A report
from the Center for American Progress (CAP) predicts the consequences of
growing retirement savings shortfalls could be severe for both American
families and the national economy, as a large share of households may be forced
to significantly reduce consumption in retirement and will have to rely heavily
on their families, charities, and the government for help to make ends meet.
CAP cites a household survey conducted by the Board of
Governors of the Federal Reserve System, which found that as of 2013,
approximately 31% of Americans reported having zero retirement savings and
lacking a defined benefit (DB) pension. Among respondents ages 55 to 64, the
share who reported having no savings or pension was still 19%, or approximately
one out of every five near-retirement households.
The report notes that a significant number of Americans
still lack access to the primary savings vehicles used today—workplace
retirement plans. But, even among those who do have access to workplace
retirement plans, those who save in them have failed to accumulate enough to be
on track to meet their needs in retirement.
According to CAP, the Survey of Consumer Finances (SCF)
shows that today, households across all age groups have wealth-to-income ratios
that are effectively unchanged from or significantly below the ratios achieved
by households in previous decades. Yet, retirement needs have grown significantly
in recent decades.
CAP cites reports from Alicia H. Munnell of the Center for
Retirement Research at Boston College, which point out life expectancy has
increased and the retirement age for full Social Security benefits has risen to
age 67, meaning workers now have more years of expenses to cover but must wait
longer to begin receiving full Social Security benefits. Health care costs also
have risen substantially, resulting in higher expenditures for retirees, and
the decline in real interest rates since 1983 means that a given amount of
wealth accumulated today now produces less retirement income than it would have
in previous decades.
The studies utilize different methodologies and arrive at
different estimates of the exact percentage of Americans at risk of struggling
financially in retirement, but even the most optimistic, which use prerecession
data, still find that approximately one-quarter of retired Americans are
falling short and that preparedness is growing worse over time. The most
middle-of-the-road estimates available place the share of current American
workers at risk at more than 50%, CAP said.
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