Retirement income adequacy improved for baby boomers and GenXers last year, but that improvement varied by age, income and whether individuals had access to a 401(k)-type retirement plan, according to a report by the Employee Benefit Research Institute.

EBRI found that last year’s gains in the housing and financial markets meant that fewer of these households were likely to run short of money in retirement.

Eligibility to participate in an employer-sponsored retirement plan was one of the most important factors when it came to retirement income adequacy, according to EBRI. Generation Xers in the lowest-income quartile with 20 or more years of future eligibility in a defined contribution plan are half as likely to run short of money as those with no years of future eligibility.

Longevity and increased health care costs also impact retirement readiness. Annuities and long-term care insurance could mitigate much of the variability in retirement income adequacy at or near retirement age, EBRI found.

The annuitization of a portion of the defined contribution and individual retirement account balances may substantially increase the probability of not running short of money in retirement, EBRI found.  

Future Social Security benefits make a huge difference for the retirement income adequacy of some households, especially GenXers in the lowest-income quartile.

“It would appear that while retirement income adequacy depends to a large degree on the household’s relative wage level and future years of eligibility in a defined contribution plan, a great deal of the variability in these values could be mitigated by appropriate risk-management techniques at or near retirement age,” said Jack VanDerhei, EBRI research director and author of the report.

The Employee Benefit Research Institute is a private, nonpartisan, nonprofit research institute based in Washington, D.C., that focuses on health, savings, retirement and economic security issues.