Americans must confront a multitrillion-dollar shortfall in savings if they plan to maintain their standard of living during retirement, according to a study released last week.
Americans must confront a multitrillion-dollar shortfall in savings if they plan to maintain their standard of living during retirement, according to a study released this week.
RetirementUSA, an advocacy group, pegs the “retirement income deficit” at $6.6 trillion. That figure represents the present-value difference between pension and retirement savings and what people need to retire.
The study was conducted for the group by the Center for Retirement Research at Boston College, which used data from the Federal Reserve's Survey of Consumer Finances.
The calculation is based on an analysis of about 70 million households comprised of people in their prime earning years, between 32 and 64. There is an average deficit of about $90,000 in retirement savings for each household.
RetirementUSA leaders emphasized that the gap is actually a conservative estimate. For instance, it doesn't include a projection of retirement health care costs, and it assumes that Social Security benefits won't decline.
“The numbers should be a wake-up call,” Maria Freese, director of government relations and policy at the National Committee to Preserve Social Security and Medicare, said during a press conference. “It's a measure of how far behind Americans are in their retirement savings today.”
In an effort to raise awareness about retirement security, RetirementUSA has launched a “Wake Up, Washington” program that is slated to run through Oct. 15. The effort will involve postings on blogs, Facebook and Twitter, as well as a compilation of individual stories of retirement challenges in an online story bank at retirement-usa.org.
The group also will urge lawmakers to focus on retirement security, which it argues is diminishing due to the decline of traditional defined-benefit pensions, the inadequacy of 401(k) savings accounts and uncertainty surrounding political support for Social Security.
“Members of Congress don't realize how big this issue is,” said Karen Friedman, executive vice president and policy director at the Pension Rights Center.
Social Security must be preserved because it's part of the foundation for a solid retirement, she said, and the problem centers on the lack of retirement savings built at work.
Just over half of full-time private-sector employees participate in an employer-sponsored plan, and more and more companies are switching from richer defined-benefit programs to less expensive defined-contribution plans.
“It's our private retirement system that is failing Americans,” Ms. Friedman said.
Shareen Miller, a home health care provider who makes about $12 an hour, said that 401(k) plans are not allowing her and her husband to accumulate enough wealth to finance their retirement. Their mortgage payments and other bills consume their monthly income.
“How are we going to retire without burdening our children?” Ms. Miller asked at the press event. “We need to get serious about the retirement crisis in our country.”
Although RetirementUSA is concentrating on raising awareness about the issue rather than advocating particular policy changes, the eventual answer will involve a partnership between employers and the government, according to Ms. Friedman.
“It is unrealistic to have a do-it-yourself savings plan as the solution to retirement security,” Ms. Friedman said. “We need a national solution.”
