More than half of all American households do not have enough put away for retirement, and the problem is getting worse, according to new research from the Center for American Progress.
Along with tracking what people are putting away for retirement, the researchers looked at dozens of studies by government, academic and private-sector organizations that model how likely people are to fall short when they retire. The most convincing estimates project that more than 50% of households will fall short, and even the most optimistic studies predict that nearly one-quarter of retirees will, CAP researchers found.
“The biggest problems are that far too many people don't have access to a private-sector retirement plan, and secondly, the plans they do have access to aren't very good,” said David Madland, managing director of the center's economic policy team. Along with stagnant wages and rising costs, the shift toward having individuals largely responsible for their own retirement makes the retirement crisis “almost unsolvable,” Mr. Madland said. “And each generation gets worse.”
As of 2013, the top 20% of working-age households by income held 67.7% of all retirement assets, while the bottom 50% held 7.4% of assets.
Roughly 31% of Americans have no retirement savings and no access to defined benefit plans, according to Federal Reserve data, including 19% of people ages 55 to 64. Of the 65% of private-sector workers with access to workplace retirement plans, only 48% participated in one in 2014. Longer-range analyses indicate the share of private-sector workers with access is now lower than in the late 1980s, CAP researchers found. Senior research associate Keith Miller said most of the models they studied assume that current retirement income sources like Social Security will pay out full benefits, but “that shouldn't be taken for granted,” Mr. Miller said.
“We want to present a clear look at the data because we think there is a retirement crisis. We think that's important because Congress needs to act,” Mr. Madland said. While some states are taking the lead on access to more private-sector retirement plans, “we are not getting to the scope and scale that we need to.”
While the growing crisis could force households to significantly reduce their standards of living in retirement, it will also place greater stress on the government and other social sources such as charities, the authors said.
The study is available on CAP's website.
Hazel Bradford is a reporter at sister publication Pensions & Investments