No Rest for Retirement Research Center

With the recent financial crisis, there has been a resurgence of attention paid by individuals to their level of preparedness to enter their retirement years. Questions have again surfaced regarding the appropriate investment vehicles to utilize in order to achieve retirement goals and maintain the high quality of life American workers have come to expect after their years on a corporate payroll have ended.

However, it did not take the trouble in the financial markets for Boston College, under the lead of Alicia Munnell, professor of management sciences, to establish a research center devoted exclusively to the issues surrounding retirement: the Center for Retirement Research.

Established in 1998, a decade before the recession and its fallout, the Center is operating in its 13th year. The mission of the Center remains intentionally broad, said Munnell, who continues to serve as the Center's director: "to promote research on retirement issues and transmit new findings to a broad audience."

Munnell has maintained the all-encompassing charge out of an understanding of the magnitude of the retirement-income debate – aware of its economic and social impact on the entire population, not exclusively retirees. She gained insight into the complexity of sustaining one's standard of living in retirement prior to joining the faculty at BC, having served on the President's Council of Economic Advisers and as assistant secretary of the Treasury for economic policy under the Clinton administration. She also spent 20 years at the Federal Reserve Bank of Boston overseeing research.

The work of the center comes during a critical period. According to Pew Research Center population projections, 26 percent of the total U.S. population are baby boomers, currently in, or soon to enter, retirement. By 2030, 18 percent of the nation will be at least 65 years of age and surveys show many soon-to-be retirees are grossly under informed and unprepared for the financial burdens of retirement.

"Preparation for retirement is a pressing issue," Munnell said. "With the continuous elimination of pension programs by employers, there is an increasing reliance on Social Security and 401Ks to provide income during one's retirement years. People must be prepared to maintain their desired quality of life in retirement from their retirement investments. It is a terrible thing to not have enough money in retirement as options close as you age. Many things from career transitions to moving cities become more complex as one grows older."

"People have not fully reflected on the changing landscape," said Andrew Eschtruth, associate director of external relations for the center. "Employer pensions are increasingly rare. The risk and responsibility for retirement planning has been shifting for many years from employers to individuals for years. Accordingly, people must also adjust their expectations about life in retirement."

The general lack of understanding about the multiple factors related to financing retirement provides the center with an ever-growing list of research topics.

"The center not only explores the benefits and challenges associated with traditional retirement income sources such as Social Security and 401Ks, but also investments such as one's house, reverse mortgages, and healthcare costs such as long term care," said Eschtruth. "The results are convincing. Many will have to work through their 60s. Doing so, not only provides income, but also health benefits associated with being active. Working longer gives your investments more time to grow and reduces the number of years one has to finance their lifestyle from retirement income."

The center's work goes beyond economics, seeking to understand the motivating behavior and impact of individual and institutional decisions in order to focus on researching practical solutions.

For instance, public pensions in the U.S. face a shortfall of over $2 trillion. The staggering number has forced state and local governments to liquidate assets and make deep cuts to services, impacting the quality of life for all community members, not just retirees.

"As the center progresses, we continue to be exposed to more challenges and issues in the retirement planning process," Munnell said. "We look not only at the economic component, but the social components as well when it comes to decisions related to retirement income. We also explore the impact of decisions of state and local governments, such as state funded pension plans, and their impact on quality of life in communities when governments must fund the obligations."

Influencing the decision making process on matters related to retirement income is where the center excels and makes its impact. It does so not just through quality research, but also through effective communication with a diverse population.

"We desire to get these issues into the public discourse," Munnell said. "Our priority is to reach decision makers at all levels of retirement savings, from the individuals to the advisors to companies, governments, and pension plans. The quality of our academic research gains us respect from peers. If we constantly regurgitate information, then we lose our thought-leadership status."

The center reaches decision-makers at all levels of the retirement income industry by tailoring the communication of their findings to the various individuals involved in the retirement planning process. It produces documents from white paper for retirement policy experts to brief explanations of contemporary retirement issues for financial planners and individuals. Members of the center's staff also frequently engage with major investment firms, insurance companies, and retirement advocacy organizations regarding their involvement in the retirement planning process.