Election holds little sway for challenges facing retirement industry – speaker

Regardless of who wins the presidential election, the retirement industry will face four big themes that will affect planning and coverage, business professor Jeffrey Brown said Monday.

The industry can expect "continued financial market volatility," said Mr. Brown, dean and professor of business at the Gies College of Business at the University of Illinois in Champaign, Ill. "Investors don't like uncertainty."

The degree of volatility will depend on whether there's a "clear answer" within a day or two or a contested presidential election that isn't resolved for several weeks, said Mr. Brown, keynote speaker for Pensions & Investments DCW Fall Series, a five-day virtual event.

Another big theme is low interest rates, which will "make retirement more expensive," he said, by pushing up the cost of annuities while also harming retirees, who typically invest in fixed-income assets. Another prominent theme is Social Security which, as it stands now, is "financially unsustainable," Mr. Brown said. He cited a Congressional Budget Office forecast that showed the Social Security Trust Funds could be exhausted by about 2031, at the current rate of spending. "We have seen this coming for a long time," he said.

The fourth theme focuses on savings disparity among income groups that "disproportionately affect Blacks and Latinos," he said.

Citing research by the Urban Institute, he noted that workers earning $75,000 are more likely to work for employers that have DC plans compared to workers earning $10,000 to $20,000. Also, higher income workers had a much better plan participation rates than the lower-income workers.

And when the Urban Institute looked at assets by race, it found that lower percentages of Blacks had financial assets, retirement accounts or home equity than whites. The comparison looked at those age 62 and older.

Existing policies and programs "reinforce disparities by race," he said. "Plan coverage as an issue of racial justice will lead to policy changes."