A new National Institute on Retirement Security (NIRS) research report
titled, The Retirement Savings Crisis: Is it Worse Than We Think?, finds retirement savings
are dangerously low, and the U.S. retirement savings deficit is between $6.8
and $14.0 trillion.
The study examines how American households are faring in
relation to retirement savings targets recommended by many financial planners
and advisors. The report looks at the Federal Reserve’s Survey of Consumer
Finances to analyze retirement plan participation, savings, and overall assets
of all U.S. households age 25 to 64, not just those with retirement account
assets.
According to the survey, approximately 45 percent, or 38 million
working-age households, do not have any retirement account assets. When
all households are included— not just households with retirement accounts—the
median retirement account balance is $3,000 for all working-age households and
$12,000 for near-retirement households.
The findings confirm that the American Dream of retiring
comfortably after a lifetime of work will be impossible for many. Based on 401(k)–type
account and IRA balances alone, some 92 percent of working households do not
meet conservative retirement savings targets for their age and income. Even
when counting their entire net worth, 65
The key research findings are as follows:
- Account ownership rates are closely correlated with income and
wealth. More than 38 million working-age households (45 percent) do not
own any retirement account assets, whether in an employer-sponsored 401(k) type
plan or an IRA. Households that do own retirement accounts have significantly
higher income and wealth—more than double the income and five times the
non-retirement assets—than households that do not own a retirement account.
- The average working household has virtually no retirement
savings. When all households are included— not just households with
retirement accounts—the median retirement account balance is $3,000 for all
working-age households and $12,000 for near-retirement households. Two-thirds
of working households age 55-64 with at least one earner have retirement
savings less than one times their annual income, which is far below what they
will need to maintain their standard of living in retirement.
- The collective retirement savings gap among working households
age 25-64 ranges from $6.8 to $14 trillion, depending on the financial measure. A large majority of
households fall short of conservative retirement savings targets for their age
and income based on working until age 67. Based on retirement account assets,
92 percent of working households do not meet targets. Under broader measures,
most households still have insufficient assets: 90 percent fall short based on
retirement account balances and estimated DB pension assets combined, 84
percent fall short based on total financial assets, and 65 percent fall short
based on net worth.
- Public policy can play a critical role in putting all Americans
on a path toward a secure retirement by strengthening Social Security,
expanding access to low-cost, high quality retirement plans, and helping
low-income workers and families save. Social Security, the primary edifice of
retirement income security, could be strengthened to stabilize system financing
and enhance benefits for vulnerable populations. Access to workplace retirement
plans could be expanded by making it easier for private employers to sponsor DB
pensions, while national and state level proposals aim to ensure universal
retirement plan coverage. Finally, expanding the Saver’s Credit and making it
refundable could help boost the retirement savings of lower-income families.
For the entire report, please click here.