Episode summary
Spencer Look and Jack VanDerhei: The Assumptions That Can Put Your Retirement at Risk
The Long View
· · Hosts: Christine Benz, Ben Johnson, Amy Arnott · Guests: Spencer Look, Jack VanDerhei
Summary
Morningstar’s retirement researchers argued that retirement readiness is highly uneven, with meaningful risk concentrated among lower-income workers, single women, and Black and Hispanic households. Spencer Look said the center’s status-quo model shows about 40% to 45% of the population at risk of shortfalls, but that workers who consistently save and participate in plans tend to fare much better. He also said long-term care materially changes the picture: excluding it cuts the at-risk share to around 25%.
The discussion focused on how Morningstar models retirement by combining household-level behavior, plan design, Social Security, longevity, and long-term care costs. Jack VanDerhei said the center’s work is meant to help policymakers, plan sponsors, and advisers judge tradeoffs rather than chase a single headline number. Both guests emphasized that access alone is not enough; automatic enrollment, higher default deferrals, auto-escalation, and lower leakage matter if the goal is better retirement income adequacy.
They also discussed Social Security reform, warning that no one knows what will happen before the scheduled 2032 trust fund shortfall. VanDerhei said younger workers have more time to adjust, while people over 50 likely cannot save enough in a 401(k) to fully offset a benefit cut. The episode closed on long-term care, annuities, and new research on plan design, with both guests saying more granular data can materially improve retirement outcomes.
Key takeaways
- Morningstar’s model puts about 40% to 45% of the population at risk of retirement shortfalls, with the highest risk among lower-income workers and certain demographic groups, according to Spencer Look.
- Spencer Look said ignoring long-term care cuts the estimated at-risk share from roughly 40% to 45% to about 25%, making it a major driver of retirement adequacy estimates.
- Jack VanDerhei said access to a plan is only a starting point; automatic enrollment, higher default deferrals, auto-escalation, and lower leakage are needed to improve outcomes.
- VanDerhei said people over 50 are unlikely to offset a potential Social Security benefit cut by saving enough more in a 401(k), so older workers need a different planning response.
- Look said the savers match could help lower-income households, but its current income limits are low enough that many eligible workers may find the contribution target hard to reach.
- Both guests said plan sponsors should evaluate changes using actual participant data and distributional outcomes, not just average effects.
Notable quotes
“Our overall status quo model shows that about 40 to 45% of the population is at risk of shortfalls”
“If you ignore long-term care costs, we published a piece where we did this and our estimates from that 40 to 45% number came down to around 25%”
“access alone is simply not going to be the answer for retirement income adequacy for many of these individuals”
“no one has any idea what's going to happen basically in the next six years”
How the episode opens
Please stay tuned for important disclosure information at the conclusion of this episode. Hi and welcome to the long view. I'm Amy Arnut, portfolio strategist for Morning Star.
And I'm Christine Benz, director of personal finance and retirement planning for Morning Star. Today we're happy to welcome two guests from Morning Star Center for Retirement and Policy Studies. Spencer Luke is associate director of retirement studies for Morning Star and Jack Vanderhigh is director of retirement studies for the center and previously worked as the research director at the employee benefit research institute from 1996 through 2022.
So Christine Spencer and Jack both produce a lot of really helpful research on retirement outcomes, social security reform, and retirement policy. So, we'll get into all of those topics in our discussion. And one of the highlights was their more balanced take on whether there's really a retirement crisis in the US.
We hear a lot of really dire warnings about that. And so I appreciated, you know, their take on where there's room for improvement as well as some data on maybe things aren't quite as bad as some people might have us believe. You won't be surprised to hear that I really like the discussion about long-term care and Spencer and Jack have both concluded that the retirement planning community has underrated long-term care as a risk factor for people's retirement plans.
So, I like delving into that. All right, so let's get into the discussion. Jack and Spencer, welcome to the Long View.
Happy to be here. Thank you so much for having us. Well, thank you so much for joining us. Maybe you could start by giving us some quick background on the Morning Star Center for Retirement and Policy Studies. How did the Center first get started and what's the mission you're trying to accomplish?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- social security changes
- long-term care costs
- retirement crisis
- retirement policy reform
- longevity
Companies and tickers mentioned
- MORN
- Morningstar
- Employee Benefit Research Institute
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Long View, this episode and its artwork belong to Morningstar, Christine Benz - Director of Personal Finance and Retirement Planning, Ben Johnson - Head of Client Solutions, Amy Arnott - Portfolio Strategist. Octagon is not affiliated with the show; this page is an independent summary.
