The Reality of the Retirement Crisis

Source: Keith Miller, David Madland, Christian E. Weller, Center for American Progress, January 26, 2015

From the summary:
When reviewing the data on how American workers are saving for retirement, two facts become abundantly clear:
∙ Millions of Americans are in danger of not having enough money to maintain their standard of living in retirement.
∙ The problem is getting worse over time.

The consequences of these growing savings shortfalls could be severe for both American families and the national economy, as a large share of households may be forced to significantly reduce consumption in retirement and will have to rely heavily on their families, charities, and the government for help to make ends meet. Rather than staying in control of their economic lives, millions of Americans may be forced to muddle through their final years partially dependent on others for financial support and to accept a standard of living significantly below that which they had envisioned.

This issue brief will illustrate the reality of this crisis by first looking at what the data have to say about how much money Americans are putting away for retirement. It will then evaluate the results of studies that use complex modeling to estimate what percentage of the population is at risk of falling short of achieving a financially stable retirement. What is made clear is that no matter how households’ needs in retirement are projected or how their incomes, assets, and debts are measured, an unacceptably large share of Americans appears at risk of being forced into a lower standard of living in retirement. The most convincing estimates of the share of households who will have insufficient assets stand at slightly more than 50 percent. But even more sobering is the fact that the most optimistic studies still find that nearly one-quarter of retirees are falling short.