution

5. © Employee Benefit Research Institute 2009 5 Change In Average Account Balances From Jan. 1, 2008 (S&P 1418) – Jan. 20, 2009 (S&P 805), Among 401(k) Participants with Account Balances as of Dec. 31, 2007 Sources: 2007 Account Balances: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project; 2008 and 2009 Account Balances: EBRI estimates. The analysis is based on all participants with account balances at the end of 2007 and contribution information for that year. Account Balance

6. © Employee Benefit Research Institute 2009 6 Change In Average Account Balances From Jan. 1, 2008 – Jan. 20, 2009, Among 401(k) Participants with Account Balances as of Dec. 31, 2007 Sources: 2007 Account Balances: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project; 2008 and 2009 Account Balances: EBRI estimates. The analysis is based on all participants with account balances at the end of 2007 and contribution information for that year. Age Tenure Matters a Great Deal in Account Growth and Decline Short Term Account Movement

7. © Employee Benefit Research Institute 2009 7 Change In Average Account Balances Among a Consistent Sample of 401(k) Participants, by Age and Tenure, Jan. 1, 2000 through Nov. 26, 2008 Tenure (in years) Sources: 1999 and 2006 Account Balances: Tabulations from EBRI/ICI Participant-Directed Retirement Plan Data Collection Project; 2007 and 2008 Account Balances: EBRI estimates. The analysis is based on a consistent sample of 2.2 million participants with account balances at the end of each year from 1999 through 2006. Long Term Account Movement

8. © Employee Benefit Research Institute 2009 8 Time Needed to Recover from 2008 401(k) Losses, Using Various Equity Return Assumptions

9. © Employee Benefit Research Institute 2009 9 Median “Excess” Returns from Target Date Funds, by Participant Age and Investment Style: 2000–2006

10. © Employee Benefit Research Institute 2009 10 Percentage of Target Date Fund Investors Having All of Their Assets in Target Date Funds, by Plan Size and Automatic Enrollment Status, 2007 Source: EBRI tabulations from the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project.

11. © Employee Benefit Research Institute 2009 11 Percentage of Target Date Fund Investors Having All of Their Assets in Target Date Funds, by Account Balance and Automatic Enrollment Status, 2007 Source: EBRI tabulations from the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project.

12. © Employee Benefit Research Institute 2009 12 Equity Allocation of Ten Target Date Fund Families, by Year of Target Date Fund, End of Year 2007 Source: Asset allocations of the target date funds as reported by Target Data Analytics from Morningstar Principia. Retirement Income would also represent Target Income, Target Today, Target Now, and other similar names used by Target Date Funds.

13. © Employee Benefit Research Institute 2009 13 Employer Suspension of 401(k) Matches 2008-9 154 Companies 3.9 million workers 88% of workers employers have DB plans – open or frozen – that must be funded 12% of workers at firms with no open or frozen DB plans Source: EBRI analysis of publicly reported employer actions What can we learn from the last time employer’s suspended matches?

14. © Employee Benefit Research Institute 2009 14 Impact of 2003 suspension of employer matches on employee contributions over time Source: EBRI tabulations from EBRI/ICI Consistent Sample, 1999-2006. Notes: A total of 15,476 employees who had contributed in 2002 and whose employer matches were frozen in 2003 are compared to 1.9 million employees who contributed in 2002 and did not have frozen matches in 2003.

15. © Employee Benefit Research Institute 2009 15 Impact of 2003 suspension of employer matches on employee participation over time: all resumption periods combined Source: Author's tabulations from EBRI/ICI Consistent Sample, 1999-2006. Notes: A total of 15,476 employees who had contributed in 2002 and whose employer matches were frozen in 2003 are compared to 1.9 million employees who contributed in 2002 and did not have frozen matches in 2003.

16. © Employee Benefit Research Institute 2009 16 Major Issues Faced By Individuals Will Savings Be Enough to Allow Retirement? Will We Be Able to Work As Long As We Want/Need To? Can Housing Value Be Included and Accessed for Income? Will Health Care Reform Make Retiree Health Insurance Affordable? Will Long Term Care Reform Make It Affordable? Will A Continued Bias Towards Equities Make Sense? Will a TIPS Fund Become The Safest Route to Real Rate of Return? Will a Life Income Annuity Become A Core “Investment” Category Will Longevity Insurance Become The Protection for Long Life? Will “Moving in With the Kids” Become The Ultimate Retirement Plan?

17. © Employee Benefit Research Institute 2009 17

18. © Employee Benefit Research Institute 2009 18 1100 13 th Street NW Suite 878 Washington, D.C. 2005 202-659-0670