TIAA-CREF Forum Addresses the Retirement Income Needs of a Heterogeneous Workforce

How tools such as auto-enrollment, investment options, financial education and the use of annuities can best tackle the challenges of providing a secure retirement for a diverse workforce were discussed at a forum sponsored by the TIAA-CREF Institute.

The forum convened experts in behavioral economics, actuarial science, individual decision making, and financial education. The day-long event was held at TIAA-CREF’s headquarters in New York City on December 3. The TIAA-CREF Institute convened the meeting to address the retirement income needs of a heterogeneous workforce.

“The issues that we are confronting around retirement have become front burner issues in America,” said Roger W. Ferguson, Jr., TIAA-CREF’s chief executive. “The TIAA-CREF Institute offers objective and high-quality research, with the ultimate goal of advancing lifelong financial security and the business of higher education.”

According to a recent survey by TIAA-CREF, ninety-three percent of Americans realize that savings is essential for financial security, yet nearly forty percent of Americans are not saving for retirement at all.

Automatically enrolling workers into workplace retirement plans affects retirement outcomes in areas including participation, contribution rates, asset allocation and cash distribution, according to Brigitte C. Madrian, Aetna Professor of Public Policy and Corporate Management at Harvard University. Defaulting workers into plans works best when workers are in similar situations, she said.

Auto-enrolling workers in retirement plans helps workers as many don’t follow through with their own stated plans to save for retirement, according to James H. Dulebohn, Associate Professor at Michigan State University.

“Auto features can provide a nudge in the right direction,” said Dulebohn.

Investors may increase their savings rate for retirement if workers in defined contribution plans, or one in which both employees and employers contribute to a retirement account, were told how big a gap existed between their savings and providing for retirement needs, said Luis M. Viceira, George E. Bates professor at Harvard University. An individual’s future capital, or future earning ability, should also be considered an asset along with savings, according to Viceira. Investors in careers that have greater fluctuations in employment and salary should take less risk in their investments than investors who earn a steady income.

Investors who are withdrawing from their assets to fund retirement face the risk of running out of money, said Garth A. Bernard, President and Chief Executive Officer of Sharper Financial Group LLC.

Investors who are saving for retirement have been told to focus on amassing a large nest egg, rather than thinking about how much income they will have in retirement, said Jeffrey R. Brown, William G. Karnes Professor of Finance, University of Illinois at Urbana-Champaign. Annuity and insurance products are valuable because they help cover consumption needs.

“We need to get out of this mindset where it’s all about accumulating wealth. The language that investors have been given to talk about this is how big my account balance is,” said Brown. “We need to change the whole retirement culture to change the language.”

Financial Literacy

Panelists also discussed the need for financial literacy. As many investors are not saving for emergencies, retirement or children’s education needs, that points up the need for employers or schools to provide financial education, according to Annamaria Lusardi, the Joel Z. and Susan Hyatt Professor of Economics at Dartmouth College.

“There are severe costs to providing financial literacy,” said Lusardi. “But I think after the financial crisis it is more expensive not to provide financial literacy.”

Financial services firms should work to grab investors’ attention quickly and avoid offering too many options, which can confuse individuals making a choice, said Eldar Shafir, William Stewart Tod Professor of Psychology and Public Affairs, Princeton University. The average person lacks much time to devote to making investment decisions, he said.

The TIAA-CREF Institute will soon be publishing a report that provides greater detail on the forum’s discussions.

The mission of the TIAA-CREF Institute is to foster objective research, build knowledge, support thought leadership, and enhance understanding of strategic issues related to higher education and lifelong financial security. TIAA-CREF is the leading provider of retirement services to the academic, medical, research and nonprofit fields. For additional information about the TIAA-CREF Institute, please visit


TIAA-CREF Institute is a division of Teachers Insurance and Annuity Association (TIAA), New York, NY.



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