ICI says America’s retirement system works

Glass Half Full Retirement?

A recent visit to FinCon17 in Dallas offers new retirement and investing insights. Worried about retirement? Many say baby boomers are ill-prepared. A lot of baby boomers expect the Social Security glass to be empty when they retire.



We’ve written on this issue Retire at 62 – how much will you need to make it? But there are always contrarians. The Investment Company Institute (ICI) argues that the American retirement system is stronger than is commonly believed. ICI promises boomers at least a glass half full retirement. They use several benchmarks to make this argument.

Average Savings

Americans have $26 trillion in savings. This is seven times (7x) more per household than in 1975, adjusted for inflation. Wealth is relative. Compared to their grandparents’ retirement, baby boomers are 7x richer.

But you ask, isn’t a lot of that wealth concentrated in the upper-income brackets, especially with the demise of traditional pensions?

ICI argues that most households have retirement-specific savings.


Most Retirees Have Employer-Sponsored Retirement Plans

Eight-nine percent (89%) of workers transitioning to retirement hold assets or have income from employer-sponsored retirement plans, including pensions, 401(k)s, 403(b)s, IRAs, or annuities. This isn’t the empty glass portrayed by doomsdayers.

This statistic doesn’t speak to asset quantity in, or income from, such plans, just the existence of such plans.

But ICI responds that many Americans have more spendable income in retirement than before. That’s at least a glass half full retirement.

Lower and Middle-Income Spendable Income Increases in Retirement

Lower-income Americans’ median spendable income in retirement after claiming Social Security increases by 123%.

Middle-income Americans’ median spendable income in retirement after claiming Social Security increases by 103%.

The top 1% of earners see their spendable income fall after claiming Social Security.

For more details from ICI.org, see the links below:

New Research Offers Good News for American Workers

Most Americans Maintain or Increase Spendable Income After Claiming Social Security, Tax Data Show

The Rosy and the Realist

ICI view is a fairly rosy. Maybe that glass half full retirement is filled with rosé.  The realist can read these post-Social Security statistics to say more about pre-retirement income opportunities than post-retirement income.

And remember that median or mean (average) statistics hide a lot of detail about the distribution of income.

Still, ICI has a point. If Social Security is intended as a safety net, the combination of Social Security plus other savings, especially employer-sponsored retirement plans, is working for a lot of Americans. The glass isn’t exactly empty, even if it’s not full to overflowing. Baby boomers’ glass half full retirement requires more effort by individual workers than the traditional pension system, but the pension system had weaknesses too. Most people were never covered by private pensions even at the peak of private sector unions. And pensions depend upon the continued health of the former employer, whereas a well-managed defined-contribution account is diversified. Comparisons to an ideal that never was are unfair to the current system.

glass half full retirement

Whose glass is it?

No one cares more about your money than you do. You must pay attention. Save for the future. Be smart and live within your means. You can’t ignore the future and be surprised to find an empty glass when retirement arrives. Do your part and it’s fair to expect at least a glass half full retirement.

ICI points out that more than 100 million Americans save for long-term goals through mutual funds, exchange-traded funds (EFTs), and other funds. That’s about a third of the total US population. Or about two-thirds of all U.S. workers. ICI members manage savings or investment assets of more than $20 trillion.

We’re in this group. And investment funds are a key part of our plan for financial independence, part of our Aging with Freedom. But we’re not blind. ICI’s vested interest is to protect the current defined-contribution retirement investment model. Their members manage the system and the savings. This self-interest doesn’t make the research wrong. It just might not be the whole story. And, remember it’s a system that still depends upon the stability and sustainability of Social Security. It’s the classic question. How do you look at the glass? Half full or half empty? It’s late in the game. Baby boomers should see the value in a glass half full retirement.

Glass Half Full Retirement Lessons

Our lesson? You need both Social Security and your own savings. You can’t count on Social Security alone to maintain pre-retirement lifestyle. If you’re middle or upper-income? Save or adjust your expectations. But Social Security is the essential backstop. Social Security reform is still necessary to survive the baby boomer demographic bubble. (We think the cap on Social Security taxable income should be lifted.)

Three recommendations for Aging with Freedom:

  1. Wealth is relative. Be sure you’re above the median in retirement savings for your income group.
  2. Deferred gratification is essential. Be sure you spend less of your income pre-retirement on lifestyle than your peers. Put more in savings and investment.
  3. Spend less than your income. Regardless of savings, adjust your lifestyle to your post-retirement income. Even if that means major changes in location or more.

Happy at Any Income

We respect the tiny house movement. Many retirees choose recreational vehicles (RVs) for both adventure and frugality. Mobile home parks may save us all. Money counts, but money isn’t everything. You can be happy, if you choose, at any level of income. That is Aging with Freedom.

Our Lifestyle Adjustment Plans

We moved to a low-cost, rural state. Housing, food, insurance, energy, water, and healthcare all cost less here than in Arizona. And Arizona is still far less expensive than several states. Looking at you California. We plan to get down to one car. And eventually none. Technology promises on-demand ride-sharing services or self-driving cars like Lyft or Waymo (Google’s self-driving car). Tesla Autopilot and Cadillac Super Cruise are here today. Getting off-grid for better energy cost control is on our wish list. We also plan to downsize earlier rather than later.

For a quick summary of moving from a high-cost state to a low-cost state, see a recent article from FreedomIsGroovy.com. The Shockingly Simple Math Behind Abandoning a High Cost State in Retirement

Is your retirement glass half full? What steps are you taking now toward Aging With Freedom?