Myths and Realities of Retirement
by Neil Lloyd

According to 2015 Form 5500 filings, 37 million Americans participated in defined benefit (DB) retirement plans, and 98 million Americans participated in defined contribution (DC) retirement plans.1 DC plans have clearly become the dominant vehicle for employer-facilitated retirement savings in the United States.

Given the growth of the DC retirement system, questions remain about DC participants’ ability to translate savings into lifetime income. The Employee Retirement Income Security Act (ERISA) Advisory Council addressed this issue in a 2005 study on retirement distribution and options and a 2008 sturdy on the spend0down of defined contribution assets at retirement. There have been many related academic and industry studies since, plus additional government studies, such as those conducted by the Government Accountability Office (GAO). However, despite this focus and interest, a number of commentators have repeatedly lamented the limited amount of action focused on addressing the lifetime income challenge. In a recent report, GAO recommended an independent commission to explore, among other issues, “improving options for the spend-down of savings in retirement.”2

Why is there a disconnect between intent, interest and action?

One hypothesis is that there is too much focus on lifetime income theory
and too little consideration of retirement realities, resulting in a disconnect
between actual retiree needs and what the market thinks retirees need.
Consequently, many solutions may have had less take-up than expected.

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Neil Lloyd
Partner, Head of U.S. DC and financial wellness research at Mercer

Neil Lloyd is a member of the Mercer DC Committee, the Mercer DC Investment Committee and several strategic research teams, including the U.S. Target Date Fund Strategic Research team. Lloyd is a regular speaker at national and regional industry forums. He participates in the industry by chairing the Plan Sponsor Council of America (PSCA) Retirement Industry Advisory Committee, being a member of the Defined Contribution Institutional Investment Association (DCIIA) Executive Committee, chairing the DCIIA Retirement Income Committee and participating in the DCIIA Academic Forum Subcommittee. At EBRI, Lloyd is the financial wellness vice chair. He also is the Mercer representative at the Center for Retirement Income.
1 Private Pension Plan Bulletin Historical Tables and Graphs 1975-2015, Employee Benefits Security Administration, U.S. Department of Labor, September 2017
2 State of Retirement in America, Government Accountability Office, GAO-18-111SP.

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Neil Lloyd
Partner, Head of U.S. DC and financial wellness research at Mercer

Neil Lloyd is a member of the Mercer DC Committee, the Mercer DC Investment Committee and several strategic research teams, including the U.S. Target Date Fund Strategic Research team. Lloyd is a regular speaker at national and regional industry forums. He participates in the industry by chairing the Plan Sponsor Council of America (PSCA) Retirement Industry Advisory Committee, being a member of the Defined Contribution Institutional Investment Association (DCIIA) Executive Committee, chairing the DCIIA Retirement Income Committee and participating in the DCIIA Academic Forum Subcommittee. At EBRI, Lloyd is the financial wellness vice chair. He also is the Mercer representative at the Center for Retirement Income.