Can 401(k) accumulations generate significant income for future retirees?

This Issue Brief develops a model that project the proportion of an individual's preretirement income that might be replaced by 401(k) plan accumulations at retirement, under several different projected scenarios. The 401(k) participant behaviors in the model are based on the year-end 2000 database collected by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI) in their collaborative effort known as the EBRI/ICI Participant-Directed Retirement Plan Data Collection Project. The most significant factor affecting projected replacement rates at retirement is having access to a 401(k) plan. Projected replacement rates from 401(k) accumulations at retirement are reduced significantly when participants are not offered a 401(k) plan in all portions of their careers. Most 401(k) participants tend to have contributions in any given year. Thus, projecting that participants always have contributions (their own and/or employer contributions) every year raises projected replacement rates, but not by much compared with the importance of being offered a plan to begin with. The model simulations show that participant activities such as taking loans, taking preretirement withdrawals, or cashing out account balances at job change reduce projected 401(k) accumulations and thus replacement rates at age 65. Because loans are forecast to be paid back to the account in full, their effect on replacement rates at retirement in the model is the smallest. Even if equity returns in the future are projected to replicate the worst 50-year segment in the Standard & Poor's (S&P) 500 history (1929 to 1978), 401(k) accumulations are still projected to replace significant proportions of projected preretirement income. Another projection scenario forecasts participants experiencing a simulated three-year bear market (negative equity returns) either early in their careers, near the middle of their careers, or at the end of their careers. Forecasts of the effects of bear markets on 401(k) balances show that a bear market in equities is projected to have the largest effect the closer it occurs to age 65 (retirement), even though older participants typically have diversified their portfolios away from equities. A three-year bear market for those early in their careers would reduce median replacement rates from 401(k) accumulations by an estimated 2.9-3.7 percentage points, compared with 13.4-17.7 percentage points for those immediately before retirement. Similarly, a simulated three-year bull market (positive equity returns) is projected to have a larger positive effect on projected account balances and replacement rates the closer it occurs to retirement.     

Women and Economic Security in Retirement:Implications for Social Security Reform

Gender-related parenting roles lower incomes of women during the working-age years and in retirement years. National retirement income programs contribute to this gender-related difference in retirement income to the degree that they consider lifetime earnings in calculating benefits. This article examines two national pension systems: those of Australia and Sweden. The pension systems of these two countries often are considered as the extremes of pension generosity, and they are based upon different philosophies about the role of government in insuring against economic risk. Due to fiscal issues and the changing roles of women in the labor market, both have reformed their systems. How system reforms can balance the role of the government in insuring against income risk and the growing financial independence of women in the work force are discussed.     

The timing of falls into poverty after retirement and widowhood

A major concern of workers, even those financially prepared for retirement, is that a small risk of poverty may grow over time. Cross-sectional data showing that older cohorts have higher poverty rates substantiate this concern. Using data from the Retirement History Study, we analyze changes in the hazard of entering poverty as a cohort of elderly couples retire and age and the wives are widowed. The initial fall into poverty among those who were not poor before the husband retired is more closely linked to the event of retirement or widowhood than to the slowly eroding household income over the period of retirement and widowhood. The death of her retired husband puts a wife in economic jeopardy whether this shock occurs one year after his retirement or some years later.     

Teaching about near-death experiences: the effectiveness of using The Day I Died

In this article, we reviewed results of research on near-death experiences (NDEs) over the past 3 decades and examined the effect of viewing the hour-long 2002 BBC documentary The Day I Died: The Mind, the Brain, and Near-Death Experiences on accurate knowledge about near-death experiences among advanced undergraduates at a southwestern university. In a quasi-experimental research design, the experimental group completed a 20-item questionnaire before and after viewing the documentary (n = 66; 45 females, 21 males), and the waitlist control group completed the questionnaire as pre- and posttest before viewing the documentary (n = 39; 36 female, 3 male). The two groups' scores at pretest were not significantly different (p > .05). Group by occasion repeated measures ANOVA revealed the experimental group's posttest scores moved significantly in the direction of correctness with a large effect size (p < .001; eta2 = .56), whereas waitlist control group posttest scores remained similar to pretest scores. We discuss two exceptions to the effectiveness of the documentary and recommendations for educators using it as well as for future research.     

Employment programs for people with psychiatric disability: the case for change

This paper evaluates the effectiveness of disability employment policy in assisting people with psychiatric disability to find, or return to, paid work. We argue that the poor employment outcomes from current programs establish the need for a paradigmatic shift in the form of a state‐provided Job Guarantee (JG) for people with psychiatric disability. In the absence of measures to generate suitable jobs, forthcoming changes to the eligibility criteria for Disability Support Pension will create risks rather than opportunities. Under the JG, the Federal Government would maintain a ‘buffer stock’ of minimum wage, public sector jobs to provide secure paid employment for this highly disadvantaged group. The role of the state in this alternative model is two fold. First, the state must provide the quantum of JG jobs required. Second, the state must ensure the design of jobs is flexible enough to meet the heterogeneous and variable support needs of workers. This will require effective integration of the JG scheme with mental health, rehabilitation and employment support services.     

Aboriginal Drinking: A Case Study in Inequality and Disadvantage

This paper examines an aspect of social inequality experienced by Aboriginal people living in a remote Queensland mining town. We contend that non-Aboriginal perceptions and attitudes of Aboriginal drinking behaviour contribute directly to structural inequalities within the Mount Isa community. Social drinking in the township is, for reserve-dwelling Aborigines, restricted mainly to one bar in one hotel and adjoining park and river bank area. The restrictions are preserved through both overt and covert discrimination. Aboriginal inebriation and excessive drinking are therefore more visible to the wider community and more accessible to police prosecution than that of any other ethnic group in the town. Although White folk tales concerning Aboriginal drinking often contain fear about acts of violence and crime directed towards the White community, soundly documented incidents are rare. This paper argues that the persistence of such attitudes is at the heart of a symbolic differential between the White and Black community in Queensland. Moreover, problems within the Aboriginal community that can be directly related to the excessive consumption of alcohol must also be seen as a product of these White reactions and perceptions.     

Social capital as social relations: the contribution of normative structures

This paper presents a framework for social capital that highlights the normative structures through which it is manifested. The primary focus is on the ways that norms structure the relationships in which social capital is embedded. To this end, we introduce four types of normative structures which condition social capital: market, bureaucratic, associative, and communal. A field site in Japan is used to illustrate how different aspects of social capital interact. This case analysis also serves to make an important distinction between the availability and use of social capital. The central arguments are that 1) social capital is organized in different ways by the normative structures in which it is embedded; 2) there are important interactions between these different aspects of social capital that are often overlooked by simpler frameworks; 3) a useful distinction can be made between available social capital and used social capital; 4) access to social capital can be used to analyze power relations; and 5) distinguishing different aspects of social capital makes areas visible that are overlooked by other understandings of social capital. We conclude by identifying the utility of our perspective for informing public policy and guiding future research.