America’s retirement crisis could cost the federal and state governments an estimated $1.3 trillion by 2040, according to a new analysis.
Inadequate retirement savings will result in higher public assistance costs, decreased tax revenue, lower household spending and a decline in standards of living, according to a report done for the Pew Charitable Trusts.
The anticipated costs — $964 billion for the federal government and $334 billion for states between 2021 and 2040 — are “relatively shocking,” John Scott, director of Pew’s retirement savings project, said during a presentation Thursday.
The shortfall is being driven in part by demographics, with the share of households including someone 65 or older that has less than $75,000 in annual income — a level the report said indicated financial vulnerability — expected to jump 43% to 33 million by 2040.
The report found that minor increases in savings habits by those “vulnerable” households could alleviate the anticipated strain to federal and state budgets. Saving an extra $140 a month, or about $1,685 annually, over 30 years, the retirement savings gap and additional taxpayer burden could be eliminated, according to the analysis.
The research assumed an inflation-adjusted return of 5% on assets that shifted from a more aggressive to a more conservative portfolio over three decades.
The study pointed to the growth of state-sponsored automated retirement savings accounts, which have been adopted in 12 states, as a way to help as many as 56 million private-sector employees without employer-sponsored retirement savings plans. Such auto-IRA programs usually automatically enroll employees, who can then opt out.
Unlike many retirement savings programs at large private companies, auto-IRAs are Roth accounts, funded with a small percentage of a worker's after-tax paycheck. Users aren't able to lower their taxable income by contributing to retirement savings on a pretax basis, as workers can in 401(k) plans, and there are no matching contributions from employers.
Chicago-based Mesirow Fiduciary Solutions adds flexPATH's plan-level outsourced fiduciary book, boosting its retirement market reach to $164 billion.
Also, Raymond James's employee advisor channel adds breakaways from Wells Fargo and Stifel, while UBS welcomes an ex-Morgan Stanley duo in Indiana.
It promised guaranteed principal and 10% monthly returns. The SEC says it invested nothing.
Ten years after entering the fee-based annuity market, MassMutual Ascend says nearly half its lifetime sales came in the past two years alone – but barriers remain among fee-only advisors.
Amplify, WealthReach, Zeplyn and Zocks have unveiled partnerships aimed at automating portfolio management, content creation, account opening, and client communication.
Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains
Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income
