Just How Bad is the Retirement Crisis?

If you’ve been paying any attention, you have heard about the retirement crisis — people don’t have nearly enough money saved and they’re living longer than ever. But the shortfall may be worse than most people realize, according to research from the National Institute on Retirement Security.

“Two recessions and a prolonged economic recovery have made a difficult retirement outlook even worse,” Diane Oakley, NIRS executive director, said in a statement.

According to the report, The Retirement Savings Crisis: Is it Worse Than We Think?, the average working household has virtually no retirement savings. The median retirement account balance is just $3,000 for all working-age households (not just those with retirement accounts). For households near retirement the balance is still just $12,000.

For various ages and incomes, the majority of households fall short of conservative retirement savings targets. According to NIRS, 92% of working households do not meet targets.

“The collective retirement savings gap among working households age 25-64 ranges from $6.8 to $14 trillion, depending on the financial measure,” the authors wrote in the report.

“We wanted to broadly examine how American households are faring in relation to retirement savings targets recommended by some financial services firms,” said Nari Rhee, report author and NIRS manager of research. “We used 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. This is important because some 45%, or 38 million working-age households, do not have any retirement account assets.”

The numbers may look bad, but Oakley is being optimistic — she thinks there are areas for improvement that could really help.

Retirement policy can improve with reforms in three areas to help all Americans and encourage greater savings: 1) strengthen Social Security; 2) expand low- and middle-wage workers’ access to retirement savings via payroll; and 3) expand the incentives of the existing Saver’s Credit,” she said.