Will it tarnish the golden years?
A collision is coming between two trends: people in the United States are living longer, but they are not saving more to cover their greater longevity. The result is what economists call the retirement gap – the difference between what people will need when they stop working and what they will have available. In fact, more than 40 percent of those between the ages of 32 and 61 have no retirement savings at all, according to one estimate. A few decades ago, most retirees could rely on company pension plans. But today, fewer employers are providing these defined-benefit packages that guarantee a set payout, and are instead offering 401(k)s and other plans that require employees to contribute and manage their own money for retirement. These plans sometimes have barriers to participation, require more of the employee financially and do not always include an employer match. Social Security, the government-run retirement program, covers only about 40 percent of pre-retirement income on average and faces future funding challenges of its own. The result is that the retirement gap continues to grow.
Some key takeaways:
The average lifespan of a 65-year-old in the United States today is between 84.3 years and 86.6 years, depending on gender, while the average retirement age is 63.
Millennials should be saving more for retirement than previous generations, yet two-thirds have no retirement savings and Millennials are more likely to encounter barriers to entry into company retirement plans.
Participation in retirement savings plans rises when employees are automatically enrolled, and some states are adopting programs to promote auto-enrollment.
Resources for Further Study
Ellis, Charles, Alicia Munnell and Andrew Eschtruth, “Falling Short: The Coming Retirement Crisis and What to Do About It,” Oxford University Press, 2014. Experts explore the nature of the retirement crisis in America, how savings have declined and solutions – both individual and policy-driven – that could help boost retirement savings.
Russell, James W., “Social Insecurity: 401(k)s and the Retirement Crisis,” Beacon Press, 2014. A professor of political science and sociology addresses the flaws in the 401(k) system and discusses strategies to overcome the retirement savings crisis it has created.
Bukhari, Jeff, “Why Today’s Retirement Savers Face A ‘Longevity Gap,’” Fortune, April 19, 2017, http://tinyurl.com/
Elkins, Kathleen, “Here’s how much the average family has saved for retirement at every age,” April 7, 2017, CNBC, http://tinyurl.com/
Lobosco, Katie, “66% of Millennials have nothing saved for retirement,” CNN, March 7, 2018, http://tinyurl.com/
Maciag, Mike, “Think Income Inequality Is Bad? Retirement Inequality May Be Worse,” Governing Magazine, March 2018, http://tinyurl.com/
Steyer, Robert, “Non-traditional, contract workers face greater retirement challenge,” Pensions & Investments, June 27, 2017, http://tinyurl.com/
Reports and Studies
“Retirement Plan Access and Participation Across Generations,” Pew Charitable Trusts, Feb. 15, 2017, http://tinyurl.com/
Brown, Jennifer Erin, “Millennials and Retirement: Already Falling Short,” National Institute on Retirement Security,” February 2018, http://tinyurl.com/
Gale, William G., Sarah E. Holmes and David C. John, “Retirement Plans for Contingent Workers: Issues and Options,” Brookings Institution, Sept. 23, 2016, http://tinyurl.com/
Morrissey, Monique, “The State of American Retirement,” Economic Policy Institute, March 3, 2016, http://tinyurl.com/
Munnell, Alicia H., and Wenliang Hou, “Will Millennials Be Ready for Retirement?” Center for Retirement Research of Boston College, January 2018, http://tinyurl.com/
The Next Step
Konish, Lorie, “These gig jobs could boost your bottom line in retirement,” CNBC, April 22, 2018, https://tinyurl.com/
Milliken, Kaitlin, “Lawmakers eye retirement help for gig economy workers,” The Hill, Feb. 6, 2018, https://tinyurl.com/
Nova, Annie, “The gig economy is lacking in this one important respect,” CNBC, Feb. 18, 2018, https://tinyurl.com/
Carrns, Ann, “For Workers Without Retirement Savings, State-Run I.R.A.s Can Pay Off,” The New York Times, April 20, 2018, https://tinyurl.com/
Fox, Justin, “Wisconsin’s Pension System Works for Everyone,” Bloomberg, May 9, 2018, https://tinyurl.com/
Silberstein, Rachel, “New York to launch retirement plan for private sector,” The Times Union, April 19, 2018, https://tinyurl.com/
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An organization focused on providing information to help those age 50 and older live well in retirement.
The Aspen Institute
One Dupont Circle, N.W., Suite 700, Washington DC 20036
Global nonpartisan think tank exploring best practices and promoting dialogue and leadership on current issues.
Boston College Center for Retirement Research
140 Commonwealth Ave., Chestnut Hill, MA 02467
Research institute studying the economic and behavioral issues affecting individual retirement income.
1775 Massachusetts Ave., N.W., Washington, DC 20036
Public policy institute conducting research on domestic and global issues.
Economic Policy Institute
1225 I St., N.W., Ste. 600, Washington, DC 20005
Liberal think tank that does research on issues affecting the economic well-being of low- and middle-income workers.
Employee Benefit Research Institute
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A research organization that seeks to enhance employee benefit programs and the public policy that supports them.
National Bureau of Economic Research
1050 Massachusetts Ave., Cambridge, MA 02138
Nonpartisan organization conducting economic research for businesses, academics and policymakers.
National Institute on Retirement Security
1612 K St., N.W., Ste. 500, Washington, DC 20006
Organization providing research and information on retirement finances to enhance understanding and foster informed policymaking.
The Pew Charitable Trusts
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Research institute seeking to provide evidence-based analysis on national and international issues.