1. Trends in Retirement Programs and Income Dallas Salisbury, President & CEO Employee Benefit Research Institute www.EBRI.org www.choosetosave.org June 10, 2008

2. V308 1 Retirement Plan Trends: Number of Plans

3. V308 2 Retirement Total Participation Trends: Including Multiple-Plan Counting

4. V308 3 Retirement Active Participation Trends: Including Multiple Plan Counting

5. V308 4 Retirement Asset Trends

6. V308 5 Retirement Plan Contribution Trends

7. V308 6 Retirement Plan Net “Contribution” Trends

8. V308 7 What Employers Spend on Benefits

9. V308 8 Factors  How much is being saved

10. V308 9 Actual Contributions Versus Needed Contributions FactorAll WorkersBaby Boomers % on track to replace 80 % with SSA included 15% Saving rate3.5%4.1% Needed rate12% - 19%18%-27% Source: Fidelity RI Retirement Index, March 2007

11. V308 10 Income quartile at age 65 Percent of final five-year average salary * The 401(k) accumulation includes 401(k) balances at employer(s) and rollover IRA balances. Source: Tabulations from the EBRI/ICI 401(k) accumulation projection model BaselineDon't always have a 401(k) 67.2 39.4 59.5 54.0 50.7 27.7 24.7 23.2 1234 27.5 30.8 34.7 Median Replacement Rates for 401(k) Accumulations* for Participants Reaching Age 65 Between 2030 & 2039

12. V308 11 Factors  How much is being saved  How much is needed

13. V308 12  SSA replaces 27% of salary at the maximum wage base and 39% at the average income  Medicare pays for about 50% of retiree health costs 2005SSAMed Male243,174130,586 Female306,263152,963 Couple515,532283,549 Avg LEM 81F 85 Source: Urban Institute, 2006 r e t i r e m e n t t r e n d s Matching the Value of SSA and Medicare to Average Life Expectancy

14. V308 13 Risk Acceptance20082018 50% MD$194,000$325,000 75% MD$253,000$424,000 90% MD$305,000$511,000 90% Drugs$654,000$1,064,000 Savings Needed for Retiree Health Benefits: Age 65 in 2008 and 2018 (couples)

15. V308 14  Starting at age 20 and saving consistently for 47 years will support a long life at rates many are now saving.  Waiting until 40 or 50 moves the numbers to the stars unless retirement is delayed. How much do you need to save if you work until 67? 0 5 10 15 20 25 30 35 40 45 7580859095100 20 40 50 Responsibility for Longevity Risk Requires Greater Individual Savings

16. V308 15 Target Final Earnings Multiples: High Income Probability of Retirement Adequacy Male Retiring at 65 Female Retiring at 65 50%4.135.29 75%7.1410.13 90%11.913.86 Source: EBRI Issue Brief September 2006 Single retiree less than $40,450

17. V308 16 Target Final Earnings Multiples: Low Income Single retiree less than $15,000 Probability of Retirement Adequacy Male Retiring at 65 Female Retiring at 65 50%10.6716.22 75%22.8534.23 90%41.9954.22 Source: EBRI Issue Brief September 2006

18. V308 17 Factors  How much is being saved  How much is needed  Longevity

19. V308 18 Source: Annuity 2000 Mortality Table, American Society of Actuaries. Figures assume you are in good health. Couple (Both Age 65) Female Age 65 Age 92 50% chance of one survivor Male Age 65 Age 88 94 100 Age 8592 100 50% chance25% chance 50% chance 25% chance of one survivor 97 100 95 90 85 People Are Likely to Live Longer Than They Think!

20. V308 19 “I think you should be more explicit here in Step Two.”

21. V308 20 Factors  How much is being saved  How much is needed  Longevity  Probability of not running out desired

22. V308 21 Income Annuity – Fully Indexed Confirmation Code: 19NXXX2B5SAZ08C001 Primary Annuitant -- Birth date: 04/01/1947 Sex: M Quote Expiration Date: 03/18/2008 Benefit Commencement Date: 05/01/2008 State of Residence: AZ Payments per Year: 12 Total Premium Amount: $200,000.00 Initial Payment Amount for Fixed Single Life Annuity with inflation adjustments: $912.12 Cancellation Option Selected: No Qualified Assets: Yes Source:https://personal.vanguard.com/us/accounttypes/retirement/ATSAnnuitiesOVContent.jsp

23. V308 22 How Much Does Portfolio Matter at 90% Confidence level? $200,000 at age 60 – 90% chance of income for 20 and 40 years Portfolio D is a 40/40/20 mix (equity/bond/cash) Source:www3.troweprice.com/ric/RIC/

24. V308 23 How much does probability matter? $200,000 at age 60 – 90% chance of income for 20 and 40 years Portfolio D is a 40/40/20 mix (equity/bond/cash) Source:www3.troweprice.com/ric/RIC/

25. V308 24 Worker Knowledge a Concern

26. V308 25 19772007 Percentage of Income, by Age, for the Retired Population, 1977 and 2007

27. V308 26 Financial Literacy  Low  Not a priority in schools or later  Efforts offset by spend and borrow consumption culture  Not high for participants  Essential if income is not annuitized and there are assets to manage

28. V308 27 Principles of Retirement Readiness  Early participation, consistent high contributions, and preservation  Early ballpark e$timate® of savings needed and annual update  Diversified asset allocation with reasonable costs and risk/age based re-balancing  Ongoing total life financial education, planning and implementation  Employer recognition of value to short term and long term productivity and profitability

29. V308 28 Helping Participants Navigate  How much can you afford to save?  Might you borrow this money?  How long do you think you will be with this employer?  Might you cash out at job change?  Is this your only savings?  Would you sell if the market dropped?  How willing are you to lose money?

30. V308 29 Getting Participation Up  Default enrollment with matching contribution highest rates  Default enrollment with no match near tie  Voluntary enrollment with match near tie  Voluntary enrollment with no match next  Voluntary IRA with payroll deduction next  Voluntary IRA on own lowest

31. V308 30 Getting Contributions Up  Automatic employer contribution best  Default contribution next  Auto escalation essential feature over long term – or less will be saved

32. V308 31 Preservation A Growing Focus  Job change and low balance losses  Loan and hardship losses  Employers increasingly seek to keep funds in the pla n at job change  Employers increasingly focused on at retirement with drawal method and options

33. V308 32 Public Policy – 2008 and Beyond  Social Security and Medicare as Focus  Mandatory savings considered but unlikely  Due to low incomes, tax loads, and health costs  Employer plans and IRA’s likely to be put to effectiveness test – tax restrictions? Fee rules?  Later retirement ages for those able to work  Low disability and SSA incomes for those not healthy enough to work

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35. V308 34 Dallas L. Salisbury President and CEO Employee Benefit Research Institute www.ebri.orgwww.ebri.org and www.choosetosave.org www.choosetosave.org

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