2025 DC Retirement at a Glance
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1. WANTED: MORE BABIES – The 2025 Social Security Trustees Report showed that the projected 75-year deficit increased from 3.50% to 3.82% of taxable payroll. The report assumes a fertility rate of 1.9 births per female but using the 2024 US fertility rate of 1.6, the 75- year deficit would increase to 4.49% of taxable payroll. (Source: Center for Retirement Research)
2. A NEW GREEN SPACE – In mid-July, it was reported that President Trump will sign an executive order that would ease the path for 401(k) and other similar plans to invest in private assets. This move opens what was mostly an untapped reservoir of $12.4 trillion in defined contribution plans, just as pensions have generally maxed out their allocations to private market assets. (Source: WSJ)
3. MICRO 401(K) BOOM – Thanks to incentives in SECURE 2.0 and new state mandates, the number of 401(k) plans is expected to increase by 36% and top one million by 2030, according to Cerulli Associates. By 2030, 92% of all 401(k) plans are projected to be micro plans — those designed for small businesses and self-employed individuals. (Source: Plan Sponsor Council of America)
4. NOT A GOOD AGE TO LOSE A JOB – For people between the ages of 50 and 65, 14% have been laid off from a job once, while another 4% have been laid off multiple times. Of those who have been laid off, the average duration of unemployment was 26 weeks. Of the 76% of workers who found new jobs, they took an average pay cut of 11%, with a 15% decline for men and a 7% decline for women.(Source: WSJ)
5. TOP HEAVY IN AGE – In 2024, older adults (65+) outnumbered children (under 18) in 11 US states and 112 metro areas, up from just 3 states and 58 metros in 2020. From 2004 to 2024, the share of older adults in the US population increased from 12.4% to 18.0%, while the share of children declined from 25.0% down to 21.5%.(Source: U.S. Census Bureau)
6. LESS COMPANIONSHIP – According to the US Census, nearly 3 in 10 Americans age 65+ live alone. For those aged 65 to 74, 27% of women and 21% of men live alone, but for those 75+, the percentage living alone increases to 43% of women and 24% of men. The primary driver of this discrepancy is average life expectancy, which in 2023 was 81.3 years for women compared to 75.8 for men. (Source: US Census, CDC)
7. SPOILING THE GRANDKIDS – 96% of all US grandparents financially support their grandchildren in some capacity. Total financial support from grandparents to their grandchildren averages $3,948 annually, but 10% report providing more than $10,000. Gifts for special occasions are the most frequent type of financial support, followed by apparel, entertainment and money for dining out. (Source: The Senior List)
8. 401(K) FEES AT HISTORIC LOWS – While the average mutual fund expense ratio remains above 1% (1.10%), the average mutual fund expense ratio for 401(k) equity plans dropped to 0.26% in 2024, down 66% from 0.76% in 2000. Over that period, bond and hybrid fund fees also dropped by 69% and 44%, respectively. (Source: Investment Company Institute)
9. TARGET FEES DOWN AS WELL – Expense ratios on target date mutual funds (TDF) have declined every year since 2015 (9 years), falling from an asset-weighted average of 0.55% to 0.29%. Within the TDF category, the average expense ratio on passive funds is 0.26%, compared to an average of 0.79% for active funds. (Source: Morningstar)
QUESTION: Fiscal year 2025 was the first time that a participant in the New York State and Local Retirement System (NYSLRS) has been eligible for an annual pension of more than $500,000. How many participants in the NYSLRS currently receive six-figure pensions?
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Note to readers in Canada: Issued in Canada by MFS Investment Management Canada Limited.