Thu, August 01, 2013
This past June, the non-profit National Institute on Retirement Security (NIRS) published a new report on the state of US retirement savings. Based on data from the Federal Reserve’s 2010 Survey of Consumer Finance, the report suggests that many Americans are poorly prepared for retirement and concerned about it.
The report, “The Retirement Savings Crisis: Is It Worse Than We Think?” notes that 85% of respondents to an NIRS survey are concerned about retirement, and 55% are “very concerned.”
45% of Americans have no retirement savings at all. Among those who are nearing retirement (defined by the study as persons aged 55 to 64), 40% had no retirement savings. Looking across all households (including those with no retirement savings accounts), the study found that the median account balance for those nearing retirement was $12,000. Retirement savings accounts are held disproportionally by those with higher incomes: 89% of households in the highest income quintile held savings in retirement accounts, but only 25% of those in the lowest quintile owned any retirement accounts.
Studies published by Fidelity and Aon Hewitt indicate that workers need to accumulate 8 to 11 times their current income by the time they retire in order to be able to afford retirement. Using this benchmark range, the report found that even when the entire net worth of working households is included, 65% of workers fall short of the goal.
With more Americans having to settle for part-time jobs, the average worker’s ability to save adequately for retirement is likely to get worse in the near-term. The report calls for improved access to retirement savings plans and strengthening of the Social Security retirement program. It remains to be seen whether such changes will actually be implemented over the next few years.
Clearly, most workers need to seriously assess whether they are saving adequately for retirement. Without adequate savings, many of today’s workers are likely to find themselves working much longer than they once expected.