This is a hidden column

getTagNameMorningstarCorporate:blog/bigpicture

Debating the State of American Retirement

Morningstar researchers and financial professionals share their thoughts on key retirement questions

Samantha Lamas

 

Retirement is consistently a central topic in any personal finance discussion, and yet it’s surrounded by many uncertainties. Retirement researchers struggle over top concerns, like if there’s a retirement crisis in the United States or if mandatory retirement savings should be implemented. 

We asked our researchers to speak to these tough questions at the 2019 Morningstar® Investment Conference. In a packed session, head of retirement research David Blanchett, head of retirement research for Morningstar’s Investment Management group, and Steve Wendel, head of Morningstar’s behavioral science group, gave their thoughts on the current state of American retirement. Throughout the session, we also gathered the opinions of the financial professionals in the audience.  

Much like the rest of the retirement community, the parties didn’t always agree. 

Is the state of American retirement as dire as predicted? 

According to the researchers, the term “retirement crisis” is relative.  

While Wendel commented that most Americans will likely face a significant shock to their standard of living in retirement, Blanchett pointed out that many retirees can adapt to this new shortfall—research finds that more than 90% of retirees today describe themselves as being satisfied or very satisfied in retirement. However, Wendel was quick to note that the outlook for future retirees looks much more dire than that of current retirees.  

We then posed this same question to the audience of financial professionals in the room through live polling, and found far more agreement: About 87% of the audience believed there is a retirement crisis in the U.S. 

The question at hand comes back to the idea of what retirement should look like. Should investors hope to maintain their standard of living throughout retirement? Or, should we lower our expectations as a society? 

Should mandatory retirement savings be implemented? 

Both researchers agreed that mandatory savings could potentially improve the state of American retirement. Blanchett cited retirement systems like that of Australia, where a relatively high mandatory employer-savings rate has shown itself to be successful for investors.  

However, both researchers pointed out that this is more of a public policy issue. Therefore, a broader discussion across the field and society is required to fully understand the implications and practicality of such a shift.  

The audience, on the other hand, had a more neutral response to this topic. When asked if the U.S. should consider mandatory retirement savings for workers, only 61% of participants voted yes. The audience gave a similar response to the question of whether the U.S. should consider mandatory retirement savings for employers, with 60% voting yes.  

Agreeing to disagree on the state of American retirement 

The researchers and audience tackled several additional questions throughout the session, such as:  

  • Should 401(k)s follow the same “open architecture” that prevails within IRAs?  
  • Should annuities and ESG investment options be featured more prominently in U.S. retirement plans?  
  • Are retirement defaults helping or hurting investors?  

The full discussion, featuring these questions, can be found in our white paper, “Debating the State of Retirement: Morningstar Researchers Agree to Disagree.” 

Although there wasn’t much agreement across the board, sharing different ideas and perspectives helps extend the conversation about the state of American retirement.   

To see more from the discussion, download “Debating the State of Retirement: Morningstar Researchers Agree to Disagree.”

Get My Copy

Morningstar Investment Management LLC is a registered investment adviser and subsidiary of Morningstar, Inc. The Morningstar name and logo are registered marks of Morningstar, Inc. Opinions expressed are as of the date indicated; such opinions are subject to change without notice. Morningstar Investment Management and its affiliates shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions or their use. This commentary is for informational purposes only. The information data, analyses, and opinions presented herein do not constitute investment advice, are provided solely for informational purposes and therefore are not an offer to buy or sell a security. Before making any investment decision, please consider consulting a financial or tax professional regarding your unique situation.  

The Morningstar Retirement Quiz for Advisors

Test your knowledge and get ideas for helping your clients.

Trending Research

Get our latest in-depth analysis and differentiated industry coverage.

Our HSA Rankings

Read how we evaluated 11 of the largest health savings account providers.