EBRI's Lori Lucas looks back (and forward) at retirement trends

Lori Lucas is retiring by year-end as president and CEO of the Employee Benefits Research Institute, leaving a legacy of research and consulting that not only advocated best practices by retirement plans but also explored consumer behavior to help sponsors encourage greater participation and savings.

She has held the EBRI job since 2018, and has had a varied career in defined contribution consulting and research, as well as financial analysis.

Before working at EBRI, she was executive vice president and practice leader at Callan LLC, leading the firm's defined contribution business. Previously, she was director of retirement research at Hewitt Associates; vice president at Ibbotson Associates; a pension fund consultant at J.H. Ellwood & Associates; and an analyst and product development leader at Morningstar Inc. She also is a past chairwoman of the Defined Contribution Institutional Investment Association.Ms. Lucas recently talked to Pensions & Investments about industry trends and challenges as well as what she as a retirement expert plans to do in her own retirement. (The interview has been edited for space, context and clarity.)

What I've learned is that keeping people in the plan is extremely important. But there are two other elements that are also extremely important to retirement success and outcomes: preventing leakage from the retirement system and also helping people spend down their assets once they get to retirement.When I was at Hewitt many years ago, and we would do an employer survey asking about priorities for the 401(k) plan, helping people spend out of the 401(k) plan was an extremely low priority. Many employers hadn't even thought about it as a priority. Now you see that it's much greater focus and a greater sense that employers believe that's part of the goal to help people spend down their assets in retirement.

There was a lot of conventional wisdom back in the late 1990s saying that target-date funds were a bad idea. And the reason why was that asset allocation is so personal (that) it's not one-size-fits-all. … It took a long time for the industry to overcome that thinking and realize that the perfect is the enemy of the good.When you looked at the data, you saw how many people in their 20s had huge allocations to stable value and money market funds because they didn't know any better. So when you were to put them into a target-date fund where they would actually have a more appropriate asset allocation, even if it wasn't a perfect allocation for them, I think it took a long time to overcome that. There's no question about it today. Even today people say, "Can we do better?" And the answer is probably, yes. We could probably do better so each and every person could have a personalized asset allocation. But it's not always realistic. It's not always going to happen. So at least the target-date fund is better than leaving people to their own devices and seeing them have really a poor allocation.

More exploration of what is the right amount people should be saving, so that we're not asking people to save too much. ... Enjoy your life a little bit more. Don't wait until you're 80 to take that vacation. If you are doing a good job of saving, then don't over-save either. I think we need to test more of that conventional wisdom around what is the right amount to save.

When I first started at EBRI, one of the former plan sponsors on the executive committee was very adamant that financial well-being had to be more than just retirement when it came to the employer's role. It is in the best interest of employees and the employers that retirement was part of financial wellness, but that it did not constitute the whole financial wellness initiative that employers undertake.

We did a series of focus groups in 2018 asking employers about their financial wellness programs and what their goals were and how they would measure success. Since that time, there's been a huge evolution. And in large part I think it's been set up quite a bit by the pandemic where employers realized that it (financial wellness) was everything, in particular emergency savings. At that point in 2020 when people really were panicking, they didn't know what was going to happen next with their ability to make ends meet. It was hard to say to an individual, "Don't use your 401(k) plan if you have to pay your, you know, your rent or your mortgage."So the 401(k) plan becomes their emergency savings vehicle. And that's not good. That's not what we want to see. What we want to see is that the same behaviors that are being successful in getting people to save in the 401(k) plan can they be applied to an emergency savings account.

The idea is having a program that holistically puts people in a better position in terms of both their current financial stability and their future financial success. But also there's a huge element of being emotionally and physically well in addition to being financially well.

The ideal state is to have goals of the benefits group be aligned with the bottom line because there's a recognition that a lot of these financial wellness benefits are paid for by the employers. The amount of money that employers have to pay in compensation and benefits is not infinite.

So, there really is pressure that the benefits group feels to demonstrate that there is behavior change, and the behavior change can be more successfully using the retirement plan. That's a very big component of it ... But it can also be something like reducing turnover within departments that have high turnover. We've seen instances where there's actually been measurements to what extent a part of the organization that was suffering from high turnover had turnover reduced as a result of certain financial wellness initiatives.

Some organizations seek to attach a success measurement to improvements in claims data indicating that people are having less health issues because they're more financially stable. These are very tricky, I can imagine. It's much easier just to send out a survey and ask, "Did you like your financial wellness initiative? Does that result in having greater satisfaction as an employee?" But more and more there is a desire to have more comprehensive and bottom-line-associated measures to demonstrate that these are actually dollars well spent.

There are a number of reasons people don't share their data. One is definitely privacy, but I think another is that they never get around to it. … So it could just be the inertia, which shows you the limitations of any solution that requires somebody to take proactive action. It's even beyond inertia. This is hard stuff. It's hard to kind of figure out the best investment allocation for yourself and feel confident.Before managed accounts, we would research how many people just gave up as they were going through the advice modules. A disproportionate amount of people just got to a certain point where they (said), "I don't even know the answers to these questions, and I'm not confident I'm answering these questions properly. I don't have any confidence in this process."

I realized after five years at EBRI that I did have something interesting that I'd been putting off for many, many years. I got my master's in writing at the same time I had a part-time job at Morningstar. I ended up working full-time at Morningstar, and decided not to get my Ph.D. in writing, which was the game plan. I was going to become a writer. But I told myself when I got that job at Morningstar, I want to do this for a while. When I have interesting things to write about, I'll go back to writing. And now 36 years later, I have lots of really interesting things to write about. So I need to go back to writing.

I would love to do fiction, which was my masters thesis in college. I'd like to keep writing about non-fiction in terms of the financial industry and retirement. I'm not giving up on that, but I want pursue my passion for writing fiction as well.

No, I think that's part of the reason I didn't get my Ph.D. I think I just want to be a writer.