New York
Life Retirement Plan Services has enhanced its Client Access website, with
upgrades to plan participation and contribution dashboards for each plan
sponsor.
One new dashboard, called “Enroll and Roll-in,” drills into
plan participation for each client. It displays participation rates and average
account balances in a plan, with comparisons to industry peers and also against
all plans on New York Life Retirement Plan Services’ platform.
New York Life has also added an employee contributions
dashboard providing details of contribution activity across a plan, including
average contribution rates by age, catch-up participation, and changes in
participant deferral rates. This tool also benchmarks each plan versus others
in its industry and across New York Life Retirement Plan Services’ client
base.
The enhancements became effective July 13 across the firm’s
platform serving defined contribution, defined benefit, and total retirement
outsourcing (TRO) clients.
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Using
data from the Health and Retirement Study for three different age cohorts who
retired in three different waves, the analysis found the median replacement
ratio for total income in the first or second year of retirement was 0.733 (or
73%). One-fourth of households had replacement ratios of 1.013 (101%) or higher
and one-fourth had replacement ratios of 0.480 (48%) or less.
The
study shows replacement ratios fell over time, especially during the first
seven to eight years of retirement. The median replacement ratio fell to
0.635 in the third or fourth year of retirement, to 0.599 in the fifth or sixth
year, and to 0.555 in the seventh or eighth year.
Study
author Patrick Purcell, with the Division of Policy Evaluation, Office of
Research, Evaluation, and Statistics, Office of Retirement and Disability
Policy at the SSA, said the sharp decline from 0.733 to 0.555 over the first
four two-year intervals of retirement may reflect conditions that are more
likely to occur in the earlier years of retirement than in later years. Such
conditions could include receipt of lump-sum pension settlements upon
retirement, working part-time or working more hours part-time in the first few
years of retirement, and the timing of a spouse’s retirement relative to the
respondent’s date of retirement. It is also possible that income from the last
year of full-time employment is mistakenly attributed to income in the first
wave of retirement in some cases, despite the methodological precaution
mentioned earlier.
Purcell
notes that most of the median replacement ratios are lower than the minimum
ratio of 70% that financial planners often recommend, but his analysis is based
on pretax income. Replacement ratios calculated on after-tax income would be
about 20% higher than ratios based on pretax income.
(Cont...)
The analysis also found that income
replacement ratios would increase if the retiree used 80% of the household's
non-housing assets to purchase an immediate income annuity upon retirement.
Because assets used to purchase annuities would no longer generate interest and
dividends, the increase in income generated by using 80% of non-financial
assets to buy an annuity was offset in part by a proportional reduction in
interest and dividend income.
If all of the households in the
sample had used 80% of their non-housing assets to purchase income annuities,
their median replacement ratios would have been about 15 to 17 percentage
points higher, on average.
In addition, using 80% of home
equity and 80% of household non-housing assets to purchase immediate annuities
would raise median replacement ratios over each of the first five waves of
retirement to levels about 24 to 26 percentage points higher.